AI Services And Trust And Safety Leadership Will Drive Strong Future Upside

Catalysts

About TaskUs

TaskUs provides specialized digital outsourcing solutions that combine technology, AI services and human talent to support fast-growing, technology-driven enterprises.

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

• Rapid adoption of AI agents and automation in customer support, where TaskUs is already deploying Agentic AI consulting and mixed human plus AI solutions, can structurally influence revenue growth as clients shift more wallet share to partners that can manage both automation and premium human support while sustaining attractive EBITDA margins.
• Growing demand for AI services from foundational model developers, social media platforms and autonomous vehicle and robotics companies, evidenced by well over 50% projected AI services growth in 2025, positions TaskUs to scale a higher value, project-rich revenue mix that can support faster earnings expansion.
• Industry-leading capabilities in Trust and Safety and AI safety, supported by repeated third-party recognition and growing multi-platform relationships, can drive continued high-teens growth in this service line and support durable, high-margin revenue streams as online risk management budgets increase.
• Global delivery expansion into higher-growth markets such as Colombia, India and Greece, backed by rising client volumes and elevated CapEx, can increase capacity for large ramps and cross-sell activity, supporting double-digit top-line growth and improved fixed cost leverage over time.
• Strong free cash flow generation and a nearly net-debt-free balance sheet enable sustained multimillion-dollar investments in AI transformation, internal efficiency programs and selective capacity build-outs, which can enhance long-term revenue scale, help stabilize net margins and support EPS growth relative to industry peers.

Assumptions

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

• The bullish analysts are assuming TaskUs's revenue will grow by 12.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 7.1% today to 8.2% in 3 years time.
• The bullish analysts expect earnings to reach $132.7 million (and earnings per share of $1.37) by about December 2028, up from $81.4 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $102.0 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.5x on those 2028 earnings, up from 12.7x today. This future PE is lower than the current PE for the US Professional Services industry at 24.2x.
• The bullish 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 7.7%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The rapid adoption of Generative AI and AI agents to automate workflows previously handled by outsourced human teams could compress volumes in core digital customer experience programs. This could lead to slower top line expansion and potential revenue decline if TaskUs is unable to offset cannibalized work with higher value AI solutions.
• Management has signaled it will be bold in ramping multimillion dollar AI investments, which are already pressuring gross margin. These investments will further weigh on profitability if expected scale benefits and pricing power from Agentic AI consulting and AI services fail to materialize, resulting in lower adjusted EBITDA margins and weaker earnings growth.
• Revenue concentration remains elevated, with the top 10 and top 20 clients representing 60% and 71% of revenue and the largest client 27%. Any budget cuts, slower ramp or insourcing by a few key customers, particularly as they pursue their own AI transformations, could materially impact revenue stability and earnings visibility.
• The AI services segment is inherently project based and lumpy, with management highlighting sprint style engagements and visible deceleration into the fourth quarter. This increases the risk that high recent growth rates normalize more quickly than expected, limiting sustained revenue growth and contributing to greater earnings volatility.
• Structural cost headwinds, including minimum wage increases in key delivery markets like the Philippines, merit inflation and continued capital expenditures for new facilities and capacity, may outpace TaskUs efficiency gains from automation and SG&A optimization over time. This would put downward pressure on net margins and constrain free cash flow available for reinvestment.

Valuation

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

• The assumed bullish price target for TaskUs is $18.0, which represents up to two standard deviations above 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 bullish 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 bullish analyst cohort, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $132.7 million, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $11.48, the analyst price target of $18.0 is 36.2% higher.
  
• 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.