When a large health insurer needs to untangle a decade of legacy data to deploy its first generative AI tool, it doesn't call a generic IT firm. It calls ExlService Holdings (NASDAQ:EXLS). This New York-based professional services firm sits at the intersection of complex, regulated workflows and modern automation, helping clients across insurance and healthcare automate everything from claims processing to predictive risk assessment. As of Oct. 26, 2026, the stock trades at $41.77 and has risen 1% over the past year.

Our proprietary Hidden Gems scoring system assigns ExlService Holdings an overall Superscore of 86 out of 100, placing it in the Strong category. The Superscore is an AI-powered score that evaluates a company's overall strength by combining financial performance, product market position, technological capabilities, leadership quality, and relative valuation. It represents the unification of all our scores into a single score for public companies, with five rating bands: Exceptional (90-100), Strong (75-89), Above Average (60-74), Average (40-59), and Cautious (0-39). An 86 Superscore places the company in the Top ~3% of all companies we score. This score serves as a data-driven signal for your research, and reading the evidence for and against it allows you to form your own conviction before committing capital.

Why EXLS Has an 86 Superscore

• Data-led revenue growth: The company achieved 14% year-over-year revenue growth in 2025, reaching $2.09 billion as it successfully embedded AI solutions into client workflows.
• Operational margin expansion: It grew operating margins to 15% in 2025, demonstrating the scalability of its high-value, AI-native consulting model.
• Proprietary workflow moats: It locks clients into its ecosystem through specialized software such as Subrosource and CareRadius, which create significant switching costs by serving as the system of record for critical insurance and health functions.
• Capital allocation discipline: It maintains a robust balance sheet and prioritizes shareholder returns through an active share repurchase program, including the recent $125 million accelerated buyback.
• Targeted acquisition strategy: The acquisition of iMerit directly expands its capabilities in model training and reinforcement learning, effectively accelerating its entry into the high-growth enterprise AI services market.

Why Is EXLS's Superscore Not Higher?

• Integration execution risk: It faces ongoing challenges in balancing aggressive M&A, like the recent iMerit deal, with the operational complexities of maintaining its global delivery network.
• Valuation reflection: The stock trades at a trailing P/E of 25.4, a level that prices in consistent double-digit growth and leaves little margin for error if AI-led contract wins cool down.
• Competitive saturation risk: It competes against both global consulting firms and pure-play AI vendors, which means its current AI-enabled services face constant pricing pressure from rivals seeking to commoditize cognitive tasks.
• Segment transition pressure: The deliberate pivot away from traditional digital operations toward higher-value AI work creates near-term volatility, as legacy revenue contracts expire faster than the new AI-centric services can fully scale.

Score	Score (out of 100)	Rank	Supporting Data Point
Product (1Y)	88	Top ~7%	Strong 14% revenue growth in 2025 driven by AI integration.
Product (5Y)	73	Top ~26%	Maintained a 17% revenue CAGR from 2021 to 2025.
Financial (1Y)	89	Top ~3%	Achieved record ROE of 28% in 2025.
Financial (5Y)	84	Top ~4%	Steady margin expansion and improved asset turnover to 1.23x.
Leaders	80	Top ~19%	Management displays high transparency in reporting segment-level metrics.
AI	40	Top ~24%	Current AI initiatives function largely as cross-sell opportunities.
Valuation Risk	73	Top ~13%	Trades at a trailing P/E of 25.4.

Is EXLS Right For Your Portfolio?

This stock warrants a closer look if...

• You want exposure to the best small-cap tech stocks that are successfully pivoting legacy business models into high-growth AI services.
• You value companies that own the underlying software infrastructure used by regulated industries like insurance and healthcare.

You may want to keep researching before buying if...

• You are concerned about the stock's valuation and the risk that AI-led growth might not offset the loss of legacy revenue streams.
• You worry that intense competition from larger, global consulting firms could erode margins in the company's core professional services business.

The Superscore is a single data-driven signal, not a recommendation to buy or sell; please weigh it carefully against your personal financial goals and risk tolerance.

My 5-year prediction for EXLS stock

ExlService has quickly risen to the top of my shortlist for stocks to buy as it continues to help businesses use AI to modernize their workflows. While that's incredibly buzzwordy -- and might require a leap of faith from investors not deeply ingrained in the AI world (myself included) -- EXLS stock's performance speaks for itself, outpacing the S&P 500's returns over the last decade.

Furthermore, ExlService is deeply embedded in many of the largest companies in the United States -- and increasingly around the world. Some of ExlService's customers are:

• the 10 largest U.S. insurers
• 9 of the top 10 biggest U.S. healthcare payers
• 8 of the top 10 largest U.S. banks
• 3 of the U.S. major sports leagues

Whether the company is using its legacy data operations or its rapidly expanding and modernizing AI capabilities, ExlService helps with functions such as fighting fraud and waste in medical billing, automating collections procedures for late payments, and even analyzing claims in property and casualty insurance.

The company sports an impressive +80 Net Promoter Score over the last five years and saw steady double-digit growth across each of its business segments last quarter:

• Insurance sales grew 16%
• Healthcare and Life Sciences revenue increased 19%
• Banking and Capital Markets sales rose 27%
• International revenue jumped 21%

Trading at 18 times forward earnings with a soaring return on invested capital of 20% (up from 9% in 2020), ExlService looks like a promising pick to benefit from the second wave of AI adoption as we go beyond LLMs and chatbots to integrating the technology's immense promise into companies' day-to-day operations.

I think ExlService looks like a solid contender to outperform over the next five years, but it certainly requires being comfortable with AI in general.

The Hidden Gems Superscore reflects The Motley Fool's proprietary AI-driven evaluation of a company across product, financial, leadership, and valuation pillars as of the article date and may change over time. Performance figures are point-in-time. Past performance does not guarantee future results.

Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool recommends ExlService. The Motley Fool has a disclosure policy.

Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.