All right. Good morning. My name is Puneet. I'm from JP Morgan's payment processing and IT services team. Glad to have here with us BK, you all know him well, CEO of Genpact, and Kyle, who heads investor relations. The format of this presentation is going to be fireside chat. I'll start with a few questions, and then we'll open the floor for questions from audience. BK, welcome. Thanks for doing this. For benefit of investors, like, who may not be as close to the story, why don't you start with talking about, like, a little bit about Genpact, like, about your journey, and if you can touch upon the, like, talk about Genpact Next strategy that you unveiled last year.
Sure. Su re, Puneet, thanks for having me here. I appreciate that. I think, we started as nearly 30 years ago. For first 10 years we were 100% subsidiary of General Electric Company. Got spun off about two decades ago, 20 years ago. What we were known for were running mission-critical operations for our clients, be it in finance, procurement, supply chain, many critical workloads for our customers. That gave us the advantage in this new world where I often talk about that there is no artificial intelligence without process intelligence. Process intelligence is what we have worked over the last three decades, and that is what has begun to shine of late in our new strategy, which we call as Genpact Next.
Genpact Next is bringing advanced technologies to the work, the critical work that we do for our clients, be it in finance, procurement, or the various workloads that we have chosen to agentify. Genpact Next has three C's as a framework. Capabilities, catalyst that enables client value and Genpact value at scale. When I talk about capabilities, it is pivoting to Advanced Technology Solutions, most importantly agentic, but Data and AI, and we can chat more about that. It's taking shape in a very significant way. We mentioned that last quarter it grew better than our expectation at 24%, and Advanced Tech now represents 27% of the revenue.
There are many, many catalysts, but one catalyst that we constantly talk about is how partnership is, and partnership ecosystem is shaping the journey at Genpact for our clients and for us. Clearly, clients, existing clients as well as new clients, in our chosen spaces is what we are accelerating with. Overall, Genpact Next is taking shape in a very, very significant fashion. What it is doing is we are building new Genpact. We are building new company. The results of that have be shown in our books. We shared that Advanced Tech grew nearly 24%. We have now guided the street that it'll grow greater than 20% for all of this year.
It is also the characteristics of Advanced Tech is what we call as 2x, 70/70. It is greater than 2x revenue by headcount of the company. It is growing at greater than 2x the rate of the company. Greater than 70% of the revenue is annuitized, and greater than 70% is on non-FTE models, commercial models. More accretion of margin happens to Genpact. That is, again, point number two shown in the gross margin. For 12th quarter in row, we grew the gross margins. We are just getting started, really pleased as to how we are building the new Genpact.
No, that's great. You covered, like, everything that I wanted to discuss.
Okay.
Thanks.
Wonderful.
We're done here.
I appreciate that.
No, seriously. Advanced technology, like you talked about, like, last quarter, like, it grew 20%+, I think 24% year-over-year, which is faster than what you shared with us, like the high teens growth at your Investor Day. Talk to us, like, what's driving this higher growth, and is it sustainable at these levels? Should we expect, like, the medium-term growth to still return to high teens level?
Look, I think we have already guided the street to greater than 20% for this year, and you all know our guidance philosophy. We are prudent and cautious always in guiding. We feel really good that for the entire balance year, it'll grow greater than 20%. The reason it is growing faster is because our differentiation is showing up in a significant fashion. The differentiation sits in context-rich process intelligence. We are adding these advanced technologies to it and bringing those solutions to our clients, existing clients, new clients. The most differentiating solution in there is agentic solutions, which are which we mentioned that we booked nearly equal to whatever we booked in all of last year.
We booked nearly equal to that in the first quarter. All of this booking is in annualized recurring revenues with minimum volume commits. It is long-term annualized revenue, which is more IP based, that is creating the differentiation, that is creating the momentum, and we believe we are just getting started.
On that, like the agentic solutions, what's driving this growth? Is it like the models by Anthropic, OpenAI, they are more capable, all the news flow or hype around all those evolution of models? Is it that the clients are more comfortable with governance on all those risk factors? Is it just this is new year, new budgets, and clients just feel ready to embrace AI? What's driving the shift towards more agentic this year compared to, let's say, all of last year? If you can size order of magnitude of how large that pipeline or the bookings of agentic solution is within overall company.
