[Long] $G: Sold as the BPO Victim, Actually Selling the Weapon — 8.8x P/E at RSI 21

Position: Long | Timeframe: 6-12 months | Conviction: Medium (needs factor decomposition to size)

Summary

Genpact ($G) sits at $38.73, down 18% in a month, RSI 21, near 52-week lows. The Feb 3-4 sell-off wasn't company-specific — it was sector-wide panic. Anthropic's expanded Claude enterprise stack triggered what traders called the "SaaSpocalypse": $285B evaporated from software and IT services on fears that agentic AI would kill traditional BPO models. Indian IT giants (Infosys, TCS, Wipro) dropped 6-7%.

$G got caught in the blast radius. The stock trades like a legacy BPO labor arbitrage play headed for disruption. 8.8x forward P/E for a company that just guided 10% EPS growth, beat-and-raised for the fifth consecutive year, and increased its dividend 10%.

The irony: Genpact isn't the victim — it's the vendor.

Thesis

Force 1: AgenTeq — Fastest Product Launch in Company History

From the Q4 2025 earnings call:

"Last February, launched AP Capture, first module accounts payable agentic suite... closed over $200 million total contract value AP agentic solutions. Over 40% awarded contract value came new clients."

$200M+ TCV in under a year. CEO Kalra: "Not seen takeoff of a solution in Genpact history at this pace."

40% of AgenTeq bookings from net new clients — companies that never used Genpact before. Existing clients rotating from FTE-led AP to AgenTeq see revenue growth AND margin expansion above June 2024 Investor Day targets.

Case study: Vesco (Fortune 500 distribution/logistics) transitioned entire AP operation to agentic automation. Touchless invoice processing improved from 40% to 65% on 3M invoices annually. HFS Research called it "evidence payable no longer back-office function... becoming frontline enterprise AI."

ISG named $G a Leader in Dec 2025 Provider Lens for GenAI/Agentic AI Services in Insurance. The firm is building domain-specific agentic suites (AP, insurance underwriting/claims) on proprietary process data from running Fortune 500 operations for decades.

Force 2: The Business Model Shift the Market Doesn't See

Core BPO is still 76% of revenue and grew 3.7% in FY2025. That's the legacy business market assumes gets cannibalized. But Advanced Technology Solutions (data/AI, digital tech, agentic solutions) grew 17% to $1.2B, now 24% of total revenue, contributing more than half of total revenue growth.

Non-FTE revenue (fixed-fee, consumption-based, outcome-based contracts) hit 48% of Q4 revenue. This isn't labor arbitrage — it's software-enabled services where $G takes process risk and delivers outcomes, not headcount.

ATS revenue per headcount: 2x company average. 70% annuitized, 70% non-FTE model. High-quality, sticky contracts.

Force 3: The Mis-Categorization Trade

Market treats $G like $TASK (TaskUs): pure-play BPO exposed to AI displacement. Reality: $G is closer to $ACN (Accenture) — selling AI transformation services — but at less than half the multiple.

$G has lower beta and higher idio variance than $ACN — the recent move is disproportionately sector-driven.

The Quality Compression Framework

$G is the long side of the quality-compression trade. Short side: $TASK (BPO victim, CEO admitted "BPO industry slowed as clients reduce costs via GenAI"), $RHI (staffing, down 58% 1Y as temp roles compress). Long side: companies selling the compression tools.

$G isn't just passively benefiting — it's driving the compression. Enterprises use AgenTeq to compress their own headcount, which validates the secular trend AND gives Genpact the contract. The faster AI adoption accelerates, the more enterprises need partners who've already run their processes at scale.

The Numbers

FY2025:

• ◆Revenue: $5.08B (+6.6%)
• ◆Adj EPS: $3.65 (+11.3%, fifth consecutive year EPS growth > revenue growth)
• ◆Gross margin: 36.0% (+60bps YoY)
• ◆Adj OI margin: 17.5% (+40bps)
• ◆Operating cash flow: $813M (including $170M client prepayments; $643M ex-prepayments, +5% YoY)
• ◆Share buybacks: $283M at avg $46.16/share (stock now $38.73)
• ◆Four consecutive quarters of earnings beats. Beat-and-raise in Q4 (EPS $0.97 vs $0.93 est).

FY2026 Guidance:

• ◆Revenue: "at least 7%" growth
• ◆ATS: "at least high teens" growth
• ◆Gross margin: 36.5% (+50bps)
• ◆Adj OI margin: 17.7% (+25bps)
• ◆Adj EPS: ~10% growth
• ◆Committed revenue: 75% of guide (backed by record backlog)
• ◆Dividend: $0.75/share annual (+10%)

Variant View

Market believes: $G is a legacy BPO getting disrupted by AI. Headcount model is dead. 8.8x P/E = correct terminal value pricing.

We believe: $G is the vendor selling the disruption tools. 48% non-FTE revenue, AgenTeq at $200M TCV in year one, ATS growing 17%+. This is an AI services company at a BPO multiple.

Why they're wrong: The SaaSpocalypse was indiscriminate — lumped $G with Indian IT services despite fundamentally different business model. Core BPO still growing +3.7% (not declining). CFO Weiner: core business will "accelerate AI-led transformations agentic operations" as clients realize "last-mile advantage." Management bought back $283M at $46.16 avg — 19% above current price.

Valuation

Scenario EV: $45 — 16% upside with 10% EPS growth floor.

Analyst targets: $42-58 (mean $50.09, +29% upside). Consensus: 42% bullish, 0% bearish — zero sell ratings.

Catalysts

• ◆Near-term: SaaSpocalypse panic fades, RSI 21 mean-reverts
• ◆Q1 2026 earnings (late Apr/early May): AgenTeq TCV growth rate — if $200M to $350M+, re-rating accelerates
• ◆Ongoing: Each new AgenTeq client win validates AI services model vs BPO victim narrative
• ◆Structural: AI adoption growth = more demand for $G as integration partner

What's Missing (Honest Gaps)

• ◆Factor decomposition: How much of -18% is sector beta vs company-specific? If >70% sector-driven, the rebound trade is compelling.
• ◆Competitive moat: Is AgenTeq differentiated vs $ACN/Infosys AI offerings, or rebranded consulting? $200M TCV + 40% new clients + Vesco case study suggest real PMF. But need to verify: process data moat (proprietary) vs price (commoditized).
• ◆ATS growth sustainability: Adoption curve steepening or plateauing? Management says pipeline "never higher" and ATS bookings now >1/3 of total. Points to steepening.

Risks & Kill Conditions

• ◆Risk: Core BPO cannibalization faster than ATS replaces it → Mitigant: Core still growing +3.7%, not declining. Even if flattens, ATS at +17% sustains overall growth.
• ◆Risk: AI services commoditize → Mitigant: Domain expertise in finance/insurance/healthcare from decades of running Fortune 500 ops. Proprietary process data.
• ◆Risk: Macro reduces AI spending → Mitigant: 75% of FY2026 committed. $813M operating cash flow.
• ◆Kill if: Core BPO revenue turns negative YoY for 2 consecutive quarters
• ◆Kill if: AgenTeq TCV growth decelerates below 50%
• ◆Kill if: Gross margin compresses below 34%

Disclosure: No position. Analysis sourced from [idiobook](https://dev.idiobook.com/post.html?id=transcript-G-2025-Q4).