CI&T Inc. (CINT) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us for CI&T Second Quarter of 2026 Earnings Call. I am Eduardo Galvao, Director of Investor Relations. Joining me today to discuss our quarterly results are Cesar Gon, our Founder and CEO; Bruno Guicardi, Founder and President for North America and Europe; and Stanley Rodrigues, our CFO. Before we begin, I would like to remind you that our remarks today will include forward-looking statements. These statements, including our business outlook, are based on the management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. We caution you not to place undue reliance on these forward-looking statements as they are valid only as of the date when made. Additionally, we'll discuss certain non-GAAP financial measures. We believe this provides a more comprehensive view of our underlying operational performance. For a full reconciliation of these measures to the most directly comparable GAAP metrics, please refer to the tables in our earnings release. Today's session is being recorded [Operator Instructions]. The full presentation deck is available on our Investor Relations website, and a replay of this call will be posted shortly after we concluded. With that, I'm pleased to hand the floor over to our Founder and CEO, Cesar Gon.

Thank you, Eduardo, and good afternoon, everyone. Global AI spend is projected to hit $2.6 trillion this year, up 47% year-over-year. And yet according to MIT, roughly 95% of AI initiatives still show no measurable business return. That gap is where I want to begin today. We published 2 papers this quarter that get at why. The first argues that most companies are optimizing the wrong variable, chasing incremental task efficiency instead of asking where AI can return 10x rather than 10%. The second paper calls it organizational hallucination. The confident belief that a company is transforming when it's actually just experimenting. In both cases, the constraint was never the technology. It's the organization's capacity to absorb it. That gap is exactly where CI&T plays. And it's why we build our business around 2 things: AI deployment, installing real capability inside a client's core and AI monetization, capturing together with our clients, the productivity gains and business impact that AI deployment creates through value-based commercial models rather than headcount. Everything you will hear from us today, the robust and sustaining revenue growth and the increase in our sales investments to foster momentum given the AI opportunity is the same thesis playing out inside our own business. This quarter's numbers reflect that opportunity and the deliberate choices we're making to capture it. We delivered record revenue of $142.8 million, up 21.9% organically and above our guidance. Broad-based across geographies, industry verticals and client cohorts. Growth was increasingly fueled by new client wins and by initial engagements scaling into large partnerships. Our new commercial models are also letting us capture a greater share of the value we create. That shows up directly in adjusted gross margin, which expanded from 30.6% in the first quarter to 32.4% as this model scale. In the first 6 months of 2026, 30% of new engagements were under new value-based pricing models, and we project this gross margin expansion to accelerate in the coming quarters. Our adjusted EBITDA margin in the quarter was 13.3%, reflecting our deliberate choice. 2026 is a transition year, one where we invest in our commercial engine to turn this AI deployment opportunity into durable, profitable growth in 2027 and beyond. As a result, our commercial pipeline is now 40% larger than in the first half of 2025. In short, our top line shows the demand is solid. Our gross margin shows monetization is working, and this year's commercial investment is what lets us compound that advantage going forward. And here we go again. The second quarter of 2026 marks our seventh consecutive quarter of double-digit organic growth. At a time when parts of our industry are consolidating through acquisitions, buying growth rather than building it, we've extended this streak without a single M&A deal, prioritizing our capital allocation towards our own transformation and our sales effort and growth engines. This embodies one of our cultural tenets. We play the infinite game. We are not optimizing for a single quarter. We are building a company designed to keep compounding for decades. This consistency reflects a structural shift in client demand and CI&T's ability to capture it. The case studies that follow show how this AI deployment momentum is translating into tangible business outcomes. [Presentation]

These case studies demonstrate how our Agentic SDLC and CI&T FLOW are resetting the baseline for enterprise productivity and speed to value. I will now hand over to Bruno to discuss how we are scaling this hyperproductivity through our global delivery model and our evolved talent strategy.