Yeah. What is driving is clearly, overall, we know that advanced technologies or AI is a conversation in every boardroom, every company. Given we have been running these mission-critical workloads or operations for our clients, we know the overall outcome that we deliver for our clients, what is the total cost of ownership, and how we are reducing the total cost of ownership while creating more high-value revenue for Genpact. It is not the models. Models are available. Yes, as reasoning improves, you know, it is part of the architecture in which we are delivering to our clients. It is more driven by how we stay accountable to driving those business outcomes that we have driven for decades, but now in a far superior fashion.
Bringing technology at that last mile intersect with operations. It is not just with existing clients. You know, we mentioned we signed six large deals in first quarter. It hasn't happened as in just a comparison point, we only signed a couple large deals in the previous first quarter.
Yeah
Last year, 2025. Overall, momentum is building up, momentum is building up not only in Advanced Tech, in Core Business Services, because clients buy not a particular, "Oh, I want to buy Advanced Tech or Core." They're buying a solution. It is, how we are architecting the solution and how we are making that difference come to life.
Yeah. Can you talk about like the unit economics on some of these agentic deals? Just like the contract structure, like do you own the IP of the solution that you offer? What are like the unit economics margin profile, incremental margin profile on some of those deals?
Let me address that. Yes, we own the IP, and this is in a pretty straightforward SaaS kind of models in which we are selling all of these agentic contracts. Agentic contracts, as I mentioned, were nearly equal to what we sold all of last year. What we sold all of last year was over $200 million. In Q1, we nearly sold that, a little bit over, around that. Momentum is continuing as we are progressing even in this quarter. On unit economics, this is how maybe I'll pick up our existing client and give you a shape of the unit economics.
If our existing client for a particular workload, we know their total cost of ownership, sometimes actually better than clients, because clients a lot of times see their own budgets and they don't see across the upstream, downstream, you know, what are the other costs or what are the other systems that they have for fulfilling a particular transaction. Sometimes fulfilling a transaction takes 15 system, 20 systems. We at that last mile can see and observe all of those systems and where the cost is sitting. We provide that window of truth of, "Hey, this is what your total cost of ownership is." Obviously, we validate it with them. We are reducing that total cost of ownership first from a client perspective, because that's how the engagement happens.
On the Genpact side, what we have also shared during our last Investor Day, on finite number of contracts we shared, we said that we are seeing as we rotate this to agentic revenue, we saw 103, 300 BPS. What was 103? If $100 bucks is the revenue we are earning from the client, we are earning 103, 3% higher, at 300 BPS higher gross margin. How is it that client is getting total cost of ownership down, you are earning more revenue, more margin? How is it happening? The method is pretty simple. You know, the higher gross margin, higher revenue is coming from either the volume or the scope. I'll give you use cases as an example.
A particular client is, these are large global clients, Fortune 50, Fortune 100 customers. Sometimes they are running the same workload in Europe or in different parts of the geography in-house or with another provider. If now we have a better mousetrap, that volume is coming to us. Or two, they were using another system or a software that is not used now, that is not needed now because we have baked it in our solution as our software, is how the revenue is increasing. For gross margin, obviously, we are reducing the total cost of ownership, but our costs are going down faster, is how gross margin accretion is happening.
Yeah.
Last point I'll make that we said 103, 300 BPS at the end of June. That was on finite number of contracts. We have also subsequently reported that these numbers are better on more number of aggregated contracts. It was very few contracts at that point in time. Now these contracts are running into many.
Yeah.
Contracts, our numbers are better than 103, 300 BPS.
Yeah. On some of these contracts, when you offer like an agentic solution, like so you combine like the human labor tokens, like offer to clients. In future, hypothetically like if token costs increases, like, do you take that risk or will you be able to pass it on to clients?
Look, I think, the bill of material is, we are keeping the bill of material with ourselves, be it, the cost of technology or the architecture or the servicing cost. Fundamentally, we do believe, take an example, servicing cost over a period of time. If, you know, the models continue to improve, the servicing cost or the labor cost in that component will go down. Overall cost of intelligence, in my view, over a period of time will actually go down. I think, we have, you know, structured the contracts in a way which are annualized recurring revenues with minimum volume commit. As transactions or any of those are add-ons.
