AI And Trust And Safety Demand Will Drive Steady But Volatile Future Returns

Catalysts

About TaskUs

TaskUs provides outsourced digital customer experience, Trust and Safety, and AI-focused services for high growth technology and enterprise clients.

What are the underlying business or industry changes driving this perspective?

• Although TaskUs is benefiting from rapid expansion in AI services with revenue growing more than 50% year over year, the inherently project based nature of this work and potential normalization of large language model training budgets could cause volatility and a lower, less visible growth trajectory that pressures overall revenue growth rates and earnings durability.
• While the shift toward AI enabled customer support and Agentic AI consulting is opening new solution based revenue streams, increased automation of existing DCX volumes and self cannibalization of human centric work may cap net top line growth and compress net margins as the mix tilts toward lower priced automated transactions.
• Despite strong current demand from social media, autonomous vehicle and robotics clients, customer concentration in a handful of large platforms means that any moderation in their AI safety or Trust and Safety spend could materially slow TaskUs growth and create downside risk to revenue and EBITDA.
• Although TaskUs is using AI to drive internal efficiency, including recruitment and quality automation, rising wage floors in key delivery markets like the Philippines and continued investments in new facilities could more than offset these savings and lead to structurally lower gross margins and slower EPS growth.
• While digital platform usage and online content volumes continue to rise globally, regulatory changes, evolving content policies and potential insourcing of critical Trust and Safety and AI safety functions by the largest platforms could reduce TaskUs share of future spend and weigh on long term revenue growth and profitability.

Assumptions

This narrative explores a more pessimistic perspective on TaskUs compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming TaskUs's revenue will grow by 9.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 7.1% today to 7.3% in 3 years time.
• The bearish analysts expect earnings to reach $108.1 million (and earnings per share of $1.12) by about December 2028, up from $81.4 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $132.8 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 12.7x on those 2028 earnings, down from 13.9x today. This future PE is lower than the current PE for the US Professional Services industry at 25.0x.
• The bearish analysts expect the number of shares outstanding to grow by 0.47% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.64%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Sustained double digit top line momentum, including record quarterly revenue of $298.7 million, 17% year over year growth in Q3 2025 and a full year 2025 outlook of roughly 18% revenue growth compared with 7.6% in 2024, suggests TaskUs is outgrowing a slowing BPO industry and could support a higher long term share price through accelerating revenue and earnings.
• Structural demand for AI and digital safety, reflected in approximately 20% year over year Trust and Safety growth for eight consecutive quarters and over 50% annual AI services growth with expectations of well over 50% for 2025, indicates powerful secular tailwinds that can expand the company’s addressable market and lift revenue and EBITDA over time.
• The strategic shift from time based outsourcing to higher value solution based offerings that combine Agentic AI, consulting and human talent, along with cross sell driven growth above 20% for multi service clients, positions TaskUs to move up the value chain and potentially expand net margins and earnings beyond current expectations.
• A very strong balance sheet with $210 million in cash, net leverage below 0.2 times and expected 2025 adjusted free cash flow of about $100 million provides significant capacity to fund AI transformation, geographic expansion and potential capital returns, which can enhance long term earnings power and support multiple expansion.
• Evidence of operating leverage and internal AI driven efficiency, such as SG&A falling to 20% of revenue from 24.5% a year earlier and efficiency programs delivering millions of dollars in savings, combined with the use of AI to raise recruiter productivity, could stabilize or improve margins after the current investment phase and drive faster growth in net income and earnings per share.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for TaskUs is $12.0, which represents up to two standard deviations below the consensus price target of $15.9. This valuation is based on what can be assumed as the expectations of TaskUs's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $18.0, and the most bearish reporting a price target of just $12.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $108.1 million, and it would be trading on a PE ratio of 12.7x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of $12.51, the analyst price target of $12.0 is 4.2% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.