Thank you, Cesar. Good afternoon, everyone. I'm glad to share our operational and talent progress for this quarter. We closed Q2 2026 with roughly 8,100 professionals with voluntary attrition at 10.1%, continuing to trend towards some of the healthiest levels in our history. At the center of this workforce are our 6,700 AI builders, the result of reskilling 100% of our professionals to work AI natively. That matters right now. Recent independent research mapped a widening gap in the market for AI deployment talent with demand for engineers who deploy AI at enterprise scale, growing roughly 50% year-over-year. Most of our industry is racing to hire into an increasingly scarce pool of talent. We didn't have to. We build it from within ahead of the market. Revenue per AI builder continues to grow, reaching over $80,000 in Q2 2026 on a last 12-month basis, an increase of 7% year-over-year. This is a direct result of AI monetization and value-based pricing, providing operating leverage and contributing to the expansion of our gross margin. Our momentum has been reinforced by a strategic partnership we announced this quarter, one that speaks directly to the role CI&T plays for large enterprises. We joined Anthropic Claude Partner Network, certifying more than 1,000 AI engineers on Claude and working with Anthropic to help set a new standard for how AI gets deployed inside the world's largest organizations. CI&T already runs Claude Code extensively inside CI&T FLOW, and this partnership expands that work into a joint go-to-market motion with a focus on co-developing industry solutions for financial services, retail, consumer goods among other verticals. It is designed to open new enterprise accounts and expand our pipeline into verticals we're co-developing, directly feeding our commercial momentum. Large enterprise need a partner who can take frontier models into complex regulated mission-critical environments and deliver production-grade outcomes. That deployment layer is exactly where CI&T operates, and this partnership makes us a connective tissue between the leading model providers and the world's largest organizations. That embedded engineering capability is exactly what enables us to play where the real value is shifting in the AI era. And this chart from Forrester is the clearest way we found to show clients why. Most of what's being sold as enterprise AI so far sits on the left side of this chart, automating individual tasks with copilots and agents, augmenting existing workflows end-to-end. It's a productivity story, efficiency gains on the top of an operating model that stays the same. The disruption is what Forrester calls the process chasm. Cross it and the business case changes entirely from efficiency to new revenue and margin structures and ultimately to growth relevance and the long-term perpetuity of the business itself. CI&T built 2 offerings, specifically for the 2 quadrants on the right side of that chasm. The one I wanted to walk you through now, the one gaining the fastest traction with our clients today is Agentic Enterprise Reinvention. Agentic Enterprise Reinvention is how we help establish enterprises redesign the core of their operations, moving from legacy ways of working to agentic native operations. We don't stop at advisory or isolated use cases. We install real operational capacity inside existing value streams, and we stay until it runs on its own. In practice, that means bringing 60% to 80% of a core end-to-end process onto an agent journey in months. Three things differentiate this from traditional systems integration. Who delivers it? Small, senior forward deployment and engineering teams. How we find the value? 3 decades of lean-based process transformation, along with our industry expertise give us the insight into where reinvention pays off. And how we get paid? Increasingly outcome-based with fees tied to business results, not to hours billed. And it compounds once we reinvent one core process, it becomes a reference architecture for the rest of the enterprise, giving every account a natural land and expand path. That means revenue that scales with the impact we create for clients, not with headcount. Now I will hand it over to Stanley to comment on our financial performance.