There are certain provisions, you know, that we have carved out in our these pricing contracts, but we feel really good about how we are managing this transition of commercial models.
Got it. Got it. Going back to like what you talked about earlier, about like how you are seeing clients sending more workflow your way. Talk to us about your Core Business Services. Like that is like obviously more than 70% of revenue you expected to grow this year. What will drive that growth? I imagine like large part of Core over next few years will transition into Advanced Technology Solutions as you bring some of those agentic solutions, help clients do that. Talk to us, like what drives that growth within Core? Like, do you expect that segment to grow for next two or three years?
Core continues to be, Puneet, an integral part of our growth equation, integral part of our growth model. Core is the reason Advanced Technology is accelerating. Core is the reason why we see exceptional product market fit with all the agentic solutions that we are bringing to bear. Core is the reason we know the total cost of ownership for our clients. Core is integral part of our equation.
Yep.
For foreseeable future, we do see Core continue to grow because a lot of foundational work, lot of process intelligence work happens in Core. If you want to or if our clients want a ton of returns on artificial intelligence investments, you know, it'll not happen without foundational work happening in Core. I must also say that while we are rotating and we are wanting to rotate Core as fast as possible to Advanced Tech because it is stickier, it is high-value revenue, it is still not, you know, as we are saying, oh, we grew 24%. Rotation is not the reason it became 24%, or rotation is not the reason that it will be greater than 20%.
It is de minimis, in at least as we see it for this year. Clients don't, as I mentioned, come to us, "Oh, I want to buy a Core," or, "I want to buy Advanced Tech." Increasingly, we are building newer mousetraps.
Yeah.
We are wanting to get the clients where they want to be, which is more advanced solutions as fast as possible. We do see core as an integral part of our ecosystem and core as the reason of continued growth. Last point I'll make, Puneet, on Core. I often use this phrase intentional disruption. We are also agentifying the workloads where our domain is strongest in core, finance, supply chain, HR procurement.
Yeah.
This is where our domain shines. Now, there are parts of Core that will not agentify, and we'll continue to run it for our clients. Core is the reason why agentification and product market fit is happening in a very, very strong fashion.
Yeah, yeah.
We see that as a core part of our model.
Yeah. No, absolutely. I totally agree. Like the Core is the reason like that you have right to win in agentic.
Right.
Advanced Technology Solutions. No, totally agree with that. Let's talk about like how your competition is changing. Like you talked about that you're winning some work from clients' in-house operations.
Let's focus on that.
Okay.
There is still like lot of market that's with clients' in-house operations.
How should we think about one, penetration rate of outsourcing versus insourcing in core work, as well as the Genpact's pros and cons in being able to bring some of those agentic solutions to customers that clients can do themselves.
I, you know, even before this wave of technology, we always shared and maintained that we are still in early journeys of outsourcing penetration. It increasingly is true even today. Now as we are bringing all of this innovation at scale, we are getting more and more TAM unlocked for us. We are also seeing new competition as an example, you know, various software providers that we never used to see. Even in case of Data and AI, as we have strengthened that franchise in a pretty strong fashion, we are again into newer buying centers of Data or AI where we are building custom agents for our clients.
All of these are newer TAMs that we have unlocked and all of the Advanced Tech solutions are firing. Obviously, Data and AI and agentic. Agentic is our own proprietary solutions. There are many solutions where we are enabling it for clients in our Data and AI segment or other segments.
Yeah.
I think,
Yeah.
We are seeing newer, type of competition.
Yeah.
You know, that we didn't encounter earlier.
You know, I imagine like agentification of business processes, that's the holy grail, like everyone's going after. Talk to us like let's say versus like a software company, I don't wanna name like they might be here at the conference but like.
You can name them too.
Software company or LLM, like they created their services businesses. Compared to those names, like what are pros and cons for clients to go with Genpact or IT services companies like they all are like?
Sure.
Like as a Horizon 3, this is the area that they want to focus on.
Yeah.
Right? Talk to us.
