Agentic AI And Non FTE Models Will Shape Balanced Long Term Outcomes

Catalysts

About Genpact

Genpact provides business process and technology services, with a focus on data, AI and agentic solutions that help large enterprises run core operations.

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

• Although the shift to agentic, task oriented AI in areas like accounts payable and record to report is building a base of recurring, non FTE revenue, wider enterprise adoption could take longer than expected if clients struggle to reengineer complex processes. This would temper the pace of revenue growth tied to these solutions.
• While the data and AI pipeline is reported to be up 50% year over year and supported by over 400 gen AI solutions in market, clients that try to build more capabilities in house or consolidate vendors could limit Genpact's share of spend. This would moderate Advanced Technology Solutions revenue and slow gross margin expansion.
• Despite partnerships with hyperscalers such as AWS, Microsoft and GCP that are meant to embed Genpact's solutions into broader tech stacks, reliance on partners' priorities and pricing power could compress economics over time. This could weigh on net margins even if top line from partner channels continues to grow.
• Although non FTE, outcome based and consumption models already represent a significant share of revenue and generally support margin improvement, these models also shift more delivery and performance risk to Genpact. This could pressure earnings if implementations underperform client expectations or volumes fluctuate.
• While the company is investing heavily in AI talent and an internal AI Gigafactory, including over 7,000 AI builders and nearly 20,000 AI practitioners, ongoing wage inflation for scarce AI skills and high product engineering spend could outpace pricing power. This could limit further adjusted operating margin expansion even if revenue continues to scale.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more pessimistic perspective on Genpact compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Genpact's revenue will grow by 7.7% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 10.9% today to 11.1% in 3 years time.
• The bearish analysts expect earnings to reach $706.4 million (and earnings per share of $4.31) by about May 2029, up from $552.5 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $794.1 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 10.2x on those 2029 earnings, down from 10.4x today. This future PE is lower than the current PE for the US Professional Services industry at 18.9x.
• The bearish analysts expect the number of shares outstanding to decline by 2.87% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.89%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Advanced Technology Solutions are already US$1.204b of annual revenue and grew 17% in 2025 with guidance for at least high teens growth in 2026. If this higher margin, higher revenue per headcount business continues to take a larger share of the mix, earnings and net margins could rise faster than expected and support a higher share price over time.
• Genpact’s agentic offerings, such as the AP suite with over US$200m in total contract value and more than 40% of that from new clients, are creating recurring, non FTE revenue with higher revenue and gross margins than legacy models. This could increase earnings and justify a higher valuation multiple.
• The data and AI pipeline is reported to be up 50% year over year, supported by more than 400 gen AI solutions in market and partner related revenue that grew nearly 50% in 2025. If these secular AI adoption trends continue to translate into bookings and backlog, long term revenue and operating income could grow faster than a flat share price implies.
• Non FTE revenue already represents 48% of quarterly revenue and about 70% of Advanced Technology Solutions revenue is annuitized. If consumption and outcome based models continue to spread across more clients and processes, the higher quality recurring revenue stream could support higher net income and a higher P/E than a flat share price assumes.
• Genpact is increasing investments in AI talent, product engineering and partnerships while still guiding to gross margin expansion of 50 basis points and adjusted operating margin expansion of 25 basis points in 2026. If this balance of reinvestment and margin improvement is sustained, earnings per share growth could outpace a stagnant share price expectation.

Valuation

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

• The assumed bearish price target for Genpact is $37.0, which represents up to two standard deviations below the consensus price target of $47.73. This valuation is based on what can be assumed as the expectations of Genpact'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 $58.0, and the most bearish reporting a price target of just $37.0.
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $6.4 billion, earnings will come to $706.4 million, and it would be trading on a PE ratio of 10.2x, assuming you use a discount rate of 7.9%.
• Given the current share price of $33.8, the analyst price target of $37.0 is 8.6% higher. 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.