Globant Q2 Earnings Call Highlights

Key Points

• AI services are scaling rapidly: Globant’s Glob.AI annual recurring revenue rose to $52.8 million from $32.8 million in March, and the company now expects at least $110 million by year-end. AI Pods have been adopted by 45 clients and generate margins roughly 10 percentage points above traditional delivery.
• Core growth was mixed: Second-quarter revenue reached $614.4 million, up 1.2% sequentially, with strong performance from larger clients, Europe, Latin America, and the Data and AI Studio. North America and new markets declined amid longer decision cycles, travel-sector weakness, and conflict-related delays.
• Profitability and outlook weakened: Adjusted operating margin fell to 13.2%, and Globant recorded a $32.3 million optimization charge, with another $20 million to $25 million expected in the third quarter. Full-year 2026 revenue guidance was reduced to $2.428 billion-$2.462 billion, though management expects cost savings and increased AI Pod adoption to improve second-half margins.

Globant NYSE: GLOB reported second-quarter 2026 revenue of $614.4 million, up 1.2% sequentially and slightly higher than a year earlier, as the company accelerated its shift toward AI-native services delivered through its AI Pods model.

Chief Executive Officer Martín Migoya said the company is developing a delivery and pricing model based on outputs, value and consumption rather than traditional billable hours. The model operates through Glob.AI, a platform launched last week that allows enterprises to deploy AI Pods supported by agentic workflows and human experts.

“As AI Pods deliver more work at higher margin for a similar price, our top line can understate the progress underneath it,” Migoya said. He added that investors should track annual recurring revenue per employee, AI Pod margins and client penetration alongside reported revenue.

AI-Native Services Expand

Glob.AI annual recurring revenue reached $52.8 million as of June, up from $32.8 million in March. The company expects to exit 2026 with at least $110 million in Glob.AI ARR, raising its earlier expectation of $60 million to $100 million. AI Pod revenue currently represents about 2% of total revenue, with management expecting it to approach 4% by year-end on a run-rate basis.

AI Pods have been adopted by 45 clients and are used by 45% of Globant’s top 20 accounts, according to the company. Migoya said the model’s gross margins run close to 10 percentage points above those of traditional delivery, while revenue per head rose 9.7% year over year to $95,800 on a run-rate basis.

Management identified core modernization, experience debt and agentic process transformation as the principal sources of demand. Migoya said the company is increasingly using AI Pods for work such as modernizing legacy systems, rebuilding customer-facing digital experiences and redesigning business processes around AI agents.

Chief Technology Officer Diego Tartara said Glob.AI incorporates more than two decades of engineering and domain expertise into standardized workflows. The platform can route work across more than 140 large language models, he said, while clients retain control of their models and data through dedicated token vaults.

Tartara said the platform is designed to reduce token waste and improve reliability through context assembly, architecture mapping, data preparation and quality gates. He cited prior deployments that accelerated drug discovery research at PharmaMar by 15 times, reduced supply-chain contract cycles at YPF by 40%, and shortened legacy migration timelines from 14 months to two months.

Core Revenue and Client Trends

Chief Financial Officer Juan Urthiague said the company grew in five of its eight verticals on a sequential basis. Its largest client cohorts outpaced the overall business: top 50 clients grew 6.9% year over year, top 20 clients grew 6.6%, and top 10 clients grew 4.4%. Sixteen of the top 20 client relationships posted year-over-year growth.

Globant’s Data and AI Studio became its second-largest studio by revenue, representing close to 11% of sales and growing nearly 35% year over year, according to Migoya. Repeat customers accounted for 96% of second-quarter revenue.

Regionally, Europe and Latin America grew 6.8% and 5.9%, respectively, from the prior-year period. North America revenue declined 2.4%, while new markets revenue fell 17.7%. Urthiague said conflict-related project delays in a particular new-markets geography created a roughly 115-basis-point drag on year-over-year growth.

The company also cited longer decision cycles in North America and pressure on travel-sector clients stemming from volatile oil prices. Migoya said some travel clients have slowed transformation programs, while others continue to accelerate AI-related initiatives.

Margins, Optimization and Capital Position

Adjusted gross margin was 36.5%, pressured by U.S. dollar weakness and utilization below target. Adjusted operating margin was 13.2%, below the company’s guided range, while adjusted net income totaled $60.3 million and adjusted diluted earnings per share were $1.40.

Globant recorded a $32.3 million one-time charge in the second quarter related to a business optimization initiative. The program includes a workforce review, office-footprint consolidation and delivery-center prioritization. Urthiague said the company expects an additional $20 million to $25 million of charges in the third quarter to complete the program.

Management said the initiative is intended to align skills with AI-focused demand, protect profitability amid foreign-exchange headwinds and support investment in Glob.AI. The company ended the quarter with $168.8 million in cash and short-term investments, $253.1 million in net debt, and quarterly free cash flow of $12.6 million. First-half free cash flow reached a company-record $48.7 million.

Globant’s board-authorized share repurchase program, allowing up to $125 million of buybacks over six quarters, remains active.

Updated Outlook

For the third quarter, Globant expects revenue of $607 million to $615 million, adjusted operating margin of 13.5% to 14.5%, and adjusted diluted EPS of $1.43 to $1.53.

For full-year 2026, the company lowered its revenue outlook to $2.428 billion to $2.462 billion from its prior range of $2.462 billion to $2.508 billion. It expects full-year adjusted operating margin of 13.5% to 14.5% and adjusted diluted EPS of $5.75 to $6.15.

Urthiague said roughly half of the guidance revision reflected weaker expectations in new markets, with about $10 million tied to travel and hospitality impacts related to higher oil prices. He said the company expects stronger free cash flow in the second half and believes the cost actions and growing AI Pod mix will position it to exit the year with improved margins.

About Globant (NYSE:GLOB)

Globant is a digitally native technology services company founded in 2003 in Buenos Aires, Argentina. Specializing in software development and digital transformation, Globant partners with enterprises to conceive, design and engineer software products and platforms. The company leverages agile methodologies and proprietary delivery frameworks to accelerate projects in areas such as cloud migration, user experience design, data analytics, artificial intelligence and blockchain-enabled solutions.

Globant's service offerings span strategy consulting, custom software engineering, digital experience design and managed services.

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