Teleperformance: Strength in Scale and Service

Teleperformance is the world’s largest provider of outsourced customer service and digital business services. The company helps many of the world’s biggest businesses and government agencies manage customer support, back-office operations, content moderation, and other critical business functions across nearly 100 countries and more than 300 languages. By combining global scale, technology, and artificial intelligence with human expertise, Teleperformance aims to become a strategic partner that helps organizations operate more efficiently and improve the customer experience. The question remains: Does this global digital business services leader deserve a spot in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Teleperformance at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Teleperformance, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Teleperformance was founded in 1978 in Paris and has grown into the world’s largest provider of digital business services and customer experience management. Rather than selling physical products, the company helps businesses outsource and transform customer interactions and business processes by combining human expertise with artificial intelligence, automation, and digital technology. Through operations in nearly 100 countries, services delivered in more than 300 languages and dialects, and support for clients in approximately 170 markets, Teleperformance enables many of the world’s largest companies and government agencies to provide customer service, technical support, content moderation, trust and safety, healthcare support, interpretation, visa processing, and back-office operations on a global scale. The company serves more than 1.500 clients across industries such as technology, financial services, healthcare, telecommunications, retail, e-commerce, travel, gaming, insurance, and the public sector, making its revenue base highly diversified across both geographies and end markets. Historically, Teleperformance was primarily known as a call center operator, but it has steadily evolved into a broader digital business services company that manages increasingly complex and mission-critical workflows for its clients. Its largest business segment is Core Services and Digital Integrated Business Services, which includes customer care, technical support, customer acquisition, omnichannel communication, trust and safety, content moderation, complex back-office operations, and AI data services that help train and improve large language models. The company also operates a high-value Specialized Services segment, which includes LanguageLine, a global leader in interpretation and translation services, TLScontact, which manages visa and consular services for governments, Health Advocate, which helps consumers navigate the US healthcare system, and recruitment process outsourcing through PSG Global Solutions. These specialized businesses diversify Teleperformance beyond traditional customer service and often benefit from higher barriers to entry due to regulatory requirements, specialized expertise, and long-term customer relationships. Teleperformance generates revenue by managing these outsourced services for clients under long-term contracts, historically based on staffing levels and service volumes, but increasingly through transaction-based, outcome-based, and subscription-based models. A defining part of the company’s strategy is its ability to combine large-scale human operations with advanced technology. Through its Future Forward strategy and proprietary TP.ai FAB platform, Teleperformance is integrating artificial intelligence, automation, analytics, and human expertise to improve productivity, reduce costs, and deliver better outcomes for clients. This allows the company to position itself not only as a provider of outsourced labor, but as a strategic partner that helps organizations modernize and transform their operations in an increasingly digital and AI-driven world. Teleperformance’s competitive moat is primarily built on its global scale, deep client relationships, multilingual capabilities, operational expertise, specialized services, and growing use of technology. The company’s scale is one of its most important advantages. With nearly half a million employees, more than 600 facilities, operations in nearly 100 countries, and services delivered in more than 300 languages and dialects, Teleperformance can support large multinational clients in a way that few competitors can match. Many global companies want one provider that can deliver consistent service quality across North America, Europe, Latin America, Asia, and other regions while still offering local language support and knowledge of local regulations. This requires a delivery network, recruitment system, training infrastructure, compliance framework, and management capability that take decades to build. Teleperformance also benefits from labor arbitrage by operating in cost-efficient regions such as Latin America, Eastern Europe, India, and the Philippines, allowing clients to reduce costs while maintaining round-the-clock multilingual support. Another important part of its moat is the depth and length of its client relationships. The company has an average client relationship of around fourteen years, and many of its largest clients have worked with Teleperformance for more than two decades. Once Teleperformance becomes embedded in a client’s customer service, back-office processes, technology systems, compliance procedures, and data security frameworks, switching to another provider becomes costly and risky. A change of provider could disrupt customer service, require retraining, create operational downtime, and increase data privacy or compliance risks, especially in sensitive industries such as finance, healthcare, insurance, and government services. This creates meaningful switching costs and helps make the revenue base more