EXL (EXLS)

Data analytics and digital solutions company ExlService Holdings (NASDAQ:EXLS) reported Q3 CY2025 results topping the market’s revenue expectations, 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.

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.

A combination of increasing reliance on data and analytics across various industries and the desire for cost efficiency through outsourcing could mean that companies in this space gain. As functions such as payroll, HR, and credit risk assessment rely on more digitization, key players in the data & business process services industry could be increased demand. On the other hand, the sector faces headwinds from growing regulatory scrutiny on data privacy and security, with laws like GDPR and evolving U.S. regulations potentially limiting data collection and monetization strategies. Additionally, rising cyber threats pose risks to firms handling sensitive personal and financial information, creating outsized headline risk when things go wrong in this area.

EXL competes with large global technology and business process outsourcing firms including Accenture, Cognizant, Genpact, and Tata Consultancy Services. In specialized areas like healthcare analytics, the company faces competition from industry-specific providers such as Cotiviti and Optum Health.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

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 grew its sales 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.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. 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 commendable and suggests the market is forecasting success for its products and services.

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 been trending up 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.

In Q3, 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.

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%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

EXL has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.1% over the last five years, quite impressive for a business services business.

Taking a step back, we can see that EXL’s margin dropped by 1.1 percentage points during that time. We’re willing to live with its performance for now but hope its cash conversion can rise soon. If its declines continue, it could signal increasing investment needs and capital intensity.

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).

EXL’s five-year average ROIC was 21.1%, beating other business services companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.

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. Uneventfully, EXL’s ROIC has stayed the same over the last few years. Rising returns would be ideal, but this is still a noteworthy feat since they're already high.

EXL reported $390.1 million of cash and $434.5 million 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 $403.6 million of EBITDA over the last 12 months, we view EXL’s 0.1× net-debt-to-EBITDA ratio as safe. We also see its $10.44 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 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.

Updated: December 3, 2025 at 11:28 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

EXL is a cream-of-the-crop business services company. First of all, the company’s revenue growth was exceptional over the last five years. On top of that, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, and its impressive operating margins show it has a highly efficient business model.

EXL’s P/E ratio based on the next 12 months is 19x. Scanning the business services landscape today, EXL’s fundamentals clearly illustrate that it’s an elite business, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $52.29 on the company (compared to the current share price of $40.15), implying they see 30.2% upside in buying EXL in the short term.