ExlService Hldgs (NASDAQ: EXLS) reported second-quarter FY26 revenue of $595 million, a 16% year-over-year increase, driven by accelerating demand for data- and AI-led services. The company raised its full-year revenue and earnings guidance following the strong performance.

Adjusted earnings per share (EPS) rose 22% to $0.59, reflecting improved operational efficiency and margin expansion despite higher sales investments. The results underscore the company’s strategic shift toward high-value AI solutions.

Financial Performance

Revenue growth was broad-based across segments, with Healthcare and Life Sciences leading at 22% growth. Insurance grew 15%, while Banking, Capital Markets, and Diversified Industries expanded 11%. International growth markets revenue increased 15%, benefiting from new client wins and ramp-ups.

Adjusted operating margin stood at 19.7%, up 10 basis points year-over-year, primarily due to improved gross margins. SG&A expenses as a percentage of revenue increased by 170 basis points to 20.9%, driven by front-end sales investments. The effective tax rate fell 110 basis points to 21.3% due to higher profits in lower-tax jurisdictions.

What the Numbers Show

The divergence between the 30% growth in data- and AI-led revenue and the 1.5% decline in digital operations revenue highlights a deliberate business mix evolution. Management stated this decline is "by design," as AI integration shifts operational work into higher-value, IP-led categories. Total operations revenue, combining both streams, grew 10%, indicating that the overall operations base remains healthy while transitioning toward more profitable AI-enabled models.

Strategic Developments & Outlook

ExlService Hldgs announced the acquisition of iMerit, expected to close on July 31, 2026. The deal is projected to add $28 to $32 million in revenue for the remaining five months of FY26, expanding capabilities in AI model training and reinforcement learning.

Consequently, the company raised its full-year 2026 revenue guidance to $2.39 billion to $2.415 billion (previously $2.3 billion to $2.33 billion) and adjusted EPS guidance to $2.25 to $2.29 (previously $2.18 to $2.23). This implies organic constant currency revenue growth of 13% to 14%.

Balance Sheet & Capital Allocation

As of June 30, 2026, cash and short-term investments totaled $284 million, against revolver debt of $381 million, resulting in net debt of $97 million. The company generated $90 million in operating cash flow during the first half of FY26. It repurchased 5.8 million shares for $179 million at an average price of $30.90 per share, including an accelerated share repurchase program.

ExlService Holdings, Inc., a global data and AI company, has announced the completion of its acquisition of iMerit, a recognized leader in AI model training, evaluation, and reinforcement learning. The transaction marks a significant strategic development for EXL, combining its enterprise data and AI expertise with iMerit's technology and foundation model relationships to help clients build AI systems that are trusted, accountable, and built to perform at scale.

Strategic Rationale and Combined Capabilities

The completed acquisition establishes an end-to-end AI platform for enterprises, uniting EXL's deep data, context, and AI expertise with iMerit's technology, expert-led solutions, and generative AI experience. The combination is designed to help enterprise clients accelerate the transition from pilot to production-scale AI deployments.

Key highlights of the combined entity include:

• End-to-end AI platform spanning data, model training, evaluation, and enterprise deployment
• iMerit's Scholars network, a global community of specialists including physicians, scientists, engineers, linguists, and other subject matter experts
• Ango Hub, iMerit's proprietary platform enabling collaboration on complex multimodal data to generate curated and validated training artifacts for high-stakes AI models
• Expanded reach into high-growth AI technology sectors, including high-tech, autonomous mobility, healthcare AI, and robotics
• Vertically specialized AI capabilities particularly relevant to regulated industries where domain knowledge, context, and compliance are critical

Leadership Transition

As part of the transaction, iMerit founder and CEO Radha Ramaswami Basu joins EXL as Executive Vice President, Head of iMerit, and becomes a member of the company's executive committee.

Leadership Commentary

Rohit Kapoor, chairman and chief executive officer of EXL, described the acquisition as a transformational pivot for the company. "By combining iMerit's capabilities with EXL's domain expertise and AI platforms, we are well positioned to help clients build, fine-tune and operationalize AI that performs reliably in production. This is especially critical in regulated industries where domain knowledge, context and compliance are non-negotiable," Kapoor said.

Basu, commenting on the combination, noted that the next generation of enterprise AI will be defined by how effectively organizations can deploy models in real-world business environments. "Together, we can help clients bridge the gap between innovation and execution, turning AI potential into measurable business results," she said.

About the Companies

EXL is a global data and AI company headquartered in New York, with approximately 68,000 employees spanning six continents. Founded in 1999, EXL serves clients across industries including insurance, healthcare, banking and capital markets, retail, communications and media, and energy and infrastructure. iMerit delivers high-quality AI data services across industries and operates the Ango Hub platform alongside its Scholars global specialist network. The acquisition extends the data and AI-led strategy EXL has been executing on for several years.