AI And Cloud-Native Solutions Will Transform Global Work Models

Published
21 Apr 25
Updated
15 Aug 25
AnalystHighTarget's Fair Value
US$186.14
64.3% undervalued intrinsic discount
15 Aug
US$66.46
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1Y
-67.5%
7D
-11.0%

Author's Valuation

US$186.1

64.3% undervalued intrinsic discount

AnalystHighTarget Fair Value

Last Update07 May 25
Fair value Decreased 27%

Key Takeaways

  • Rapid adoption of Globant's AI pod and platform-centric models is reshaping revenue streams, increasing client value, and boosting customer retention beyond peer expectations.
  • Advanced AI automation and delivery innovations are driving significant margin expansion and operational efficiency, positioning Globant as a key orchestrator in large-scale digital transformations.
  • Rising automation, wage pressures, client concentration, and operational complexity threaten margin stability and sustainable growth amidst stiff competition in digital transformation services.

Catalysts

About Globant
    Provides technology services worldwide.
What are the underlying business or industry changes driving this perspective?
  • Analyst consensus anticipates strong AI-driven revenue growth for Globant, but this likely underestimates the transformative impact of the subscription-based AI pod model, which is already gaining rapid adoption and could meaningfully accelerate topline growth and recurring revenue far beyond current forecasts as AI project complexity and value per client rise dramatically.
  • Analyst consensus expects operational efficiencies and margin expansion from AI platform scaling, yet margin gains could be far more substantial: Globant's integrated, token-based AI delivery architecture and advanced automation threaten to structurally reset delivery costs and unlock high-double-digit operating margin potential as AI pod supervision requirements drop over time.
  • Unlike peers, Globant's ability to enable and manage massive at-scale AI transformations-spanning physical robotics, real-time 3D, and enterprise cloud migration-positions it as a central orchestrator of next-generation business models, expanding its addressable market and capturing larger, multi-year contracts with premium pricing, lifting both revenue and net margins.
  • The company's proprietary Enterprise AI platform and adjacent digital products are driving a shift from project-centric to platform-centric client engagements, markedly increasing customer stickiness and long-term wallet share, thereby stabilizing and amplifying multi-year revenue streams.
  • Globant's early leadership deploying AI to orchestrate distributed workforces, global capability centers, and outcome-based contracts directly benefits from the persistent global shift to remote/hybrid work and near/offshoring, enabling the company to optimize utilization rates, capture greater cost arbitrage, and sustain margin expansion ahead of industry peers.

Globant Earnings and Revenue Growth

Globant Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • This narrative explores a more optimistic perspective on Globant compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
  • The bullish analysts are assuming Globant's revenue will grow by 9.7% annually over the next 3 years.
  • The bullish analysts assume that profit margins will increase from 6.2% today to 8.9% in 3 years time.
  • The bullish analysts expect earnings to reach $290.0 million (and earnings per share of $6.66) by about August 2028, up from $151.3 million today. The analysts are largely in agreement about this estimate.
  • 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 37.8x on those 2028 earnings, up from 22.7x today. This future PE is greater than the current PE for the GB IT industry at 31.4x.
  • Analysts expect the number of shares outstanding to grow by 1.88% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 8.59%, as per the Simply Wall St company report.

Globant Future Earnings Per Share Growth

Globant Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Globant's long-term growth may be negatively impacted as the increasing adoption of AI and automation drives both clients and competitors to rely more on commoditized solutions, pressuring both revenue growth and net profitability by eroding pricing power in digital transformation services.
  • Persistent wage inflation, especially in Latin America and key delivery regions, alongside ongoing global talent shortages, may drive up operating costs faster than revenue, compressing net margins and making sustained earnings growth more challenging.
  • Intensified price competition and market saturation in mature outsourcing and digital transformation markets could put downward pressure on both margins and topline revenue as clients shop for lower-cost or more automated alternatives.
  • High client concentration risk persists, evidenced by the outsized impact specific clients or geographies (such as North America or professional services clients) have on sequential revenue, exposing Globant to sudden revenue shortfalls if any large client reduces spending or churns.
  • Rapid expansion into new geographies and aggressive scaling of the workforce, coupled with the need to constantly upskill employees in fast-moving technologies like advanced AI and cloud-native solutions, risks operational inefficiencies and could inflate SG&A expenses, squeezing net margins if execution falters.

Valuation

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

  • The assumed bullish price target for Globant is $186.14, which represents two standard deviations above the consensus price target of $126.85. This valuation is based on what can be assumed as the expectations of Globant'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 $230.0, and the most bearish reporting a price target of just $87.0.
  • In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $3.2 billion, earnings will come to $290.0 million, and it would be trading on a PE ratio of 37.8x, assuming you use a discount rate of 8.6%.
  • Given the current share price of $78.12, the bullish analyst price target of $186.14 is 58.0% 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.

How well do narratives help inform your perspective?

Disclaimer

AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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