I would now like to introduce Trent Thrash, Interim Chief Financial Officer. Trent, you may begin.
Hello, everyone, and thank you for joining us for today's TaskUs earnings call. Full details of our results and additional management commentary are available in our earnings release, which can be found on the investor relations section of our website at ir.taskus.com. We have also posted supplemental information on our website, including an investor presentation and an Excel-based financial metrics file. Before we start, I would like to remind you that the following discussions contain forward-looking statements within the meaning of the Federal Securities Laws, including, but not limited to, statements regarding our future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here. You should not place undue reliance on any forward-looking statements.
Factors that could cause actual results to differ from these forward-looking statements can be found in our annual report on Form 10-K. This filing, which may be supplemented with subsequent periodic reports, is accessible on the SEC's website and our investor relations website. Any forward-looking statements made on today's conference call, including responses to questions, are based on current expectations as of today, and TaskUs assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. The discussions throughout today's call contain non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our earnings press release, which is available in the IR section of our website. Now, I will turn the call over to Bryce Maddock, our Co-founder and Chief Executive Officer. Bryce.
Thank you, Trent. Good afternoon, everyone, and thank you for joining us. In the first quarter, we delivered a solid start to the year, generating $306.3 million in revenue, and outperformed the top end of our revenue guidance by $8.3 million or approximately 3%. Our year-over-year revenue growth rate of 10.3% helped us generate $58.6 million in adjusted EBITDA or an adjusted EBITDA margin of 19.1%. This was approximately 3.5 ahead of the adjusted EBITDA dollars implied by the top end of our Q1 margin guidance. During the quarter, we successfully completed the previously announced refinancing of our credit facilities and returned more than $330 million to our shareholders in the form of a $3.65 per share special dividend.
Strong Q1 cash generation of $42.2 million in adjusted free cash flow allowed us to end the quarter with $152 million in cash and a net debt to adjusted EBITDA ratio of less than 1.4 x after the distribution of that special dividend. This level of leverage enables us to continue investing in the business as we look to take advantage of emerging growth opportunities. To that end, during Q1, we made progress on our strategic goals of expanding our agentic AI consulting practice, enhancing our fast-growing AI service offerings, and driving AI deeper into our internal operations. In summary, this quarter's performance underscores the resilience of our business, the critical role we play in our clients' most complex operations, and our steadfast focus on driving long-term shareholder value in the AI era.
In a dynamic macroeconomic environment where many enterprises are carefully scrutinizing vendor spend, clients are choosing TaskUs as a critical partner, and we continue to outpace the competition by offering an exceptional combination of quality, specialized expertise, and technology-enabled efficiency. Throughout all of this, we remain laser-focused on long-term results. Our goal is to increase revenue, EBITDA, and earnings per share over a multi-year horizon at a rate that is among the best in the industry. Next, I'll go through some of the highlights of our Q1 performance and 2026 outlook. I'll hand it over to Trent to walk through our financials in more detail. Q1 revenue was $306.3 million, an increase of 10.3% on a year-over-year basis. As expected, growth from our largest client moderated to 1% compared to Q1 of 2025.
As a result, revenue concentration from our top client was 24% in Q1, a 2% sequential and year-over-year decline. While our long-term strategic partnership with this client remains very strong, we continue to expect revenue to be negatively impacted by their automation efforts throughout 2026 before seeing the benefit of vendor consolidation in the medium term. Excluding our top client, year-over-year growth from all other clients was again robust at 13.5% for the quarter. This was fueled by strong growth from clients two through 20 of well north of 20%. Notably, both of these client cohorts' growth rates accelerated when compared to Q4. Our sales and client service teams sustained their impressive momentum from Q4 into the new year, delivering a remarkable performance in Q1 of 2026.
