Genpact (G): Full Memo
Data date: price as of the 2026-10-16 close (Yahoo Finance). Financials from SEC XBRL company facts, fiscal years 2021–2025 (FY2025 10-K). Guidance from Genpact's Q2 2026 report (Aug. 6, 2026). Q3 2026 results were not yet out at the data date; they are scheduled for Nov. 5, 2026.
Labels: Reported = from a filing or price feed. Estimate = third-party consensus or company guidance treated as an estimate. Assumption = my model input.
1. Investment thesis
What it does: Genpact provides business process management and digital transformation services, mostly to large enterprises (finance and accounting, procurement, insurance and customer operations), plus a growing advanced technology solutions practice (AI, data, and software). General knowledge; not checked against the current 10-K.
How it makes money: Mostly multi-year contracts billed on time, transactions, or fixed fees. Revenue is recurring in the sense that large clients renew, but contracts are re-bid. General knowledge.
Why customers choose it: Process knowledge, scale, and the ability to run and improve operations, not just advise on them. General knowledge.
Competitive advantages: Deep process expertise in finance and insurance, and long client relationships. Advantages are moderate; the industry is competitive and pricing is pressured. Assessment.
Growth drivers: Advanced technology solutions (reported to be up 24% year over year in Q2 2026); AI-enabled services. Reported in press coverage of the Q2 2026 release; verify in the 8-K.
Major threats: Generative AI reduces the labor hours that outsourcing contracts are priced on. Clients may bring work in-house or push for lower unit prices. Assessment.
AI opportunity and disruption: AI can raise margins on existing contracts and create new consulting and data work. The same tools can cut the effort needed per transaction, which would shrink billable volume. The net effect is the central question. Assessment.
What must be true:
- Revenue keeps growing about 7% a year (2026 guidance is at least $5.435B, up about 7%).
- Operating margins hold at about 15% as AI tools are adopted.
- Clients accept AI-driven pricing without large unit-price cuts.
- Free cash flow stays strong enough to fund buybacks and the dividend.
Bull thesis: Genpact is growing revenue about 7%, earns about a 15% operating margin, and trades at about 9x company-guided non-GAAP EPS. It has already grown EPS from $1.91 (2021) to $3.13 (2025) on GAAP. AI could expand its margins and service mix.
Bear thesis: Services revenue is exposed to AI-driven productivity. Growth is only moderate, leverage is higher than peers on a lease-inclusive basis, and a low multiple may reflect expected decline rather than mispricing.
2. Business quality
| Factor | Assessment | Basis |
|---|---|---|
| Revenue model | Contract-based services, mostly recurring in practice | General knowledge |
| Recurring share | Not measured in this pass | Not verified |
| Customer concentration | Moderate; large enterprise clients, no single dominant client verified | Not verified |
| Geographic exposure | Global delivery; US and Europe are major markets | General knowledge |
| Pricing power | Limited to moderate; clients re-bid and push unit prices down | Assessment |
| Market position | Mid-tier global provider, below the largest IT services firms in scale | General knowledge |
| Moat | Narrow | Assessment |
| Switching costs | Moderate: process knowledge and integrations raise the cost of changing providers | Assessment |
| Network effects | None material | Assessment |
| Brand | Moderate within its niche | Assessment |
| Cost advantages | Offshore delivery scale | Assessment |
| Regulatory advantage | None material | Assessment |
| Industry structure | Competitive and fragmented, with large IT services firms and specialists | General knowledge |
| Long-term runway | Moderate; depends on AI-era demand for process work | Assessment |
Moat rating: Narrow. Switching costs are real but not large, and the industry competes on price.
Business quality rating: Average to strong. Operating margin is about 15%, revenue is growing about 7%, and return on equity is about 22%. The business is solid but not exceptional, and the AI question is open.
3. Financial quality (SEC 10-K, fiscal years ended Dec. 31)
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue ($B) | 4.02 | 4.37 | 4.48 | 4.77 | 5.08 |
| Revenue growth | – | 9% | 2% | 6% | 7% |
| GAAP net income ($M) | 369 | 353 | 631 | 514 | 552 |
| GAAP diluted EPS | 1.91 | 1.88 | 3.41 | 2.85 | 3.13 |
| Operating income ($M) | 509 | 502 | 631 | 702 | 750 |
| Operating cash flow ($M) | 694 | 444 | 491 | 615 | 813 |
| Capex ($M) | 53 | 51 | 55 | 83 | 78 |
| Stock-based comp ($M) | 82 | 77 | 89 | 66 | 90 |
| Share repurchases ($M) | 298 | 214 | 225 | 253 | not captured |
| Stockholders' equity ($B) | 1.90 | 1.83 | 2.25 | 2.39 | 2.55 |
Source: SEC XBRL company facts. Reported unless marked derived.