stable. Teleperformance’s moat is also strengthened by its broad industry diversification. The company serves clients across technology, telecom, healthcare, financial services, retail, e-commerce, travel, media, insurance, government, and other sectors, which reduces dependence on any single industry. Weakness in areas such as automotive, energy, or media can be partly offset by growth in areas such as financial services, insurance, public sector, healthcare, or fast-moving consumer goods. The company has also moved up the value chain by expanding into specialized services that are harder to replicate than traditional call center work. LanguageLine’s interpretation and translation services are deeply used in healthcare, emergency services, and public sector settings, while TLScontact’s visa processing business requires government relationships, compliance capabilities, and secure handling of sensitive personal information. Health Advocate, recruitment process outsourcing, trust and safety, content moderation, and AI data services similarly require specialized knowledge, operational scale, and strong compliance systems. These businesses make Teleperformance less dependent on simple voice-based customer service and give it exposure to higher-value areas of business process outsourcing. Technology is becoming an increasingly important part of the moat. Through artificial intelligence, automation, real-time translation, analytics, agent-assistance tools, and workflow optimization, Teleperformance can improve productivity and service quality for clients while reducing repetitive manual work. Its large revenue base and global platform allow it to invest heavily in proprietary tools and partnerships that smaller competitors may struggle to fund. While AI is clearly a risk because it could automate parts of traditional customer support, it is also an opportunity for Teleperformance if the company can use AI to improve efficiency, win more complex contracts, and expand into areas such as AI data services and customer experience transformation. The company’s Future Forward strategy is therefore important because it aims to make Teleperformance a next-generation, AI-enabled business services company rather than a legacy call center operator. Finally, Teleperformance’s strong cash generation supports continued investment in technology, acquisitions, and new service offerings, reinforcing its ability to adapt as client needs evolve. Overall, Teleperformance’s moat does not come from patents or a single irreplaceable product. It comes from the combination of global scale, multilingual reach, long-standing client relationships, high switching costs, operational complexity, specialized expertise, technology investment, and diversified end markets. These advantages make the company difficult for smaller competitors to replicate and help explain why Teleperformance remains one of the leading global players in digital business services.

Management

Jorge Amar serves as the CEO of Teleperformance, assuming the role in March 2026 after spending much of his professional career advising some of the world's largest companies on customer experience, service operations, and artificial intelligence. Born in Argentina and having built most of his career in the United States, Jorge Amar brings extensive experience in helping global organizations transform their customer-facing operations through technology while maintaining a strong focus on consumer and employee adoption. His appointment reflects Teleperformance's strategic ambition to evolve from a traditional business process outsourcing company into a next-generation, AI-enabled digital business services leader. Before joining Teleperformance, Jorge Amar spent many years at McKinsey & Company, where he became a Senior Partner and led the firm's Global Customer Care Practice. In this role, Jorge Amar advised leading multinational corporations on customer experience strategy, operational excellence, digital transformation, and the implementation of artificial intelligence across enterprise environments. Rather than focusing solely on technology, his work emphasized how organizations can successfully combine AI with human capabilities to improve customer outcomes, increase efficiency, and create sustainable competitive advantages. This experience provided him with deep insight into the strategic priorities of many of the world's largest companies, many of which are current or potential clients of Teleperformance. The decision to appoint Jorge Amar represents a significant shift in leadership for Teleperformance. He succeeds founder Daniel Julien, who built the company into the global leader in outsourced customer experience management over several decades. By selecting an external leader with extensive expertise in artificial intelligence and digital transformation, the Board signaled that the company's future growth will be driven not simply by expanding its workforce but by integrating technology, automation, and AI throughout its operations. Management has described Jorge Amar as bringing three critical strengths to the organization: a deep understanding of how artificial intelligence functions in enterprise environments, close relationships with existing and prospective clients and an understanding of their evolving needs, and a highly analytical approach to strategy and execution. Since becoming CEO, Jorge Amar has been tasked with executing Teleperformance's Future Forward strategy, which aims to position the company as a next-generation AI-enabled business services provider. Central to this strategy is TP.ai FAB, the company's proprietary AI orchestration platform designed to combine artificial intelligence, automation, and human expertise across its global operations. Rather than viewing AI as a threat to the business, Jorge Amar has emphasized using AI to augment employees, improve productivity, create better customer experiences, and unlock entirely new business