Genpact's Q4: The Beat Was Priced In, But Guidance Reset the Expectation Gap

The market's verdict on Genpact's fourth quarter was a shrug. The company delivered a clear beat on the bottom line, but that positive surprise was immediately overshadowed by a guidance reset that widened the expectation gap. The stock's decline of $0.69 to $37.65 tells the real story: the earnings beat was largely priced in, leaving the new focus squarely on a more cautious forward view.

On the surface, the print was solid. Genpact's adjusted EPS of $0.97 topped the analyst consensus of $0.93 by 3.8%. Revenue also came in ahead, with sales of $1.32 billion beating estimates by 0.8%. This was the expected result from a company that had just reported a strong full year, with Advanced Technology Solutions growing 17% and full-year adjusted EPS up 11.3%. The beat was good, but it wasn't a surprise that would move the needle.

The real shock came in the forward guidance. Management set Q1 revenue at a midpoint of $1.29 billion, which is 0.5% below analysts' estimates of $1.30 billion. More importantly, they maintained their full-year growth target at the low end of prior expectations. This created an immediate expectation gap. The market had likely been pricing in a continuation of the strong momentum seen in the final quarter of 2025, but the guidance suggests a near-term slowdown. In the game of expectations, a beat on the past is often less valuable than a clear signal for the future. Here, the future signal was a reset to a lower baseline.

The Growth Engine: Advanced Tech's 17% Surge vs. Core Stagnation

The transformation narrative is clear, but the execution is lopsided. Genpact's 2025 growth was powered almost entirely by its Advanced Technology Solutions (ATS) segment, which grew 17% to $1.204 billion and now represents a quarter of total revenue. This high-flying engine drove the company's margin expansion, with gross profit up 8.3% and adjusted operating income margin improving by 40 basis points. In contrast, the core Business Services segment, which still makes up 76% of the business, grew a mere 3.7%. The split highlights the ongoing shift but also the company's deep reliance on a single, high-growth pillar.

Management's 2026 guidance aims to maintain this acceleration, targeting "at least high-teens" growth for Advanced Tech. That's a strong commitment to keep the engine revving. Yet the segment's size relative to the whole remains a key variable. At 24% of revenue, ATS is still a major contributor, but it is not yet large enough to fully offset the slower-moving core. This creates a tension: the market was expecting a broad-based acceleration, but the reality is a concentrated bet on one segment. For the stock's forward trajectory, the expectation gap hinges on whether ATS can continue its 17% run without the core business catching up.

The guidance reset for overall revenue, which is now expected to grow at least 7%, reflects this dynamic. It's a cautious number that likely factors in the core's modest growth, even as ATS aims for a faster pace. The bottom line is that the company's transformation is real, but it's not yet complete. The high-flying segment is delivering on the promise, but the market's patience for a prolonged period of core stagnation may be wearing thin.

The Agentic Operations Model: Commercial Traction and Margin Impact

The commercial rollout of Genpact's agentic model is showing tangible traction, but the path to broad-based profitability remains selective. The company's push into AI-driven operations is translating into measurable growth, particularly through strategic partnerships and a rapidly expanding solution portfolio. In 2025, partner-related revenue increased nearly 50% year over year, a powerful endorsement fueled by alliances with AWS, Microsoft, Google Cloud, and Databricks. This channel is a key lever for scaling new offerings without heavy upfront investment.

More broadly, the company has built a significant deployment engine. Management states that Genpact has scaled its "AI Gigafactory" and now has more than 400 GenAI solutions in market (deployed or going live). This scale is critical for the model's viability, moving it from pilot projects to a repeatable, productized offering. The commercial impact is clearest in the accounts payable (AP) suite, where the company closed over $200 million in total contract value last year. The model's efficiency is also evident: for existing clients shifting from traditional models, both revenue and gross margin expansion have been "notably above" prior expectations.

This operational shift is directly fueling the company's margin story. The entire 2025 beat on profitability was driven by this acceleration. The adjusted operating income margin improved 40 basis points to ~17.7%, with gross margin expanding 60 basis points. The high-margin, fixed-fee nature of many agentic deals-where about 70% of ATS revenue comes from non-FTE models-is the engine. This is the core of the margin expansion narrative.

Yet, the expectation gap here is about sustainability and breadth. The model is demonstrably profitable on a per-solution basis, but it is not yet large enough to fully offset the slower growth and lower margins of the core business. The 400+ solutions are a start, but they are concentrated in specific verticals and use cases. For the stock to re-rate, the market needs to see this model's profitability spread across a wider base of revenue. The guidance reset suggests management is being cautious, likely factoring in that the high-margin agentic growth will take time to fully lift the overall cost structure. The traction is real, but the margin impact is still a work in progress.

The 2026 Guidance Reset: A Floor or a Ceiling?

The 2026 outlook sets a clear floor but also a high bar. Management's guidance for full-year revenue growth of "at least 7%" provides a baseline, but the market's patience hinges on consistent execution that beats the low end of prior expectations. This isn't a growth target to chase; it's a floor to clear. The real test is whether the company can steadily climb from that floor, validating the transformation story that powered the 2025 beat.

On the earnings cadence, the target for adjusted diluted EPS growth of ~10% implies a steady, if not spectacular, expansion in profitability. However, this target is entirely dependent on the execution of the margin story. The 2025 beat was driven by a 40-basis-point improvement in adjusted operating margin, fueled by the high-margin shift to agentic solutions. For 2026, that margin expansion must continue, even as the company invests aggressively in its technology capabilities. Any stumble here would quickly reset expectations downward.

The key variable to watch is the trajectory of Advanced Technology Solutions. The segment's 17% growth in 2025 was the engine, and management's 2026 plan to maintain that pace is critical. The market needs to see this high-margin engine not just keep running, but also grow large enough to meaningfully lift the overall cost structure. The current guidance suggests a cautious view, likely factoring in that the core business's modest growth will continue to weigh on the top line. The expectation gap will close only if ATS's contribution to both revenue and margin expands faster than the guidance implies.

In short, the 2026 guidance reset is a ceiling on near-term optimism. The stock's valuation will now be determined by whether Genpact can consistently beat this cautious baseline, proving that the transformation is accelerating rather than plateauing. The floor is set; the ceiling is the market's patience.