Derived:
- Revenue CAGR FY21–25: about 6% (derived). EPS CAGR FY21–25: about 13% (derived). EPS was volatile, with a 2023 spike.
- Operating margin: about 12.7% in FY21, 11.5% in FY22, then 14.1%, 14.7%, and 14.8% in FY23–25 (derived).
- SBC-adjusted FCF (OCF minus capex minus SBC): $645M in FY25, or 12.7% of revenue (derived).
- FCF per share (SBC-adjusted): about $3.70 on 175.7M shares at FY25 (derived).
- FCF conversion versus GAAP net income: about 133% in FY25 (OCF minus capex, derived).
- ROE: about 22% (Yahoo feed; derived from net income over average equity gives a similar figure).
- ROIC, gross margin, and interest coverage were not computed in this pass.
Cash and debt: Yahoo feed shows total debt of $1.41B (including leases) and cash of $0.52B, for net debt of about $0.89B. The SEC long-term debt line is $1.17B and cash $0.85B at FY25, which implies net debt of about $0.31B. The gap is leases and other items; the feed figure is used for valuation to be conservative. Debt-to-equity is 0.54x on the feed basis.
Share count and dilution: shares outstanding fell from about 190M (FY20) to 176M (FY25), roughly −8% over five years. Reported. SBC is about $90M a year, roughly 1.4% of the market cap per year, so buybacks have more than offset dilution. Full buyback history for FY25 was not captured.
Dividend: $0.75 a year, about a 2% yield (feed).
Buybacks versus SBC: Repurchases of about $200–300M a year over FY21–24 exceeded SBC of $66–89M. Share count fell, so buybacks likely increased value per share, but only if the purchases were made near or below intrinsic value. The stock traded between about $27 and $48 over the past year, roughly 9–15x trailing GAAP earnings.
Improving trends: Revenue growth has moved from 2% (FY23) to 7% (FY25). Operating cash flow rose from $444M to $813M over FY22–25. Operating margin has held near 15% for three years.
Deteriorating trends: Revenue growth was flat in FY23. Net income in FY24–25 is below the FY23 level, which was lifted by unusual items not identified in this pass.
Accounting concerns: GAAP EPS volatility (FY23 $3.41 versus $2.85 in FY24) suggests one-off items. The non-GAAP EPS guidance (at least $4.09 for 2026) is well above GAAP, so the gap should be checked in the 10-K before relying on either figure.
Red flags: None confirmed in the data reviewed. The main open question is whether AI reduces demand for billable process work.
4. Fundamental scorecard
| Metric | Current | 5-year trend | Peer comparison (CTSH / EXLS / ACN) | Assessment |
|---|---|---|---|---|
| P/E, GAAP trailing | 11.9x (on FY25 EPS of $3.13) | 26x (FY21) → 15x (FY25) | — | Below its own history |
| Forward P/E, non-GAAP | 9.1x on guidance ≥$4.09; 8.3x on feed | — | 10.4x / 15.2x / 14.5x | Cheapest of the group on feed data |
| EV / EBITDA | 8.1x (feed) | — | 7.6x / 16.3x / 9.9x | In line with CTSH |
| Price / SBC-adjusted FCF | 9.7x | — | — | Reasonable |
| FCF yield (SBC-adjusted) | About 10% | — | — | Attractive if the business holds |
| PEG | Not meaningful: no stable EPS growth rate established | — | — | Not used |
| Debt metrics | Net debt ~$0.9B (feed); D/E 0.54x | — | CTSH D/E 0.14x; EXLS 0.57x; ACN 0.40x | Average to weak |
| ROE | ~22% | 19–28% range | CTSH 15%; EXLS 26%; ACN 26% | Good |
| Operating margin | 15% | 13–15% | CTSH 17.5%; EXLS 14.6%; ACN 15.3% | In line |
| EPS growth | 13% CAGR FY21–25 | Volatile | — | Moderate |
| Revenue growth | 7% (2025, 2026 guided) | 2–9% | CTSH 4.5%; EXLS 15.6%; ACN 6.2% | Moderate; EXLS is faster |
| Share-count growth | Falling | −8% over five years | — | Positive |
| Dividend yield | ~2% | — | CTSH 2.0%; ACN 3.0% | Comparable |
| Insider ownership | 0.6% (feed) | — | EXLS 2.7%; ACN ~0% | Low |
Forward P/E from the feed (8.3x) implies EPS of about $4.51, which is above company guidance of at least $4.09. The guidance-based 9.1x is the more conservative figure, and I use it below.
5. Competitive position
Major competitors: Cognizant, Accenture, EXL Service, WNS (now part of a larger group), and offshore IT services providers.
Where Genpact is stronger: Process-specific expertise in finance and insurance, and a mid-size footprint that is more focused than the largest firms. Growth (7%) is above Cognizant (4.5%) and Accenture (6.2%).