opportunities such as AI data services, digital transformation consulting, and technology-enabled workflow management. Jorge Amar's background appears particularly well suited to the challenges facing Teleperformance today. The company operates in an industry undergoing significant technological change, where the successful integration of artificial intelligence may determine future competitive positioning. His experience advising global enterprises on both technological transformation and customer experience provides him with a perspective that extends beyond traditional outsourcing operations. Combined with his understanding of client needs and his analytical approach to strategy, Jorge Amar appears well positioned to guide Teleperformance through its next phase of evolution as it seeks to strengthen its leadership position in digital business services and artificial intelligence-enabled customer experience management.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Teleperformance falls short of this criterion, as its ROIC has remained below 10% throughout the past decade, generally fluctuating between 7% and 10%. While I prefer companies that consistently generate high returns on invested capital, there are several structural characteristics of Teleperformance’s business model that help explain why its ROIC has historically been relatively modest. First, Teleperformance has pursued an acquisition-driven growth strategy for many years. The company has expanded through significant acquisitions that have broadened its service offering and strengthened its global footprint. When a company grows through acquisitions, the amount of capital tied up in the business increases immediately, while it often takes years before the acquired businesses contribute their full earnings potential. This naturally puts downward pressure on ROIC. Second, the nature of the business itself limits returns on capital. Unlike software companies or businesses with highly scalable products, Teleperformance operates a labor-intensive service model that requires substantial investments in employees, technology platforms, delivery centers, cybersecurity, compliance systems, and training. At the same time, the business process outsourcing industry is highly competitive, with many contracts awarded through competitive bidding processes that naturally limit operating margins. Third, Teleperformance has deliberately expanded into specialized and higher-value services such as interpretation, healthcare support, visa processing, trust and safety, AI data services, and consulting. These businesses strengthen the company’s competitive position and create higher barriers to entry, but they also require meaningful investment before their full earnings potential is realized. The relatively stable ROIC over the past decade suggests that these structural factors, rather than a deterioration in the business, largely explain the company’s returns on capital. Importantly, Teleperformance consistently generates strong free cash flow despite its modest ROIC, demonstrating that the business remains highly cash generative and self-funding. The company also benefits from long-standing customer relationships, with an average client relationship of approximately fourteen years, providing predictable recurring revenue and reducing business risk. Looking ahead, ROIC could gradually improve as Teleperformance executes its Future Forward strategy and continues integrating artificial intelligence and automation across its operations. Management aims to increase productivity, expand higher-value digital services, and improve efficiency, which could allow earnings to grow faster than the capital invested in the business over time. In addition, as past acquisitions become more fully integrated, they should contribute more meaningfully to profitability. However, given the company’s acquisition-driven strategy and the operationally intensive nature of its industry, I would not expect Teleperformance to achieve the exceptionally high ROIC generated by many asset-light businesses. Instead, investors should probably expect moderate but stable returns on invested capital supported by strong cash generation, recurring customer relationships, and a leading global market position.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Teleperformance has managed to increase its equity in most years over the past decade, with the only notable declines occurring in 2020 and 2025. Overall, the trend has been positive, reflecting the company’s ability to create value for shareholders over time. One of the main reasons for this growth is that Teleperformance has consistently generated solid profits while retaining a meaningful portion of those earnings within the business rather than distributing all of them to shareholders. These retained earnings have gradually increased the company’s equity and provided capital to support future expansion. Another important driver has been Teleperformance’s long-term growth strategy. The company has expanded both organically and through acquisitions, entering new geographies and adding specialized services such as interpretation, healthcare support, visa processing, and AI-related solutions. As these businesses have been integrated into the group, they have contributed to a larger and more diversified company, which has generally supported equity growth over time. The exceptionally strong increase in 2021 partly reflected the recovery following the pandemic-affected 2020, while growth remained healthy in the following years as the company continued to expand its operations. The decline in 2025 should not necessarily be interpreted as a deterioration of the underlying business. Management took a conservative approach by reducing the value assigned to one of its recruitment businesses due to a weaker market outlook, even though this had no impact on the company’s cash generation. Combined with shareholder distributions and normal fluctuations in annual earnings, this resulted in a lower reported equity for the year. Looking ahead, I believe Teleperformance should be able to continue growing its equity over the long term, although the path is unlikely to be perfectly smooth. The company continues to generate strong cash flows, operates in markets with favorable long-term growth drivers, and is investing heavily in artificial intelligence and higher-value digital services that could support future profitability. At the same time, acquisitions, shareholder distributions, and periodic adjustments to the value of acquired businesses may create temporary fluctuations in reported equity from year to year. Therefore, I would expect the long-term trend to remain positive, even if individual years occasionally show declines.