TELUS International Hangs Tough on 2025 Guidance—Is Now the Time to Bet on This Digital Giant?

Let me tell ya, investors in TELUS International (NYSE: TIXT) are in for a wild ride. The company just reaffirmed its 2025 earnings guidance despite some rocky first-quarter numbers, and that’s either a bold move or a sign of confidence. Let’s break this down.

First, the facts: TELUS Digital (as it’s now branded) is sticking to its targets of 2% organic revenue growth, $400 million Adjusted EBITDA, and $0.32 per share in earnings for 2025. But here’s the catch—the Q1 results weren’t pretty. Revenue rose just 2% to $670 million, while profits cratered. The net loss hit $25 million, down from a $28 million profit a year ago. Costs are soaring, with salaries and benefits eating into margins. So why the confidence?

The answer lies in the long game. TELUS isn’t just a call-center operator—it’s positioning itself as a tech partner for the AI era. Let’s dive into the numbers.

The Good: Growth Anchors and Tech Bets

TELUS has two pillars holding it up: its anchor client, TELUS Corporation (which accounts for 30% of revenue), and its push into AI-driven digital solutions. In Q1, its AI & Data Solutions division saw strong engagement, and the company is rolling out tools like its proprietary Fuel iX platform to manage AI governance. That’s critical as clients scramble to navigate GenAI’s risks and rewards.

The company also won a big client in a “leading social media company,” which Cramer would call a “goldmine” if it pencils out. Plus, it’s expanding its workforce by 5% to 78,424 employees—a sign it’s doubling down on scaling services.

The Bad: Costs and Cash Flow Woes

Now the ugly truth: TELUS is burning cash. Free cash flow plunged to $41 million in Q1, down from $107 million a year ago, thanks to higher expenses and slower client payments. Its leverage ratio ticked up to 3.4x, nearing its 3.0x upper target. If the economy tanks, those debt levels could become a problem fast.

And let’s not ignore the elephant in the room: reliance on big clients. The top five account for 45% of revenue. If one of them ditches TELUS—or demands steep discounts—the whole house of cards could collapse.

The Ugly: The “Cost Discipline” Mirage

Management insists it’s cutting costs, but expenses jumped 10% year-over-year in Q1. Adjusted EBITDA fell to $90 million, half the profit margin of a year ago. The company blames “unfavorable client dynamics,” but investors are asking: Is this a temporary glitch or a sign of structural issues?

Why They’re Sticking to Guidance—and Whether You Should

TELUS is banking on two things: client retention and AI-driven efficiency. The 2% revenue growth target is modest, but achievable if existing clients expand their contracts. The social media win and TELUS Corp’s stability provide a floor. Meanwhile, investments in cloud and AI tools could pay off as clients shell out for automation.

But here’s the rub: The stock is down over 20% year-to-date, and the Q1 miss has spooked traders. The question is: Is this a buying opportunity, or a trap?

The Verdict: Hold for Now, but Watch the Debt

TELUS isn’t a slam dunk, but it’s not a write-off either. The reaffirmed guidance shows management’s confidence in its long-term bets, and the AI push is a smart move in a tech-driven economy. However, the company needs to trim costs and boost cash flow to stay afloat.

If I were in the audience of Mad Money, this is what I’d say: Hold TIXT if you’re patient. The 2025 targets are conservative enough to hit, and the AI angle could surprise on the upside. But if the leverage ratio breaches 3.5x or free cash flow stays anemic, bail fast.

Final Take: TELUS is a “grind-it-out” play. The 2% revenue growth and $400M EBITDA goals are achievable, but only if costs get under control. Investors should wait for a clearer signal—like a beat on Q2 earnings—before jumping in. This isn’t a moonshot stock, but it could be a steady earner if management executes.

Bottom Line: TIXT is a “hold” with an asterisk. Keep an eye on that debt—and pray for some AI magic.