Where Genpact is weaker: Scale and brand relative to Accenture; lower growth than EXL (15.6%); a balance sheet with more debt than Cognizant.
Valuation: Cheapest of the group on forward P/E in the feed, similar to Cognizant on EV/EBITDA. The discount reflects the market's view of AI risk to services pricing.
Expected return: See section 8. Base-case returns are moderate, and the bear case is weak.
6. Valuation
Model inputs:
- Revenue FY26: $5.435B (company guidance, "at least"; reported guidance)
- SBC-adjusted FCF margin: 12.7% base, from FY25 (reported inputs)
- Net debt: $0.89B (feed; conservative)
- Shares: 167.2M (feed)
- Discount rate: 9% base
- No dilution beyond SBC already deducted
| Assumption | Bear | Base | Bull |
|---|---|---|---|
| Revenue growth, years 1–10 | 4% fading to 2% | 7% fading to 3% | 9% fading to 3% |
| SBC-adjusted FCF margin | 10% | 12.7% | 15% |
| Discount rate | 10.0% | 9.0% | 8.5% |
| Terminal growth | 2.0% | 3.0% | 3.5% |
| Exit multiple (P / SBC-adjusted FCF) | 7x | 10x | 13x |
| Scenario | Fair value / share | Implied market cap | Key assumptions |
|---|---|---|---|
| Bear | $39.93 | $6.7B | Growth slows to 4%; margins compress to 10% |
| Base | $78.24 | $13.1B | Growth 7% fading to 3%; margin holds at 12.7% |
| Bull | $122.46 | $20.5B | Growth 9%; margin rises to 15% |
Current price vs. fair value: $37.26 is about 52% below the base value and about 7% below the bear value.
Margin-of-safety prices (base case): 25%: $58.68. 35%: $50.86.
Sensitivity: at 9.5% the base value is $71.69; at 10% it is $66.08. Analyst mean target is $42.64 (11 analysts, estimate).
How to read this. My base value is well above the analyst target. The gap comes from assuming a 12.7% FCF margin on a growing base, which is the key input. If margins fall to the bear case, value is about $40, close to today's price. A defensible central range is $45–60, with the analyst target at the low end.
Peer valuation: Genpact trades at about 8x EV/EBITDA, in line with Cognizant (7.6x) and below Accenture (9.9x) and EXL (16.3x).
Historical valuation. Year-end price divided by GAAP EPS:
| Year-end | Price | GAAP EPS | P/E |
|---|---|---|---|
| FY21 | $49.50 | 1.91 | 26x |
| FY22 | $43.70 | 1.88 | 23x |
| FY23 | $33.20 | 3.41 | 10x |
| FY24 | $41.80 | 2.85 | 15x |
| FY25 | $46.00 | 3.13 | 15x |
| Now | $37.26 | 3.13 (trailing) | 12x |
The 3-year average (FY23–25) is about 13x. The current 12x is close to it. Growth has been steady, the margin is stable, and capital structure has not changed much, so this comparison is more relevant than most in this memo. It still does not assume mean reversion; the base case uses a 10x exit, below the 3-year average.
7. Expected return
Annualized total return from $37.26, including the $0.75 dividend.
| Scenario | 3 years | 5 years | 10 years |
|---|---|---|---|
| Bear | −9.5% (price $26) | −3.8% (price $27) | +0.3% (price $31) |
| Base | +12.2% (price $50) | +10.1% (price $56) | +7.6% (price $67) |
| Bull | +31.3% (price $81) | +21.8% (price $94) | +13.3% (price $116) |
Decomposition (base, 5 years, approximate): revenue growth about 5–6% a year; margin change near zero; share count shrinking about 1% a year (buybacks above SBC, assumed in the model only through the SBC-adjusted FCF); dividend about 2%; valuation change from 9.7x to 10x, roughly neutral. Derived.
Comparison with a broad index: the base case (10.1% over 5 years, 7.6% over 10 years) is above an index assumption of 7–8% over the long run, but the margin is thin in the 10-year case. Index assumption not verified against current forecasts.
8. Risk analysis
| Risk | Probability | Severity | Evidence that the thesis is breaking |
|---|---|---|---|
| AI reduces billable services volume | High | High | Revenue growth below 3% for two years; unit prices fall |
| Competitive pricing pressure | High | Medium | Operating margin falls below 13% |
| Client concentration | Medium | Medium | Loss of a top-ten client (not verified) |
| Cyclicality | Low | Low | Services are mostly steady |
| Leverage | Low | Medium | Net debt rises above 2x FCF |
| Management and capital allocation | Medium | Medium | Acquisitions at high multiples; buybacks above intrinsic value |
| Accounting quality | Medium | Medium | Persistent gap between GAAP and non-GAAP earnings |
| Dilution | Low | Low | SBC rises faster than buybacks |
| Valuation compression | Medium | Medium | Multiple falls below 8x even as earnings grow |
9. Buffett and Lynch lenses
Buffett-style: partial pass. Understandability is moderate: services businesses are harder to model than consumer brands. The moat is narrow. ROE is about 22% and free cash flow is solid, with a balance sheet that is adequate rather than strong. Capital allocation has been reasonable: share count has fallen. The price is well below the base value, but the base value depends on margins holding in a changing industry.