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. eleperformance has generated positive free cash flow every year over the past decade, which is an important strength of the business. Free cash flow has increased significantly over time, rising from 267 million in 2016 to 1.361 million in 2025, although the development has not been perfectly linear. It declined in some years, including 2018 and 2025, but the overall long-term trend has been clearly positive. The levered free cash flow margin has also improved meaningfully over time, rising from 7,3% in 2016 to 13,3% in 2025. This demonstrates that Teleperformance has become increasingly efficient at converting revenue into cash despite operating in a labor-intensive industry. One of the main reasons for this strong cash generation is the company's global scale. Teleperformance serves more than 1.500 clients across nearly 100 countries, and once its delivery centers, technology platforms, and management structures are in place, it can support additional business without costs increasing at the same pace. This creates operating efficiencies that allow a larger share of earnings to become cash. Another important factor is the company's disciplined operational management. Management highlighted that Teleperformance delivered the strongest cash generation in the second half of 2025 in its history, driven by improvements in day-to-day cash management while continuing to invest in areas where demand is growing, such as India and South Africa. This is particularly encouraging because the company achieved strong cash generation without reducing investments that support future growth. Teleperformance also benefits from long-term client relationships and recurring demand for services such as customer experience management, interpretation, healthcare support, trust and safety, and AI-related services, providing a stable foundation for cash generation. The decline in free cash flow from 2024 to 2025 does not necessarily indicate a deterioration in the underlying business. Management still described 2025 as a year with very strong cash generation, although the reported figure was affected by temporary factors such as restructuring payments and currency movements. Looking ahead, I expect Teleperformance to remain a strong generator of free cash flow, although investors should not expect every year to be better than the previous one. Management expects the company to continue generating substantial cash, even if the figure may be somewhat lower in the coming year due to currency movements. Over the longer term, the Future Forward strategy could further strengthen cash generation by using artificial intelligence and automation to improve productivity, reduce repetitive work, and expand higher-value digital services. Teleperformance uses its free cash flow in several ways. First, it reinvests in the business by expanding its global delivery network, investing in technology, developing AI-enabled solutions, and strengthening its specialized service offerings. Second, it uses cash to reduce debt and maintain financial flexibility, particularly following acquisitions. Finally, the company returns cash to shareholders through a growing dividend, with management recently proposing another increase in the annual dividend. The board has also acknowledged shareholder interest in allocating more capital to investors going forward. The free cash flow yield suggests that Teleperformance may be trading at a very attractive valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is debt. It is crucial to assess whether a business has a manageable level of debt that can be repaid within a period of 3 years. We do this by dividing the total long-term debt by earnings. Upon analyzing Teleperformance’s financials, I have determined that the company has 6,5 years of earnings in debt. This is significantly higher than the three-year limit I prefer. That said, there is a clear explanation for the elevated debt, namely the acquisition of Majorel, which significantly expanded Teleperformance’s global footprint and service offering. Management has also emphasized that reducing debt remains a priority and that the company continues to make progress while still investing in future growth and returning cash to shareholders through dividends. Importantly, management has repeatedly stated that Teleperformance has a strong balance sheet, no liquidity concerns, and excellent access to funding if needed. The company also holds a BBB credit rating, which management points out is the highest among its major peers. In addition, Teleperformance has successfully raised financing in the market when needed, demonstrating that lenders have confidence in the business. Given the company’s consistent ability to generate substantial free cash flow, management expects debt to continue declining over time while supporting the company’s growth strategy. Therefore, while the debt-to-earnings figure is well above my preferred threshold, I do not consider it a red flag in this case because the debt is supported by a highly cash-generative business with a leading global market position and a clear plan to gradually reduce leverage.