Q1 was defined by the deepening of our established partnerships with more than 75% of signings driven by wins from existing clients. While signings remained well balanced across each of our verticals, we saw exceptional strength within our mobility, logistics, and travel, social media, healthcare, and technology verticals. Our Q1 signings and pipeline also included an acceleration of demand for onshore delivery in our AI Services offering. In summary, our continued signing success in high-growth sectors reinforces our trajectory for solid full-year growth from clients outside of our largest client relationship. Let's look at our service line performance for the quarter in more detail. Digital Customer Experience delivered $168.5 million in revenue, representing year-over-year growth of 5.4%. DCX growth was primarily driven by clients in our technology, mobility, logistics, and travel, entertainment and gaming, and healthcare verticals.
Given our year-to-date revenue and signings performance, we continue to expect DCX growth in the mid to high single digits for 2026. We continue to believe the execution of our strategic plan to invest in operational excellence and premium support offerings is enabling us to gain wallet share across our Digital Customer Experience clients. Turning to Trust & Safety, we generated $75.8 million in revenue, reflecting approximately 4.7% year-over-year growth. Here, our growth was primarily driven by clients in our financial services, technology, and social media verticals. Trust & Safety growth rates have slowed because of our largest client's automation efforts. Additionally, we've seen certain Trust & Safety revenues shift to our AI Services service line as we help clients automate certain moderation workflows while continuing to support our clients in the most sensitive areas that require nuanced human intervention.
Given these factors, we expect our Trust & Safety revenues to decline year-over-year starting in Q2 and for the full year of 2026. Moving on to AI Services, this specialized service offering continues to be our fastest-growing service line, with revenue increasing 36% year-over-year to $61.9 million. Here, our strong growth was primarily attributable to the ongoing ramp of clients in our mobility, logistics, and travel vertical, including our largest autonomous vehicle client and clients in the robotics industry and our technology vertical. In total, more than 40% of our Q1 signings were in AI Services, a positive indicator regarding the continued upward trajectory of this service line's performance for the remainder of 2026.
Our investments in our AI service offerings and talent to ensure the safety and accuracy of the world's leading foundational models, hyperscalers, autonomous vehicles, and robotic technologies are paying off. Moving on from service line highlights, I'd like to provide a brief update on our strategy for the AI-driven future. As part of the first pillar of our AI strategy, we're doubling down on our AI service offerings. Here, we're increasingly excited about the high-growth opportunities within physical AI, autonomous vehicles, and robotics. Today, TaskUs provides a broad range of services to leading autonomous vehicle and robotic delivery companies. From data collection and mapping to critical remote assistance and roadside emergency response, we're building an entirely new practice to support this emerging sector.
Over the past year, we've seen growth rates accelerate across this space, and we believe revenue from clients in this space will more than triple in 2026. We are also seeing significant momentum for physical AI from companies building humanoid and other robots. Here, we provide high-fidelity egocentric data capture and imitation learning to train general-purpose robots for real-world tasks. We believe this market is set for material growth based on the pace of investment being made in this space. Turning to the second pillar of our AI strategy, investments in our AI consulting practice, I wanna highlight an example of our operational evolution with a streaming service client. This client challenged TaskUs to deploy AI agents to improve their time to resolve while dropping their overall support cost. In just a few weeks, we successfully integrated agentic AI to transform the client's support ecosystem.
Rather than simply routing tickets, our AI agents autonomously navigate the client's back-end systems to diagnose streaming and account issues across various hardware environments. By deploying autonomous agents, we're not only providing subscribers with instantaneous 24/7 resolution but are also allowing our human teammates to focus on higher-value sales and retention workflows. This shift from manual troubleshooting to AI-led service delivery underscores our commitment to driving efficiency and superior customer experience for our high-growth technology clients. Lastly, the third cornerstone of our strategy for the AI era remains the automation of our internal processes to drive margin expansion and operational excellence. While we previously discussed our successful incorporation of agentic AI into our talent acquisition workflow, we're also leveraging agentic AI to automate our HR help desk function, where our teammates generate tens of thousands of inquiries regarding benefits, payroll, leave management, and policy clarification.
Today, our agentic AI HR specialist integrates directly into our internal communication channels and back-end systems and is able to autonomously solve approximately 50% of general HR inquiries. This shift allows our HR business partners to move away from ticket management and toward high-impact initiatives like employee engagement and leadership development. Use of agentic AI across our support teams will ultimately enable us to reduce what we spend on support as a % of revenues and further improve our margins. Before handing it over to Trent to provide more details on our Q1 results, I wanna touch on our 2026 outlook.