Lynch-style: Stalwart. EPS grew about 13% a year over five years, with revenue growth in the mid single digits. Lynch would call it a Stalwart rather than a Fast Grower. PEG is not meaningful here, because EPS growth is volatile and the 2026 EPS growth rate is not established. The story is not simple because AI could change the business model.
10. Capital allocation test
Why own Genpact instead of an index? Only if you believe AI supports, rather than erodes, its services pricing, and that its margin holds near 15%. Then the base case returns about 8–10% a year from today's price, with a dividend, and the stock trades near 9x guided earnings. If AI cuts billable volume, the bear case returns about −4% a year over five years. Downside is limited by the low multiple but not eliminated.
The evidence does not yet support a compelling case that Genpact beats an index with high confidence. The Q3 2026 print on Nov. 5 is a near-term checkpoint.
Classification: Attractive below $51. At $37 the stock is below the 35% margin-of-safety price on the base case. Because the base value depends on margins, I would not call it attractive at the current price without the qualifier.
Comparison with peers: against Cognizant, Genpact has higher growth and a similar multiple; against EXL, it is slower-growing and much cheaper. Against Accenture, the valuation discount is larger than the difference in quality.
11. Investment decision dashboard
| Field | Value |
|---|---|
| Current price | $37.26 (Oct. 16, 2026 close) |
| Market cap | $6.2B |
| Enterprise value | $7.2B (feed) |
| Business quality | Average to strong |
| Moat | Narrow |
| Financial strength | Adequate; net debt about $0.9B on a lease-inclusive basis |
| Growth outlook | Moderate: about 7% revenue growth, guided |
| Valuation | Below history and peers; 9x guided EPS |
| Risk level | Medium–high (AI pricing risk) |
| Bear-case fair value | $40 |
| Base-case fair value | $78 (defensible range $45–60) |
| Bull-case fair value | $122 |
| 25% MoS price | $59 (base) |
| 35% MoS price | $51 (base) |
| Expected 5-year base-case CAGR | 10.1% |
| Expected 10-year base-case CAGR | 7.6% |
| Most important bull argument | Cheap on guided earnings with steady growth and a falling share count |
| Most important bear argument | AI reduces billable services volume and pushes unit prices down |
| Biggest unknown | Whether AI expands Genpact's margin or shrinks its revenue base |
| Thesis breaker | Revenue growth below 3% for two years, or operating margin below 13% |
Classification: Attractive below $51. The stock is currently below the 35% margin price on the base case, but my defensible range ($45–60) puts it near fair value. Wait for the Q3 2026 print on Nov. 5 before acting.
Final conclusion
Is this a great business? Solid but not great. It has steady growth, a consistent 15% operating margin, and a falling share count. Its moat is narrow and its industry is exposed to AI-driven productivity gains.
Is the valuation attractive? Yes, relative to its history and peers, at about 9x guided earnings and 12x trailing GAAP. The base-case value is well above the price, but my own defensible range is lower, so the margin of safety is smaller than the model suggests.
What return appears realistically achievable? About 8–10% a year over five years in the base case, with about 2% from the dividend. The bear case is about −4% a year over five years.
What could permanently impair it? Clients reducing billable work faster than Genpact can replace it with higher-margin AI services, combined with price cuts on existing contracts.
Does it justify allocating capital instead of owning the market? Only modestly. The base case is about the same as a broad index, with more risk. It suits an investor who is comfortable with services-sector AI risk and who will wait for a price near $51 or below. This is research, not personalized advice.
Sources
- SEC XBRL company facts for Genpact (CIK via screener cache), FY2021–FY2025 10-K values
- Yahoo Finance market and peer data, Oct. 16–17, 2026 (
memo_peers.json,screen_results_sp400_sp600.csv) - Q2 2026 guidance coverage: MarketBeat, Aug. 6, 2026
- Q3 2026 results date: Morningstar / PR Newswire, Oct. 8, 2026
- Model outputs:
memo_valuation.json
Source caveats: The Q2 2026 EPS figure differs between sources ($0.89 versus $1.00), and the FY2026 guidance figure ($4.09) comes from a secondary report. Check both against the Q2 8-K. Business-quality and moat assessments are general knowledge, not verified against the current filing.