Thank you, Bruno, and good afternoon, everyone. Let me walk you through our financial results for the second quarter of 2026. As Cesar mentioned, we delivered record net revenue of $142.8 million, up 21.9% year-over-year, entirely organic and 14.1% at constant currency, above our guidance of at least $140 million. This performance reflects the strength of our go-to-market execution. Through the quarter, we saw our sales pipeline expand and our conversion rates improve, the direct payoff of deliberate commercial initiatives and the tangible results of our AI deployment delivers for our clients. Beyond the headline number, what matters is how evenly this growth is spread across our footprint. This slide shows the composition of our growth and the message is clear: our momentum is not carried by any single vertical or client. Every region contributed. Latin America was the largest engine, expanding 32.1% year-over-year. New markets grew 26.3% and North America added a consistent 10.2% on a large mature base. Financial services, our largest vertical, continued to grow strongly, up 36% year-over-year. Technology and telecommunications accelerated to 68% growth, a robust turnaround from the contraction we saw just a year ago. Others grew 25%; life science, 16%; and retail and industrial goods, 11%. The one exception is consumer goods, where demand has been softer, a headwind we view as temporary. The composition by client cohort tells an equally healthy story. Clients outside our top 10 grew 24.1%, outpacing the 19% growth of our top 10, reinforcing that our momentum is not dependent on any single account. Taken together, this confirms that our AI deployment is a global catalyst, driving deeper penetration across every region and every client tier we serve. As you may recall from our last quarter's call, we said that our new engagement models gained traction, they would begin to expand our gross margin, and that is exactly what we are seeing. This quarter, our adjusted gross margin expanded sequentially from 30.6% in the first quarter to 32.4%, an increase of 1.8 percentage points as those models lift the value we capture per engagement. That said, on a year-over-year basis, adjusted gross margin declined driven by a foreign exchange headwind as our productivity gains offset the impact of the payroll tax resumption. Looking ahead, we expect gross margin to continue improving over the coming quarters as adoption of these models broadens across our book of business, a core driver of the profitability expansion we are working toward. Adjusted EBITDA was $19 million with a 13.3% adjusted EBITDA margin. The year-over-year compression reflects 2 main factors. The first is the appreciation of the Brazilian real against the U.S. dollar, which we have flagged before. On an FX-neutral basis, adjusted EBITDA would have been $20.8 million, a 15.6% margin, giving a clearer view of our underlying performance. The second factor is deliberate, and it reflects 2 distinct components related to our sales efforts. Part of it is a targeted investment specific to 2026, including scaling our Agentic SDLC initiative to capture the current acceleration in demand for AI deployment. This is not a permanent addition to our cost base. The other part is structural, an expansion of our commercial organization to support new offerings, practices and vertical initiatives as well as commission expenses, which will remain part of how we go to market going forward. Together, these investments are funding the 40% pipeline expansion year-over-year, as Cesar mentioned, and higher conversion rate already showing up in our top line. This is a conscious trade-off between near-term margin and durable higher-quality growth. Importantly, the underlying trend is encouraging. Our adjusted gross margin expanded sequentially, showing that the pressure at the EBITDA level comes from our deliberate investments and external headwinds, not from our core delivery economics, which are, in fact, improving. Looking ahead, we expect our adjusted EBITDA margin to improve sequentially, while these investments position us to fuel growth into 2027 and beyond. Moving to our bottom line. Adjusted profit was $8.7 million in the second quarter with a 6.1% margin. This reflects the same 2 main factors I just described on EBITDA, the appreciation of the Brazilian real and our deliberate investment in growth. Adjusted diluted earnings per share was $0.07 versus $0.09 in the prior year. We see this as an investment cycle, not a new baseline. As these investments continue to fuel our growth into 2027 and beyond, we expect profitability to recover and our capital discipline to keep amplifying returns for shareholders. This quarter, that discipline included repurchasing 2.8 million in shares, continuing our ongoing buyback program even as we invest in growth. Combined with these repurchases, our weighted average diluted share count is down 3.6% year-over-year, meaning each remaining share now carries a larger claim on our future earnings. I will now turn the call back to Cesar to discuss our business outlook and the strategic path forward for the remainder of 2026.

