Globant (GLOB) is having a rough Friday. The stock is down more than 11% in premarket trading after the company's second-quarter earnings report left investors wanting more. The headline numbers were a bit of a mixed bag: revenue came in slightly above expectations, but earnings per share missed, and the company trimmed its full-year guidance. That's usually a recipe for a sell-off, and that's exactly what we're seeing.
Needham analyst Mayank Tandon weighed in on the results, lowering his price target on the stock from $50 to $45, though he kept a Buy rating. Tandon noted that revenue modestly exceeded expectations, but EPS was pressured by forex headwinds. The softer guidance for the third quarter and the full year reflects weakness in New Markets, softer travel demand, and longer decision cycles. In other words, the macro environment isn't doing Globant any favors right now.
But here's the interesting part: while the core business is facing some near-term turbulence, the company's AI platform, Glob.AI, is taking off. The annual recurring revenue (ARR) for Glob.AI accelerated to a $52.8 million exit rate, up about 60% quarter-over-quarter. And the company raised its 2026 guidance for Glob.AI ARR to at least $110 million, up from a previous range of $60 million to $100 million. That's a big vote of confidence in the AI story.
Tandon also pointed out that revenue per head rose 9.7% year-over-year to $95,800, and a business optimization program is expected to create a leaner cost base heading into fiscal 2027. The analyst acknowledges that Globant is dealing with near-term pressure from uneven demand and its shift toward outcome-based pricing. But he also notes that Glob.AI ARR is growing faster than initially expected and carries margins about 10 percentage points above traditional delivery. Those cost-saving measures should help support margins toward the end of the year.
Now, let's dig into the numbers. Adjusted EPS came in at $1.40, missing the $1.50 analyst estimate. Revenue was $614.417 million, beating the $613.06 million consensus. Revenue was split across regions: North America accounted for 52.8%, Latin America 20.8%, Europe 20.9%, and New Markets 5.5%. The top customer made up 8.9% of revenue, while the top five and top ten customers represented 21.6% and 30.6%, respectively. That's a fairly diversified customer base, which is good to see.
Glob.AI ARR rose 61% sequentially to $52.8 million in the quarter. The company also opened Glob.AI to the broader market, allowing enterprises to deploy AI Pods and pay based on output or usage rather than hours worked. That's a fundamental shift in how Globant delivers and prices its services. The platform is supported by partnerships with Anthropic, Vercel, and OpenAI, and it's clearly a key part of the company's growth strategy.
Over the past 12 months, Globant served 904 customers generating more than $100,000 in revenue, including 331 customers contributing over $1 million annually, compared to 339 a year earlier. Additionally, 63.0% of Q2 2026 revenue was denominated in U.S. dollars.
Margins were a bit of a sore spot. Non-IFRS adjusted gross margin contracted to 36.5% from 38.1% in the year-ago quarter. Adjusted operating margin declined to 13.2% from 15.0%. That's a meaningful drop, and it's likely one of the reasons the stock is getting hit.
On the cash flow front, there's some good news. Free cash flow improved to $12.6 million from negative $2.9 million a year earlier, marking the company's strongest first-half cash generation on record. Globant ended the quarter with $168.8 million in cash and short-term investments.
Looking ahead, the company's guidance is a bit underwhelming. For the third quarter, Globant expects adjusted EPS of $1.43 to $1.53, versus the $1.59 estimate, and revenue of $607 million to $615 million, compared with the $625.791 million consensus. For the full year, the company lowered its adjusted EPS outlook to $5.75 to $6.15 from $6.10 to $6.50, below the $6.21 analyst estimate. It also cut its fiscal year 2026 revenue guidance to $2.428 billion to $2.462 billion from $2.462 billion to $2.508 billion, versus the $2.473 billion consensus.
So, what's the takeaway? Globant is in a bit of a transition period. The core business is facing some headwinds, but the AI opportunity is real and growing fast. The company is betting that Glob.AI will be a major driver of future growth, and the early numbers are encouraging. But Wall Street is focused on the here and now, and the near-term guidance isn't great. It's a classic case of a company with a great long-term story but some short-term pain. Investors will have to decide whether they're willing to wait for the AI payoff.
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