Look, I think maybe I'll pick up two or three genre of competition or I'll say partners and they are everybody's frenemies and I always believe in an ecosystem play. Look, first off, what is the core advantage in which core differentiation because of which we are accelerating? It is because of understanding the context at the last mile because we've been running operations. Now, many of our IT peers have not been running operations. They've been running various different workloads, IT workloads, not operations workloads. We've been running operations workload, and that's what we have carved our identity and our brand and all of our assets around that. That is shining up now because, you know, you think about actually any company. Any company is process, people, technology.
Yeah.
Any company is, including yours, process, people, technology. People is what make process and technology happen. What became simpler? What became more ubiquitous? What became more available? Technology became more ubiquitous.
Yeah.
Technology became more available. Technology is becoming more cheaper. Operations and the process part, which is the upstream and downstream, how data and where data sits, that didn't become simpler. Technology or tool will go only that far, as much as the process allows. Our differentiation sat in the process, we are bringing that technology is why it is accelerating at a pace. As far as model companies go, we are leveraging all of the model companies in our technology architecture, but also swapping out wherever deterministic models are needed or probabilistic models are needed. You know, where certain things can be done by open source models.
Yeah.
Because we do believe that cost of intelligence overall will go down and, you know, a lot of powering is happening even with open source models. How do you find and build the architecture in a secure environment, in a responsible fashion, where you use all these capabilities to drive most value for clients and take a share of that value for Genpact?
Got it. At this time, like, are there any questions from audience? Just wait until you get the mic.
Hey, BK. Thanks so much for being here. On that cost of intelligence thesis, you seem pretty convicted in your idea that the cost of intelligence will go down. We're trying to do some work on token pricing and how that's gonna shake out for all the foundational labs. They need to charge more for inference costs and kind of cover the, all the amortization of all the capital investments they've outlaid. Some of the leading models feels like there's big price increases potentially in front of us, but also obviously some democratization or competition. Could you just share your thoughts, state of the market as you see it for compute inference cost of intelligence? Thanks.
Brendan, look, I think there are many competing forces, including the ones you enunciated, you know, where these model companies will have to charge more. There are other competing forces, where democratization of intelligence, open source models from different parts of the world becoming available. I think everything doesn't need probabilistic high-end models. A lot can be de-delivered through deterministic models, which are far more cheaper. It is also the nature of problem you are wanting to solve. The nature of problem that you are wanting to solve is a very acute hard problem or nature of problem if we are wanting to build a scalable finance solution. Is it really the most intense problem where lots of token will be used? I doubt it.
It is dependent upon also the spaces we are choosing, how what we are going after, and how we see building a sustainable, revenue-generating, more margin accretive model for Genpact.
It might take some time, like everyone is just trying to token max right now. Totally agree, like, not every workflow needs frontier models. You know, that's fair point. Any other questions? Okay, I'll keep going. Let's talk about near term for this year. Talk to us like the trends you are seeing in near-term demand environment of guidance that you issued last week.
Couple weeks ago.
Couple of weeks ago. Sorry, it's all haze now. The guidance that you issued indicates like the growth will accelerate in second half of this year. You talked about earlier, like the large deals that you signed, six large deals in Q1. I think there was similar number in Q4 last year. Talk to us, like what drives the confidence that the growth acceleration is doable, like in second half? Like, talk to us about this near-term trends?
Yeah.
That you are seeing.
Sure. Overall, let me first just get the guidance out if that's okay, Puneet. It is a simple structured process, you know, and a pretty simple philosophy that we have of a prudent, cautious approach. It is, you know, the first half, second half is a simple mathematics. Some of that, you enunciated also in six large deals that we signed, continued momentum from end of last year. We will see a little bit of acceleration, you know, both in Advanced Tech as well as, you know, as we go into the second half for Core Business Services.
We feel good about the guidance that we have given, and it is also aided by the pipeline, by the booking, by the backlog we have, and the number of conversations and the demand that we see across the board, across all cohorts, be it geos, be it Advanced Technology Solutions, Core Business Services, be it on the various vertical segments that we report. If we see any cohort, our demand is off the charts. If I take an example of Advanced Technology Solutions, the pipeline is up 30% just over last 90 days. You know, agentic pipeline or inflow is up greater than 3x. We feel really good about, you know, as to where we sit.
We see strong demand of, the solutions that we are building and the pivot we are making.
