ExlService Holdings Q2 adj. EPS $0.59 beats $0.55 estimate
ExlService Holdings reported Q2 FY26 adjusted EPS of $0.59, beating the $0.55 estimate, and revenue of $594.8M, surpassing the $573.9M forecast. The company raised full-year EPS guidance to $2.25-$2.29.
*this image is generated using AI for illustrative purposes only.
ExlService Holdings Inc. reported second-quarter fiscal 2026 adjusted diluted earnings per share (EPS) of $0.59, surpassing the analyst consensus estimate of $0.55 by 7.27%. The global data and artificial intelligence company also posted total revenue of $594.8 million for the quarter ended June 30, 2026, beating the $573.898 million estimate by 3.64%. This performance reflects a 15.6% year-over-year revenue increase from $514.460 million in the prior-year period, driven by accelerating adoption of enterprise AI solutions across insurance, healthcare, and banking verticals.
The strong quarterly results prompted ExlService to raise its full-year FY2026 guidance. The company now projects adjusted diluted EPS of $2.25 to $2.29, exceeding the previous analyst estimate of $2.23. Total revenue outlook for FY2026 was increased to $2.390 billion to $2.415 billion, above the consensus of $2.329 billion. Chief Financial Officer Maurizio Nicolelli cited strong visibility into the remainder of the year as the basis for the upward revision. Organic constant currency revenue growth is now expected to range between 13% and 14%.
Financial Performance by Segment
Revenue growth was broad-based across all reportable segments, with Healthcare and Life Sciences recording the highest gross margin expansion. The following table details segment-wise performance for the three months ended June 30, 2026.
| Reportable Segment | Revenue Q2 2026 ($M) | Revenue Q2 2025 ($M) | Gross Margin Q2 2026 (%) | Gross Margin Q2 2025 (%) |
|---|---|---|---|---|
| Insurance | $197.8 | $172.2 | 34.6% | 34.8% |
| Healthcare and Life Sciences | $158.0 | $129.5 | 46.9% | 43.5% |
| Banking, Capital Markets and Diversified Industries | $133.9 | $121.1 | 34.8% | 37.8% |
| International Growth Markets | $105.1 | $91.7 | 35.1% | 35.1% |
| Total | $594.8 | $514.5 | 38.0% | 37.7% |
Gross profit for the quarter totaled $225.9 million, compared to $194.2 million in the same period last year. GAAP diluted EPS rose 4.9% to $0.42 from $0.40, while adjusted diluted EPS surged 22.3% to $0.59 from $0.49. Operating income margin stood at 14.7%, down from 15.8% in the second quarter of 2025, but adjusted operating income margin remained stable at 19.7%, compared to 19.6% in the prior-year period.
What the Numbers Show
A notable divergence exists between ExlService’s GAAP operating income margin and its adjusted operating income margin. While GAAP operating income margin contracted to 14.7% from 15.8% in the prior-year period, adjusted operating income margin held steady at 19.7%, nearly unchanged from 19.6%. This stability in non-GAAP metrics suggests that underlying operational efficiency remains intact despite higher GAAP expenses, which include significant non-cash charges such as stock-based compensation ($24.6 million in Q2 2026 vs. $16.4 million in Q2 2025) and amortization of acquisition-related intangibles. The rise in stock-based compensation indicates increased investment in talent retention, likely to support the scaling of AI capabilities and integration of new acquisitions like iMerit, which is expected to close on July 31, 2026.
How will the integration of iMerit, closing July 31, 2026, impact ExlService's gross margins and AI service offerings in the near term?
What specific factors are driving the significant 3.4% gross margin expansion in the Healthcare and Life Sciences segment compared to other verticals?
Will the continued rise in stock-based compensation pressure GAAP operating margins in future quarters despite stable adjusted metrics?
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