In light of our strong Q1 operational execution and sales momentum, and our expectation that our largest clients' AI-driven efficiency initiatives are likely to negatively impact our Trust & Safety revenues in 2026, we're reiterating our full year revenue outlook of $1.21 billion-$1.24 billion. At the $1.225 billion midpoint of our revenue guidance, we expect full year adjusted EBITDA margins to remain approximately 19%. We're increasing our outlook for adjusted free cash flow by approximately 10% to $110 million at the midpoint, with a range of $105 million-$115 million.
For the second quarter, we expect revenue to be between $296 million and $298 million or approximately 1% year-over-year revenue growth at the midpoint. Adjusted EBITDA margins are expected to approximate 18%. While this guidance implies a sequential quarterly revenue decline, the Q2 guidance range is the same as the range we provided for Q1 revenues on our last call. Q2 revenues will be impacted by the automation-driven revenue declines at our largest client. Here we continue to have a very strong relationship and expect to benefit from vendor consolidation. We will continue to face revenue headwinds at this client in 2026. Q2 margins are impacted by three factors. First, our AI Services business is seeing disproportionate amounts of demand for onshore delivery. While this is accretive to revenue, onshore work generally comes at a lower margin profile.
Second, our annual wage increases were made effective in April. Finally, our margins are and will be impacted by our ongoing investments in our emerging growth and AI transformation initiatives. We believe that those investments are paying off. As noted earlier, Q1 revenue at clients number two through 20 grew over 20%, while growth in our top 10 clients, excluding our largest client, was even more impressive at well over 30% for the quarter. We expect growth rates amongst clients two through 20 to remain in the strong double digits in Q2 and for the second half of 2026. Given the overall macro backdrop in the BPO industry and the outlook for our largest client, we're pleased with the enduring strength of our performance, the demand for our premium DCX offerings, and the advancements we're making to scale AI Services.
I look forward to updating you on our Q2 results and 2026 guidance during our next call. With that, I'll hand it over to Trent to go through our Q1 financials and 2026 outlook in more detail.
Thank you, Bryce, and good afternoon, everyone. In the first quarter, we earned total revenues of $306.3 million, reflecting an increase of 10.3% compared to the previous year. This was well ahead of our guidance and consensus analyst estimates for the quarter. Approximately 70% of our growth came from clients that have been with TaskUs longer than one year. This strong top-line performance demonstrated our ability to consistently execute against our strategic priorities and capture market share, even amidst a dynamic macroeconomic backdrop. As Bryce mentioned, we saw solid year-over-year growth across all three of our specialized service lines. AI Services grew a remarkable 36.1%. DCX growth was slightly improved over Q4 at 5.4%, and Trust & Safety growth was 4.7%.
These results were primarily due to strong volume performance and program expansions from existing clients, as well as new client ramps exceeding expectations across a broad range of verticals during the quarter. The strong performance was partially offset by low single-digit growth from our largest client, which weighed on our consolidated and Trust & Safety growth rates. In the first quarter, our largest client represented 24% of total revenue, down from 26% in 2025. Our top 10 client concentration was 63%, up from 57% in Q1 of last year, and our top 20 clients accounted for 75% of our revenue, up from 70% in the prior year period. Excluding our largest client, revenue from the rest of our business grew approximately 13.5% on a year-over-year basis in Q1 compared to approximately 12% growth in Q1 of 2025.
This growth rate was slightly improved on a sequential basis despite the quarter-over-quarter impact from lower seasonal revenues and two fewer working days. These results are a direct reflection of our strategy to focus our resources on our largest opportunities. In doing so, we intentionally partner with the fastest-growing disruptors in the world. As they scale their operations and consolidate their vendor base, we scale with them, capturing an increasingly larger share of their outsourced spend. Looking at our geographic delivery mix in the first quarter, we generated 53% of our revenues in the Philippines, 13% in the United States, 13% in India, and 21% from the rest of the world, primarily in Latin America and Europe. In Q1, we saw particularly strong revenue performance in the United States, Colombia, and Greece.