Thanks, Stanley. We continue to see an improving demand environment as enterprises increase their spending on AI deployment. And we are pleased with the evolution of our AI monetization efforts through new value-based commercial models. For the third quarter of 2026, we expect revenue of at least $145.7 million, a 14.4% increase over the third quarter of 2025 or 12.3% at constant currency. For the full year, we are raising our revenue guidance to the range of $566 million to $578 million, implying organic growth of 15.5% to 18%. Our revised outlook includes a positive FX impact of approximately 400 basis points. Alongside that, we now expect adjusted EBITDA margin for the year in the range of 15% to 17%, reflecting deliberate investment in the commercial engine that drives demand and accelerates monetization with sequential margin improvements through the second half as planned. This is a forward-leaning choice to move first on AI deployment and expand our wallet share. And to be clear, this doesn't trade away financial discipline. Profitable cash generative growth is still the bar we hold ourselves to. What we are building is a company that scales revenue with less headcount and grows more profitable as the new commercial models mature. With that, we are ready to begin the Q&A session. Thank you.

[Operator Instructions] The first question comes from Puneet Jain from JPMorgan.

I want to follow up on margin guidance like the cut of around 200 basis points. Like I understand like a lot of its discretionary investments and then currency. Can you break down like that impact for us, like how much of the incremental impact is FX versus investments? And why should we expect like the level of investments to go down? Like we're still in very early stages of AI build-out AI ramp-up. Like why won't like this level of investment stay where it is into next year and beyond?

I may start here. Puneet, thanks for the question. Puneet, let's take the full picture here. And if you see 7 quarters of double-digit growth growing 4x faster than our peers. We are gaining market share. We're gaining wallet share, which means we are deepening relationship with our clients. We have this broad-based. You see growth in the top 10 clients outside the top 10 clients, you see growth in all the regions. You see growth in most of the segments, except by one. And everything is pure organic. We have a pipeline growing 40%. So everything is funded by this investment that we've been making ahead of the pack and specifically in this second quarter. We heavily -- it's an answer to this surge in demand for AI deployment, then we reshape, redesign our go-to-market, and that's what you see in the second quarter. Going forward, we see part of this investment, we are reducing along throughout the quarters, which is the -- specifically the SDLC -- Agentic SDLC deployment. But the other half, I would say, we will continue to see there. So it's more structural. So if you see from last year's quarter sales, it's 8% of net revenue. And this quarter, we are talking about 12%. So going forward, we will be pretty much in between. And this will be more than compensated by what you see in the gross margin as this will continue to improve. And also, we will have operating leverage on top of SG&A as a whole, sales as well. And as a consequence, that's why you see EBITDA growing and everything already counting on this deep pressure from the FX, everything is compounding there.

Okay. That's helpful. And then like on your top line, like it seems like the financial services vertical is doing really well, like including the top client that's up nicely sequentially in this quarter. So how broad-based like the growth in financial services is and your expectations for the rest of the year there for that vertical?

Sure. I can get this one. You're right, financial services was the second fastest vertical for us. We grew 36% year-over-year in financial services, but we grew across the board, retail, 11%; tech and telco, 68%; life sciences, 16%. So we see only -- by the way, only consumer goods, minus 9%. So it's a solid growth around all the -- not only verticals, but if you see -- if you look at our top 10 clients, even if you exclude our top 1 client, it's still a very high growth, 16% year-over-year among the top 10, excluding the top 1 that grew solid too. So basically, we will continue to see -- we are forecasting expansion across the board in our -- all the verticals in the top 10 clients and also the whole cohort of clients. I think what is behind us is a solid increase in AI deployment demand and also the fact that I think we did all the investments to capture this momentum, as [ Estavo ] mentioned in our sales organization. So we expand verticals, reach across the board to really speed up growth and increase the wallet share in our portfolio and also increase the land in new clients. So this is -- I think it's the second time we are raising our revenue guidance, and we continue to see a growing demand, and it's basically across the board. Of course, financial services will continue to be our #1 vertical. I think, it's the use case for efficiency and customer experience in the financial services, especially in the banking sector has become very clear now in terms of impact. So -- but we see also other verticals evolving like retail with agentic commerce will be a big trend, and it's a head start. Every single industry will have a set of very powerful use case to explore. So we are preparing our offerings and teams to capture that.

Just to add to that, financial service grew 36% year-over-year, while our top client grew 27%. So if you exclude the top clients within that vertical, the other clients grew faster than that, so even higher than the 36% we see here.

