Data analytics and digital solutions company ExlService Holdings (NASDAQ: EXLS) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 14.8% year on year to $501 million. The company expects the full year’s revenue to be around $2.05 billion, close to analysts’ estimates. Its non-GAAP profit of $0.48 per share was 8.8% above analysts’ consensus estimates.

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Chairman and Chief Executive Officer Rohit Kapoor said, “We are pleased with our first quarter results and strong start to the year, as we delivered revenue and adjusted diluted EPS growth of 15% and 27% respectively. Our strong business momentum underscores the successful execution of our differentiated data and AI-led strategy and demonstrates the enduring resilience and adaptability of EXL’s business model.”

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.

Sales Growth

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

With $1.9 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’s sales grew at an exceptional 13.8% 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 13.3% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

This quarter, EXL reported year-on-year revenue growth of 14.8%, and its $501 million of revenue exceeded Wall Street’s estimates by 2%.

Looking ahead, sell-side analysts expect revenue to grow 10.7% over the next 12 months, a slight deceleration versus the last two years. Despite the slowdown, this projection is admirable and suggests the market is forecasting success for its products and services.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

EXL has been an efficient company over the last five years. It was one of the more profitable businesses in the business services sector, boasting an average operating margin of 14%.

Analyzing the trend in its profitability, EXL’s operating margin rose by 2 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, EXL generated an operating profit margin of 15.7%, up 1.6 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

EXL’s EPS grew at an astounding 22.4% compounded annual growth rate over the last five years, higher than its 13.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into EXL’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, EXL’s operating margin expanded by 2 percentage points over the last five years. On top of that, its share count shrank by 5.2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q1, EXL reported EPS at $0.48, up from $0.38 in the same quarter last year. This print beat analysts’ estimates by 8.8%. Over the next 12 months, Wall Street expects EXL’s full-year EPS of $1.76 to grow 9.9%.

Key Takeaways from EXL’s Q1 Results

We enjoyed seeing EXL beat analysts’ revenue, EPS, and EBITDA expectations this quarter. On the other hand, its full-year EPS guidance slightly missed. Still, this quarter had some key positives. The stock remained flat at $45.09 immediately following the results.

Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.