We ended the quarter with approximately 64,400 global teammates, a decrease of approximately 1,100 teammates from the end of Q4. This was primarily the result of seasonal revenue falloff. Next, I'd like to provide additional details about our service line performance. In the first quarter, our DCX offering generated $168.5 million in revenue and year-over-year growth of 5.4%. Of this growth, more than 40% was attributable to clients we ramped within the last year. Overall, DCX growth was primarily attributable to strong performance from existing clients in our entertainment and gaming, mobility, logistics and travel, healthcare and technology verticals, and new clients in technology. This growth was partially offset by a decrease in revenue from existing clients in our financial services and retail and e-commerce verticals.
In terms of signings in Q1, DCX again demonstrated remarkable resilience in the first quarter. We saw broad-based strength in signings across most of our vertical markets, including mobility, logistics and travel, healthcare, technology, social media, financial services, and professional services and industry. Our Trust & Safety offering, which includes our content moderation and financial crime and compliance services, grew by 4.7% compared to Q1 of 2025, resulting in $75.8 million of revenue. Here, the contribution to growth from new and existing clients was well-balanced at approximately 50% each. From a vertical perspective, existing client growth in Trust & Safety was primarily driven by technology, social media, and financial services offset by a decline in retail and e-commerce. New client growth was strongest in our financial services vertical.
Our AI Services topped 30% year-over-year growth for the sixth quarter in a row at 36.1%, resulting in $61.9 million in revenue. This was primarily as a result of expansion in services we provide to new and existing clients in our mobility, logistics and travel, and technology verticals. Overall, existing clients contributed in excess of 80% of AI Services' total growth for the quarter, led by one of our long-term autonomous vehicle clients. From a signings perspective, we're seeing strong demand signals for AI Services from clients within our mobility, logistics and travel, and social media verticals. Moving on to the drivers of our income statement performance.
In the first quarter of 2026, we earned adjusted EBITDA of $58.6 million, a 19.1% margin, which compared favorably to the $56.4 million of adjusted EBITDA implied by the midpoint of our initial Q1 guidance. As a reminder, our year-over-year and sequential margin declines were expected and reflect several factors, including geographic delivery mix shift to lower margin U.S.-based delivery and our strategic investments in emerging growth opportunities and the strengthening of our AI capabilities. Our cost of service as a percentage of revenue was 64.6% in the first quarter compared to 61.6% in Q1 of the prior year. The increase was primarily driven by several factors, including the impact of annual personnel cost inflation, new facility expansions, and the delivery mix shift and growth investments I just mentioned.
These factors were partially offset by the run rate benefit of operating efficiency improvements made during the second half of 2025 carrying over into Q1. In the first quarter, our SG&A expenses were $58.3 million or 19% of revenue. This compares to SG&A in Q1 of 2025 of $57.4 million or 20.7% of revenue. The decline as a percentage of revenue reflected our continuous efforts to optimize overhead costs and a reduction in stock-based compensation expense. These factors were partially offset by transaction costs related to our special dividend and refinancing. Adjusted net income for the quarter was $32.8 million, and adjusted earnings per share was $0.35. By comparison, in the year-ago period, we earned adjusted net income of $35.9 million and adjusted EPS of $0.38.
Our weighted average share count was relatively consistent and therefore not a material driver of our adjusted EPS performance. Now, moving on to the balance sheet. Cash and cash equivalents were $152.3 million as of March 31st, 2026, compared with a December 31st, 2025 balance of $211.7 million. The decline in cash was primarily due to special dividend and refinancing related payments of approximately $84 million, offset by free cash flows for the quarter. Our net leverage ratio continued to be healthy at less than 1.4 x at the end of Q1. As a reminder, we calculate this ratio as total debt less cash divided by adjusted EBITDA for the trailing 12-month period.
