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Globant (GLOB -9.5%) is trading sharply lower today despite an upside Q3 report with decent Q4 guidance last night. We think expectations were running a bit high heading into this report given the steady rise in its share price since early June +(+51%). It is also up around 9% just since early November. Globant is a technology service provider that helps companies go digital with AI technology being a key part of that.

• Non-IFRS (same as non-GAAP) EPS grew 10% yr/yr to $1.63, which was at the high end of prior guidance of $1.60-1.64. However, it was only slightly above analyst expectations. In fairness, GLOB is known for small EPS beats in the $0.01-0.02 range, so this was par for the course. Unlike many tech names, GLOB actually provides realistic guidance and does not lowball guidance, just to report big upside.
• Revenue rose 12.7% yr/yr to a record $614.7 mln, which was right in-line with analyst expectations and at the mid-point of prior guidance of $611-617 mln. The Q4 guidance was in-line. Notably, revenue from its largest client, Disney (DIS), increased by 17.5% yr/yr and 14% sequentially, so that was good to see. North America accounts for 55.7% of revs, followed by Latin America (21.8%), Europe (17.6%), and the Middle East and APAC at 4.9%.
• Globant sees strong demand in its main industries and says it's growing market share everywhere. For 2024, Globant says it's expecting the highest growth of any major IT service provider, with an estimated of 15% increase in revenue. Bookings are solid, with two of the biggest in company's history secured in the last six months. For 2025, GLOB is confident about double-digit revenue growth due to a strong pipeline and faster organic growth.
• GLOB sounded very bullish on AI. Clients are using AI tools both personally and professionally. Globant calls AI the biggest breakthrough since smartphones. Last year, companies spent $15 bln on generative AI and it cited an industry report saying that spend could reach $175-250 bln by 2027. In the first nine months of 2024, AI-related work generated over $250 mln in revenue for GLOB, up 120% yr/yr.
• Globant noted that it is seeing clients take a more active approach in terms of incorporating AI in 2024. Last year, a lot of the work was exploratory, analyzing the technology, assessing impact etc. As such, typical bookings were very small. In 2024, the AI work is much more intentional and GLOB sees a bigger pipeline.
• In terms of its macro view, GLOB is not seeing deterioration in clients' budgets for 2025. In fact, GLOB says it's seeing more stabilization after 2-3 years of an industry where growth was scarce. GLOB says it was a tough industry but it looks like things are stabilizing or getting a little bit better.

Overall, this was a good quarter for Globant considering the macro pressures that its industry has been facing in recent quarters. We are not seeing a glaring reason for the stock being down so much today. We think it may be the muted upside and in-line guidance. Also, remember this stock was up more than 50% from early June to yesterday's close, so investors perhaps are using this report as an opportunity to lock in gains. We also suspect that weakness in tech and the Nasdaq today are also weighing on shares.