Concentrix (CNXC)

Customer experience solutions provider Concentrix (NASDAQ:CNXC) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 1.5% year on year to $2.42 billion. Guidance for next quarter’s revenue was optimistic at $2.46 billion at the midpoint, 2.3% above analysts’ estimates. Its non-GAAP profit of $2.70 per share was 1.7% below analysts’ consensus estimates.

Company Overview

With a team of approximately 450,000 employees across 75 countries, Concentrix (NASDAQ:CNXC) designs and delivers customer experience solutions that help global brands manage their customer interactions across digital channels and contact centers.

The sector stands to benefit from ongoing digital transformation, increasing corporate demand for cost efficiencies, and the growing complexity of regulatory and cybersecurity landscapes. For those that invest wisely, AI and automation capabilities could emerge as competitive advantages, enhancing process efficiencies for the companies themselves as well as their clients. On the flip side, AI could be a headwind as well as the technology could lower the barrier to entry in the space and give rise to more self-service solutions. Additional challenges in the years ahead could include wage inflation for highly skilled consultants and potential regulatory scrutiny on outsourcing practices—especially in industries like finance and healthcare where who has access to certain data matters greatly.

Concentrix competes with other customer experience providers like Teleperformance, TELUS International, TaskUs, and Foundever Group, as well as with IT and business process services companies including Accenture, Cognizant, and Genpact that offer complementary services in consulting, design, and analytics.

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $9.63 billion in revenue over the past 12 months, Concentrix 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, Concentrix grew its sales at an incredible 15.8% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Concentrix’s annualized revenue growth of 22% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Concentrix reported modest year-on-year revenue growth of 1.5% but beat Wall Street’s estimates by 1.2%. Company management is currently guiding for a 2.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

Concentrix was profitable over the last five years but held back by its large cost base. Its average operating margin of 8.3% was weak for a business services business.

Analyzing the trend in its profitability, Concentrix’s operating margin decreased by 2.5 percentage points 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. Concentrix’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Concentrix generated an operating margin profit margin of 6.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

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.

Concentrix’s full-year EPS grew at an unimpressive 6.8% compounded annual growth rate over the last four years, in line with the broader business services sector.

In Q2, Concentrix reported EPS at $2.70, up from $2.69 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates. Over the next 12 months, Wall Street expects Concentrix’s full-year EPS of $11.62 to grow 3.6%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Concentrix has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 5.5% over the last five years, slightly better than the broader business services sector.

Concentrix’s free cash flow clocked in at $180.7 million in Q2, equivalent to a 7.5% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Concentrix historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.3%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Concentrix’s ROIC averaged 4 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Concentrix reported $342.8 million of cash and $4.89 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.52 billion of EBITDA over the last 12 months, we view Concentrix’s 3.0× net-debt-to-EBITDA ratio as safe. We also see its $154.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was great to see Concentrix’s revenue top analysts’ expectations. We were also glad it raised its full-year revenue and EPS guidance. On the other hand, its EPS and EBITDA missed. Overall, this print was mixed but still had some key positives. Investors were likely hoping for more, and shares traded down 2% to $54.05 immediately following the results.

Updated: July 12, 2025 at 12:00 AM EDT

Before making an investment decision, investors should account for Concentrix’s business fundamentals and valuation in addition to what happened in the latest quarter.

We think Concentrix is a solid business. First off, its revenue growth was exceptional over the last five years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its scale and strong customer awareness give it negotiating power. On top of that, its sturdy operating margins show it has disciplined cost controls.

Concentrix’s P/E ratio based on the next 12 months is 4.9x. Looking at the business services space right now, Concentrix trades at a compelling valuation. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $67.67 on the company (compared to the current share price of $58.62), implying they see 15.4% upside in buying Concentrix in the short term.