Our refinanced $500 million term loan maturing in March of 2031 bears interest at SOFR plus 2.75%, and our new $100 million revolver remains undrawn. Cash generated from operations on a year-to-date basis was $46.3 million through Q1 of 2026 as compared to $36.3 million through Q1 of 2025. The increase was primarily due to the positive impact of changes in working capital stemming from lower Q1 revenue and stronger cash collections. Year-to-date adjusted free cash flow was $42.2 million or 72.1% of adjusted EBITDA. Our Q1 year-to-date CapEx decreased to $10.2 million compared to $14.5 million through Q1 of 2025, primarily due to lower facility build-out and technology refresh expenditures.
As a result, we now expect CapEx to be approximately $50 million for the year, a reduction of $10 million compared to our initial 2026 outlook. In terms of our financial outlook for the remainder of the year, we are reiterating our full year 2026 revenue range of $1.21 billion-$1.24 billion, resulting in a midpoint of $1.225 billion. We also still expect to earn full year 2026 adjusted EBITDA margins of approximately 19% at the midpoint of our guidance. We are increasing our full year adjusted free cash flow outlook to $110 million at the midpoint, with a range of $105 million-$115 million.
As a reminder, adjusted free cash flow excludes the impact of certain costs that are non-recurring and outside the ordinary course of business. For the second quarter, we expect revenues to be in the range of $296 million-$298 million, reflecting growth of 1% at the midpoint in Q2. We expect our adjusted EBITDA margin to be approximately 18%, which includes the impact of wage increases and continued investments to support our revenue growth and AI transformation initiatives. As a reminder, our margin guidance is based on current foreign exchange rates. Deterioration in the value of the U.S. dollar would put downward pressure on our margin performance. In summary, based on a successful Q1, we are reaffirming our annual guidance despite continued uncertainty at our largest client.
Our sales and CS teams continue to deliver a strong pipeline in signings, particularly within AI Services. Within Digital Customer Experience, we continue to take share from the competition based on our premium support offerings, delivery excellence, and advancements in AI transformation. None of this would be possible without the dedication of our talented teammates around the globe. Now I'll hand it back to Bryce to close us out.
Thank you, Trent. Before we open for questions, I'd like to share another TaskUs teammate story. Our growth is anchored in a culture that empowers the individual, a philosophy captured by our core value, inspire others by believing in yourself. We see the tangible results of this daily. Take Iza Shahibudin, a quality analyst in Malaysia. On her own initiative, Iza launched a grassroots tuition program to help underprivileged youth, demonstrating how our teammates' personal missions often become catalysts for community transformation. In alignment with Iza's mission, we have built the TaskUs NextGen Scholarship Program. In 2025, we awarded scholarships supporting nearly 2,700 children of our teammates around the world. This isn't just an investment in education. It's a retention engagement engine that secures the future of our teammates' families while empowering parents to reach their full career potential.
From Iza's local leadership to our global scholarship initiatives, TaskUs remains committed to a culture where personal confidence and corporate responsibility drive our collective success. With that, I'll ask the operator to open the line for our question-and-answer session. Operator?
Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Puneet Jain of JP Morgan. Please go ahead.
Hey, thanks for taking my question. Can you talk about like your expectations of contract margins, revenue profile over its life when you provide AI consulting services to an existing DCX customer?
Puneet, thanks so much for the question. Obviously, we're investing heavily upfront in every one of our AI consulting engagements. The goal is to drive these consulting engagements towards outcome-based pricing arrangements, in which we combine both technology and talent in a single price per solution. At this stage, we've done a number of pilots and are in live production with a number of clients on our AI-enabled DCX solution. In all of those cases, we're acting as a reseller for our partners, Decagon and Regal, and marking up the preferential pricing that we're able to get from them. That's the kind of first phase of that engagement.
Long term, we're hoping that we can wrap the AI solution as a single price for both the technology solution and the talent solution, getting paid for resolving cases. We think that will put us in control of our margin profile and really incentivize us to expand margins by driving greater AI efficiency gains.
Interesting. No, thanks for that. Like the other area that's growing fast, like the AI Services, can you talk about like scalability of that service line, given like you use like a combination of freelancers and full-time employees in that business? Given like how fast that service has grown in last couple of years and ongoing demand for AI Services, can you potentially double that service in next couple of years operationally? Can you scale it up operationally to sustain current level of growth for next two or three years?
