Business transformation services company Genpact (NYSE: G) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 7.4% year on year to $1.21 billion. On the other hand, next quarter’s revenue guidance of $1.22 billion was less impressive, coming in 2.3% below analysts’ estimates. Its non-GAAP profit of $0.84 per share was 5.8% above analysts’ consensus estimates.
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Genpact (G) Q1 CY2025 Highlights:
- Revenue: $1.21 billion vs analyst estimates of $1.21 billion (7.4% year-on-year growth, in line)
- Adjusted EPS: $0.84 vs analyst estimates of $0.79 (5.8% beat)
- Adjusted EBITDA: $220.6 million vs analyst estimates of $218.9 million (18.2% margin, 0.8% beat)
- The company dropped its revenue guidance for the full year to $4.93 billion at the midpoint from $5.08 billion, a 2.8% decrease
- Management lowered its full-year Adjusted EPS guidance to $3.47 at the midpoint, a 2.5% decrease
- Operating Margin: 15.1%, in line with the same quarter last year
- Free Cash Flow was $17.86 million, up from -$50.23 million in the same quarter last year
- Constant Currency Revenue rose 8.3% year on year (4.3% in the same quarter last year)
- Market Capitalization: $8.66 billion
"We entered 2025 with strong momentum. Revenue in the first quarter grew 8% year-over-year with Data-Tech-AI revenue up 12%, on a constant currency basis, driving adjusted EPS growth of 16%. Looking ahead, our deep process and domain expertise remains a key competitive advantage as we partner with clients to optimize costs and accelerate transformation using AI and other advanced technologies," said Balkrishan "BK" Kalra, Genpact's President & CEO.
Company Overview
Originally spun off from General Electric in 2005 to provide business process services, Genpact (NYSE: G) is a global professional services firm that helps businesses transform their operations through digital technology, AI, and data analytics solutions.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $4.85 billion in revenue over the past 12 months, Genpact is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.
As you can see below, Genpact’s sales grew at a decent 5.9% compounded annual growth rate over the last five years. This shows its offerings generated slightly more demand than the average business services company, a useful starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Genpact’s annualized revenue growth of 5.1% over the last two years aligns with its five-year trend, suggesting its demand was stable. 
We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 5.4% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Genpact has properly hedged its foreign currency exposure. 
This quarter, Genpact grew its revenue by 7.4% year on year, and its $1.21 billion of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 3.9% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 6.6% over the next 12 months, similar to its two-year rate. This projection is above the sector average and indicates its newer products and services will spur better top-line performance.
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Adjusted Operating Margin
Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.
Genpact has been an efficient company over the last five years. It was one of the more profitable businesses in the business services sector, boasting an average adjusted operating margin of 16.7%.
Looking at the trend in its profitability, Genpact’s adjusted operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.
In Q1, Genpact generated an adjusted operating profit margin of 17.3%, up 1.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Genpact’s EPS grew at a solid 9.5% compounded annual growth rate over the last five years, higher than its 5.9% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its adjusted operating margin didn’t expand.
Diving into Genpact’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Genpact has repurchased its stock, shrinking its share count by 9.2%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. 
In Q1, Genpact reported EPS at $0.84, up from $0.73 in the same quarter last year. This print beat analysts’ estimates by 5.8%. Over the next 12 months, Wall Street expects Genpact’s full-year EPS of $3.39 to grow 6.2%.
Key Takeaways from Genpact’s Q1 Results
It was encouraging to see Genpact beat analysts’ constant currency revenue and EPS expectations this quarter. On the other hand, it lowered its full-year revenue and EPS guidance. Overall, this was a softer quarter. The stock traded down 15.3% to $41.99 immediately following the results.
Genpact didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
