EXL’s (NASDAQ:EXLS) Q3 Sales Beat Estimates

Data analytics and digital solutions company ExlService Holdings (NASDAQ:EXLS) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 12.2% year on year to $529.6 million. The company expects the full year’s revenue to be around $2.08 billion, close to analysts’ estimates. Its non-GAAP profit of $0.48 per share was 3.2% above analysts’ consensus estimates.

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Chairman and Chief Executive Officer Rohit Kapoor said, “I am pleased to report another strong quarter as we delivered revenue growth of 12% and increased our adjusted diluted EPS by 11%. Our sustained double-digit growth demonstrates the strength of our competitive position as a global data and AI company. EXL’s recognized industry expertise and leadership in embedding AI in the workflow is resonating strongly with the market and fueling our growth with new and existing clients.”

Company Overview

Originally founded as an outsourcing company in 1999 before evolving into a technology-focused enterprise, EXL (NASDAQ:EXLS) provides data analytics and AI-powered digital operations solutions that help businesses transform their operations and make better decisions.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $2.03 billion in revenue over the past 12 months, EXL is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, EXL’s sales grew at an incredible 16% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows EXL’s demand was higher than many business services companies.

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. EXL’s annualized revenue growth of 12.8% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, EXL reported year-on-year revenue growth of 12.2%, and its $529.6 million of revenue exceeded Wall Street’s estimates by 1.2%.

Looking ahead, sell-side analysts expect revenue to grow 10.3% over the next 12 months, a slight deceleration versus the last two years. Still, this projection is admirable and suggests the market is forecasting success for its products and services.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

EXL’s operating margin has risen over the last 12 months and averaged 14.4% over the last five years. On top of that, its profitability was top-notch for a business services business, showing it’s an well-run company that manages its expenses efficiently and benefits from immense operating leverage as it scales.

Looking at the trend in its profitability, EXL’s 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.

This quarter, EXL generated an operating margin profit margin of 14.4%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

EXL’s EPS grew at an astounding 24.4% compounded annual growth rate over the last five years, higher than its 16% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For EXL, its two-year annual EPS growth of 16.4% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, EXL reported adjusted EPS of $0.48, up from $0.44 in the same quarter last year. This print beat analysts’ estimates by 3.2%. Over the next 12 months, Wall Street expects EXL’s full-year EPS of $1.89 to grow 8.8%.

Key Takeaways from EXL’s Q3 Results

It was good to see EXL narrowly top analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Both full-year revenue and full-year EPS guidance were also raised slightly. Overall, this print had some key positives. The stock remained flat at $41.50 immediately following the results.

Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.