Yeah, Puneet, thanks for that. Obviously, this is the brightest spot in our business at the moment is our AI Services practice. In Q1, for the sixth quarter in a row, that practice grew at over 30% year-over-year. We absolutely can double, if not more than double, the size of this business. When we look out across the space, there are a number of players that have scaled into the hundreds of millions, if not billion-dollar-plus, revenue driven primarily or exclusively from AI Services. We're competing with those players today for the work that we're doing for foundational models and social media companies. We also have an interesting practice inside of autonomous vehicles where we're seeing significant growth.
We think we're uniquely positioned to combine both freelancer and full-time talent to support the scaling of autonomous vehicles across not only the United States, but the globe. We're really excited about that part of the practice as well. We think it differentiates us from some of the other AI service players. This is an incredibly exciting area of our business and will lead to the reinvention of other components of the business over time.
Okay. Thank you.
Thank you. One moment for our next question. Our next question comes from the line of Jonathan Lee of Guggenheim. Please go ahead.
Great. Thanks for taking my questions. You've talked about expectations for contraction of your largest client, and they've since formalized their AI-driven Trust & Safety roadmap publicly. Now a quarter in, is the pace of decline tracking to plan or accelerating? And can you size a floor where their outsource spend may stabilize, especially given your expectation of benefit from vendor consolidation there?
Thanks, Jonathan. Yeah, so at this stage, we've continued to have conversations regularly with our largest client. We know that their plans and investments are all driven towards automating large swaths of the work that are currently done by outsource vendors. We're in a privileged position given the geographic footprint that we've got for the client. It aligns with where they're taking the business strategically in the future. They've continued to reaffirm their commitment to consolidate share with us among a small handful of other vendors over time. What we're seeing in these numbers is the original plan that we expected in terms of automation taking a portion of the volumes over the course of 2026.
As we head into 2027, we expect to benefit from vendor consolidation. The uncertainty we talked about on the call really comes down to the pace of that automation and whether it accelerates beyond those initial expectations. For the purposes of providing the guidance today, we kept that automation in line with the expectations that we provided at the start of the year, which is truly the latest guidance that we've received from that customer.
Got it. Thanks for that, Bryce. Just as a follow-up, you know, you reiterated the full year outlook, and Q2 is expected to be impacted by that largest client. Now, that implies a pretty meaningful sequential step-up in the back half. What gives you confidence in that ramp? Is it signed deals you have to go live or pipeline you still need to convert?
These are ramp plans primarily with existing clients, so that the AI Services side of the business is seeing significant growth across a number of customers. We expect that to lead to material step-up in quarter-over-quarter revenue in the back half of the year. You know, I'll also say what I said on the call, which is, while the guidance we're providing today for Q2 shows a step down in revenue from Q1 to Q2, the guidance itself is actually the same as the guidance we provided for Q1, when we initially provided our guidance. We're providing guidance that we feel highly confident we'll be able to deliver upon or exceed for Q2.
Appreciate that, Bryce.
Thank you. One moment for our next question. Our next question comes from the line of Jacob Haggarty of Baird. Please go ahead.
Hey, guys. This is Jacob on for Dave Koning. Is there gonna be a chance with the AI Services you said coming a lot on onshore to eventually offshore this volume where we get a similar dynamic that we've seen for the past, call it a decade or so, where you're getting that margin benefit from offshoring things that are currently onshore?
There is right now what we're seeing is a lot of these initial projects the clients prefer to launch closer to their operations. It sort of mirrors the trend that we saw inside Trust & Safety, you know, in the first few years of that business where there was large-scale growth onshore. We believe that this will probably follow the same trend, and we'll shift certain parts of that operation into offshore delivery over time. With that being said, there are certain components of the onshore operations that will likely remain onshore. In some cases, that's because of cultural context around the type of data that's being collected and annotated.
In other cases, it's actually because the operations require a physical market presence, when dealing with things like autonomous vehicles or delivery robots. It'll be an interesting dynamic to watch over time, but certainly, in the years to come, we would expect to see some of this revenue shift to a higher margin offshore environment.