Yeah. Any impact from like the geopolitical tensions that we've been seeing for last three months, more than three months? Not just, let's say, in form of energy prices, but like the disruption in supply chain. Do lot of work in supply chain area.
Yeah.
Are you seeing any impact at all?
Look, there is uncertain environment, we are not seeing impact in our demand pipeline. Actually, some of our demand pipeline is up because of these uncertain environments, as our solutions play right into it, like you mentioned, supply chain or few other solutions. They even in risk play right into it. We haven't seen the impact of the geopolitical uncertainty that is all around us.
Let me ask again, going back to the new type of delivery model and structure. Talk to us how it impacts Genpact in two ways. One, the contracts that you are signing, are you signing more outcome-based contracts? What is different now that clients are ready to sign outcome-based compared to any time before? Number two, talk to us change management in terms of your people. Like, there are so many employees, how do you motivate your employees, convince them that this shift towards AI is not bad for their jobs and whatnot, get them to align with your mission?
Let me talk about our people first, you know, because all the time we talk about clients and contracts and so on and so forth, but I'll address that too. Really thrilled, and that is one thing that I must say, you know, surprised me as to how our people are absorbing the change and are leaning in hard to become more AI natives and AI immigrants, if you will.
You know, we have enabled all of our people with the latest tools and technologies, and we track it, and we shared at the end of last year. That we had north of 10 million hours, I think it was 12 million hours of learning, which was relative to our size, a disproportionate number if you look at any of our peer sets. Bulk of that learning was in AI and agentic because we have enabled many of you know, frontier courses and you know, courses from Harvard or MIT through our Genome platform, and it is really working well. We talked about at the Investor Day, AI builders and AI practitioners. That progression is again continuing exceptionally well.
Really thrilled as to how our talent is getting remade. We are also hiring, you know, a lot of new talent too, while maintaining the headcount. You know, we have started showing a little bit of, you know, how revenue is decoupling from the headcount. Really pleased and thrilled as to how our employee base is absorbing all of this AI change. On commercial contracts, Puneet, again, you know, I would say we want to nudge more and hard and faster. Very pleased as to how we are signing all of the agentic contracts because that's all is none of that is any time or material or FTE based or anything like that. All of that is more annualized recurring revenues. Also more in Data and AI or Advanced Tech.
Overall, as a franchise, I would want us to nudge more to become non-FD models. We are already at 48%, nearly half of the company is there, but our aspiration is much bigger.
Got it. Got it. With two minutes left, let me ask one last question. Last year, you launched Genpact Next, which included 7%+ revenue growth, and you defined the operating model, where you expect Genpact to be. In last 1 year, what have you learned? How has that strategy evolved versus your plans one year ago? What surprised you? And also from your perspective, what do you think, folks like us, investors, analysts, we don't appreciate enough?
Okay, it'll take more than two minutes, but I'll quickly go. Really thrilled with the progress that we have made on Genpact Next, and the strategy we announced. Strategy is playing right because, you know, we said Advanced tech will grow high teens.
Yeah.
We are growing greater than 20 very quickly. It is because of the product market fit, because of the flywheel effect, because of the flywheel effect from Core Business Services to Advanced Tech and all parts within that, be it Data and AI, consulting, digital solutions partners and so on and so forth, decision support services. All of this flywheel effect and creating the differentiation more through agentic solutions. Look, I think what is less understood, I think I'll characterize it by two or three points. First point is, it is less understood that we have exponential power of big and small. This is what my clients tell us. Our clients tell us that. We are big enough for them to consider us as a Fortune 500 partner, and we are small enough to care for every client.
Yeah.
We are big enough to make massive investments. We are small and agile enough to change and dance on time and move with speed. We are demonstrating the speed. What is also less understood is that our context-rich process intelligence is shaping up as differentiation in a significant way because we are bringing technology there. What is also less appreciated is the leadership team. The leadership team in our sector that we have brought is the most differentiating factor.
It is leadership team that existed for 25, 30 years, people like me and many others, and leadership team that we have brought net new, who are, you know, tech natives, and we are with one singular purpose of making us the most premier agentic solutions company in our chosen spaces, and we are moving with speed that we are demonstrating. I think we'll show better and better results.
Absolutely. Appreciate it. Thank you so much.
Thank you. Thank you, Puneet. Thank you.