Got it. Yes. No, I was looking at on a sequential growth basis and like it was up nicely at top client as well as rest of the financial services even on sequential growth, but I understand. So appreciate it.

Our next question comes from Steven from Wedbush.

I want to start on the Agentic SDLC that you guys pointed out in the quarter. I want to ask specifically about the pipeline that you're seeing there because you mentioned that you saw 40% year-over-year growth in the pipeline, but what percentage of that was specifically tied to Agentic SDLC? And does this carry any higher average deal sizes? And can you talk a little bit about the metrics there?

Sure. I can start, Bruno, you can jump in. Well, I think roughly 35%, 40% of our demand, we articulate as Agentic SDLC, especially transforming the current engagements we already have, so old traditional digital engagements now being reshaped as Agentic SDLC engagements with different commercial models and different margin profile, too. So this is one specific offering where we are very, very competitive. I think we are 5 to 10x ahead of our typical competitors. So we have a lot of space for replacing underperforming competitors. And I think the gap is increasing. We have been investing with CI&T FLOW and all the reskilling of our teams a lot in the last 3 years. And I see the gap of performance versus our competitors increasing. That gives us a lot of room for replacing and then on our clients and also land on new avenues of growth. So -- and the second question, we are -- sorry.

Specifically on the deal sizes for Agentic SDLC versus your traditional deal sizes.

Yes. We are seeing an increase in the deal size. We are not sure if it's a trend or some more just momentum or -- but we see in the last 2 quarters, the size of the deals are larger. But we are not sure yet if it's just a transition from previous recurring model or if it's a long-term tenets. We disclosed the number. We are 40% -- we have a 40% larger pipeline versus the same period last year and with a very solid conversion rate. So -- and the deals are larger now, but not sure yet if it is a tenets. It depends on how the market evolves.

Okay. Got it. And if I can ask a quick follow-up because I want to ask you about the geographic split moving forward because Latin America was another solid quarter of growth at 32%. If you look at North America, though, it was a 600 basis point deceleration from 1Q '26, where last quarter was 16% and this quarter was 10%. Is there anything to point out there from a demand perspective? Is there any sort of competitive displacement happening there? Anything that you would want to point out specifically within North America?

Let me take this one. No, just seasonality, Steven. I think we can expect that to be accelerating again throughout the year. So I think it was just Q2 seasonality, some gaps in contract renewals and other kind of situations or kind of ad hoc, nothing systematic.

Our next question comes from Bryan Bergin from TD Cowen.

I wanted to ask on tech and telecom. So really strong growth number there in the quarter, the second consecutive really strong growth number. So I guess, first, is this being driven by a handful of large transformation wins? Are you seeing broader demand there in the client base? Maybe just give us more detail on what's driving that because there's been some peers that have had more challenging results in that vertical. And how should we think about that going forward as we go through the second half?

Sure, sure. Thanks, Bryan. Great to see you here. First is telco. I think we have some big telcos as clients, and we are getting a lot of traction with them, especially around Agentic SDLC. And again, it resonates with, I think, the level of differentiation we are being able to showcase in terms of productivity. The second is a new trend that is -- because we combine tech and telco, but it was majority telco. Historically, CI&T was not -- we don't have really a lot of demand from the techie companies, but it's happening now. I think it's also correlated with the AI deployment demand. And so now we have some big tech companies increase their spending with us. It's also correlated with the partnerships we are announcing probably you saw not only the typical hyperscalers, Amazon, Google, Microsoft, but also the new big players, especially Anthropic. So it's a new revenue source for us, and we are forcing -- we're very happy to see this also adding to our growth.

Okay. Okay. Understood. And then just a follow-up on the margin recovery path. So to achieve that full year EBITDA margin target, it looks like you have to meaningfully improve from just over 14% in the first half. So can you just categorize kind of what are the biggest drivers of that improvement as you go through the second half? How much is coming from commercial model benefits versus moderating investment spend versus potentially moderating FX headwind?