Gotcha. Nice. Just as a follow-up here, so I think you guys called out social media clients and Trust & Safety actually being good this quarter. Are you seeing any other social media clients or other clients in Trust & Safety moving towards automation in the same way that your largest client has? Is there still a lot of growth coming from, you know, those parts of Trust & Safety?
Yeah. Overall, Trust & Safety was resilient in Q1. We do expect, as we said on the call, Trust & Safety revenues to decline for the full year, and so we'll see a decline in year-over-year revenue for Trust & Safety starting in Q2. That's being primarily driven by our largest client, but we've also seen somewhat similar trends across other social media customers where we're doing Trust & Safety work. Some of that work is being shifted into AI Services, where the work that we've done to build the models that have automated Trust & Safety workflows requires ongoing maintenance of those models doing evals and ensuring that policies that are being updated are properly trained. There's gonna be some shift of that revenue from Trust & Safety to AI Services.
The predominant reduction in Trust & Safety revenue is truly just being driven by automation. At this stage, it's safe to say that automation is most materially impacting our Trust & Safety business.
Thank you. One moment for our next question. Our next question comes from the line of Matt Dezort of William Blair. Please go ahead.
Great. Thanks. This is Matt on for Maggie Nolan. Hi, team. I'm curious on the AV robotics and foundation model demand. I think you called out you expect those revenues to triple year-over-year now in 2026. I'm wondering if that's apples to apples with the doubling you laid out last quarter, how you're seeing that demand across new and existing clients, and I guess just the durability of growth that you see in these verticals.
Within AI Services, this is the place that's growing the fastest, the work that we're doing for autonomous vehicles and robotics. What I'd say there is, we're seeing an incredible amount of investment go into this space. The autonomous vehicle rollout is much further along in its development. We've gone from five to seven years ago, a period of collecting and annotating data, to a period in which we're actually doing live remote and field operations to actually bring these vehicles to customers and ferry customers around cities. The scale that's happening in that space over the next year is gonna be pretty exponential.
Inside robotics, we're closer to where we were, say, five years ago in autonomous vehicles, where the focus is primarily on data collection, data annotation, and evals to get these physical AI models to work effectively. There we're investing heavily in bringing in industry experts to really develop that practice and ensure that we capture the growth that we expect that to see in that market. We've seen other players inside AI Services build businesses that are worth hundreds of millions, if not billions of dollars around the expert answer space. A number of players that really help foundational models with recruiting experts. TaskUs did okay in that space, but it wasn't our core business.
I would say that we didn't deliver as well as I would have hoped. When it comes to this robotics opportunity, we are determined not to miss the opportunity, and we think we're better positioned given the skill sets that are required to do this physical AI workflows. I'm excited to keep track of that as well as the growth in the autonomous vehicle space in the quarters and years to come.
Appreciate that. I guess can you just double-click on macro versus 90 days ago? I guess what impacts are you seeing from lingering tariffs, straits being shut down? I know the Philippines moved to a four-day workweek, just curious how, if at all, that's impacted your delivery operations and how you're thinking about the rest of the year. Thanks.
Yeah, thanks so much for that. On, on the demand side, there hasn't been a material impact that we've experienced from, you know, the macro deterioration. We are watching closely on the impact on our employees around the world. Earlier this quarter, I was in the Philippines, and, you know, one of the topics on all of our teammates' minds was the increase in the cost of living in the Philippines. They recently put out numbers with 7.2% inflation, really fed mostly by fuel, and food costs going up.
This is something we're tracking closely in all of the markets that we operate in, the impact that that's having on our teammates and their lives, and ensuring that we're on the front foot doing the right thing by our teammates to make our commitment known to them. Focused on attracting and retaining the best talent in the space. As we see the simpler workflows get automated, it really is the best strategy to ensure that we're attracting that top talent that can focus on the premium and complex work that's left behind. We continue to focus on being an employer of choice in all of these markets. You know, this is a time when we can demonstrate our commitment to our employees by ensuring they're fairly compensated as prices continue to rise.
Thanks.
Thank you. This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.