Digital Transformation And AI Will Expand Global Opportunities

Key Takeaways

• Shift toward AI-powered and digital solutions drives higher-margin growth and greater client diversification, reducing reliance on traditional services.
  
• Proprietary platforms and efficiency initiatives help counteract cost pressures, positioning the company for improved margins as client spend recovers.
  
• Margin pressure, high debt, overreliance on key clients, rapid industry automation, and rising competition threaten the company's growth, earnings stability, and financial flexibility.

Catalysts

Offers digital customer experience and digital solutions in the Asia-Pacific, the Central America, Europe, Africa, North America, the United Arab Emirates, and internationally.

• The accelerating enterprise adoption of AI, automation, and advanced digital solutions is driving demand for TELUS International's AI & Data Solutions and Digital Solutions portfolio, supporting long-term revenue growth and mix shift toward higher-margin services as proof-of-concept work transitions to large-scale enterprise deployments in 2026–2027.
  
• Ongoing digital transformation across diverse industry verticals-including healthcare, communications, automotive, and financial services-continues to produce new client wins and expansion with existing customers, enabling broad-based and recurring revenue growth and reducing reliance on legacy, lower-margin business lines.
  
• TELUS International's position as a neutral, independent partner in the AI space is attracting new opportunities as clients seek alternatives in response to competitive industry developments, leading to increased wallet share among major tech and automotive clients and directly supporting near
• and medium-term revenue and margin growth.
  
• Strategic investments in proprietary platforms (e.g., Fuel iX) and operational excellence programs-particularly those embedding AI to enhance workforce efficiency, agent performance, and customer outcomes-are expected to offset labor cost inflation and competitive pricing pressures over time, leading to gradual improvement in net margins.
  
• Anticipated recovery of discretionary IT and digital spend, coupled with the continued trend toward outcome-based service models, positions TELUS International to secure higher-value and higher-margin contracts across its client base, offering upside potential to both revenue and overall earnings as spend rebounds in the sector.

TELUS International (Cda) Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming TELUS International (Cda)'s revenue will grow by 2.6% annually over the next 3 years.
• Analysts are not forecasting that TELUS International (Cda) will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate TELUS International (Cda)'s profit margin will increase from -14.1% to the average US Professional Services industry of 7.1% in 3 years.
• If TELUS International (Cda)'s profit margin were to converge on the industry average, you could expect earnings to reach $208.0 million (and earnings per share of $0.72) by about August 2028, up from $-383.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.3x on those 2028 earnings, up from -2.6x today. This future PE is lower than the current PE for the US Professional Services industry at 22.5x.
• Analysts expect the number of shares outstanding to grow by 1.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.06%, as per the Simply Wall St company report.

TELUS International (Cda) Future Earnings Per Share Growth

Risks

• Persistent margin pressures from industry-wide competitive pricing, rising labor costs in key markets (like Europe and the US), and increasing complexity of client work threaten to compress net profit margins and constrain future earnings, as indicated by management's ongoing struggle to offset these structural pressures.
  
• Elevated leverage (3.75x net debt to adjusted EBITDA) and a recently recorded goodwill impairment signal strained financial flexibility and lower long-term earnings power, raising concerns over the sustainability of both investment and shareholder returns.
  
• Continued heavy reliance on the parent company (TELUS) for a sizable portion of revenue (26% YTD), and client concentration among top 10 customers, exposes the business to material revenue volatility and earnings risk if large contracts are renegotiated, reduced, or lost.
  
• Rapid advancements in AI and automation, particularly in areas like content moderation and legacy customer experience work, risk disintermediating traditional services faster than TELUS International can upshift to more complex or higher-value offerings-potentially compressing revenue and limiting growth despite investments in new technology.
  
• Intensifying global competition, combined with ongoing labor cost inflation, shifting client demand (notably a 14% YoY decline in e-commerce/fintech), and possible future regulatory and macroeconomic headwinds, could erode TELUS International's pricing power, pressure top-line revenue growth, and prolong low margin recovery.

Valuation

• The analysts have a consensus price target of $4.064 for TELUS International (Cda) based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $5.25, and the most bearish reporting a price target of just $3.4.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.9 billion, earnings will come to $208.0 million, and it would be trading on a PE ratio of 7.3x, assuming you use a discount rate of 9.1%.
  
• Given the current share price of $3.64, the analyst price target of $4.06 is 10.4% 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.