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Risks

Macroeconomic factors is a risk for Teleperformance because demand for its services is closely linked to the overall level of economic activity. The company helps businesses manage customer interactions, sales support, back-office processes, and other business services, meaning that the amount of work it performs ultimately depends on the activity levels of its clients. During periods of strong economic growth, companies tend to expand into new markets, launch new products, increase marketing spending, and hire more employees. These activities generate more customer inquiries, sales transactions, and administrative work, all of which create additional demand for Teleperformance’s services. The opposite is true during periods of economic weakness. When businesses become uncertain about the outlook, they often delay investments, postpone expansion plans, reduce hiring, and cut discretionary spending. This can result in lower volumes of customer interactions and fewer outsourcing opportunities, reducing Teleperformance’s organic growth. Some of Teleperformance’s end markets are particularly sensitive to economic cycles. Industries such as travel, retail, e-commerce, and recruitment tend to experience weaker demand when consumers and businesses become more cautious. For example, fewer people booking flights or purchasing discretionary goods means fewer customer service requests for airlines and retailers, which directly reduces the volume of work handled by Teleperformance. Likewise, when companies slow hiring during economic downturns, demand for recruitment outsourcing services declines. Management has already highlighted that weaker hiring activity has negatively affected parts of its Specialized Services business. Macroeconomic uncertainty can also create pricing pressure. During favorable economic conditions, companies are generally focused on growth and improving customer experience, making them more willing to invest in outsourced services. During more challenging periods, however, clients often shift their focus toward cost reductions and become more aggressive when negotiating contracts. This can lead to longer sales cycles, delayed implementation of new projects, and pressure on pricing and profitability. Management has stated that the current geopolitical and macroeconomic environment has caused some customers to postpone or slow the ramp-up of large transformation projects because they prefer to wait until economic conditions become more predictable. Finally, Teleperformance operates on a truly global scale, generating revenue and employing people across nearly 100 countries. As a result, movements in exchange rates can meaningfully affect the company's reported financial results. Management noted that unfavorable currency movements had a significant negative impact on revenue in 2025 despite the underlying business continuing to perform well. While these currency fluctuations do not necessarily change the long-term value of the business, they can create short-term volatility in reported results.

Technological disruption is a risk for Teleperformance because the company operates in an industry that is being transformed by artificial intelligence and automation. Historically, businesses have relied on human agents to answer customer inquiries, provide technical support, process transactions, and perform a wide range of back-office tasks. Today, many of these activities can increasingly be handled by AI-powered chatbots, voice assistants, and automated workflows. These technologies are becoming more capable, are available around the clock, and can often operate at a lower cost than traditional customer service solutions. As a result, artificial intelligence has the potential to fundamentally change the business process outsourcing industry. The greatest risk for Teleperformance is that AI could reduce the need for human agents. A significant portion of the company's revenue is generated by handling large volumes of customer interactions on behalf of its clients. If artificial intelligence becomes capable of resolving a growing share of these interactions, the total amount of work outsourced to companies like Teleperformance could decline. Even a relatively small reduction in call or chat volumes could have a meaningful impact on a company that employs nearly half a million people worldwide. Management has already acknowledged that some revenue has been affected by automation on the client side, demonstrating that this is not merely a theoretical risk but one that is already beginning to influence the industry. Technological disruption could also create pricing pressure. As artificial intelligence handles more routine inquiries, clients may require fewer human agents and may expect lower prices for the remaining work. Companies could increasingly compare the cost of outsourcing to the cost of implementing AI solutions internally, giving them greater bargaining power when negotiating contracts. Even if Teleperformance retains existing clients, lower volumes and more aggressive pricing could put pressure on revenue growth and profitability. Another risk is that some of Teleperformance's largest clients may choose to develop their own AI capabilities rather than outsource these functions. The rapid improvement of large language models and generative AI has reduced the barriers to implementing automated customer support. As these technologies become more reliable, businesses may decide to keep a larger share of customer interactions in-house, reducing the total addressable market for traditional business process outsourcing services. Finally, customer preferences are also evolving alongside technological progress. Many consumers increasingly prefer immediate responses through automated systems rather than waiting to speak with a human representative, particularly for simple requests such as tracking an order, resetting a password, or answering frequently asked questions. As artificial intelligence continues to improve, the range of tasks that can be handled without human intervention is likely to expand further. If this trend continues, Teleperformance could face lower demand for its traditional services, slower growth, and greater competitive pressure as the industry adapts to an increasingly AI-driven future.

Competition is a risk for Teleperformance because the business process outsourcing industry is highly competitive and continues to evolve rapidly. Companies increasingly expect their outsourcing partners not only to provide customer service but also to deliver digital transformation, artificial intelligence, analytics, automation, and consulting services. As a result, Teleperformance competes not only with traditional business process outsourcing companies but also with consulting firms, IT service providers, and technology companies that offer broader and more integrated solutions. Some competitors focus on global scale and extensive service offerings, while others compete through lower prices, specialized expertise, or strong local market knowledge. Teleperformance operates in nearly 100 countries, meaning it faces competition in virtually every market where it does business. Large multinational clients often evaluate several providers before awarding contracts and may even divide work among multiple vendors to reduce their dependence on a single supplier. This means that Teleperformance must continuously demonstrate superior service quality, operational efficiency, and technological capabilities in order to retain and expand its business. If competitors are able to offer better technology, lower prices, or more attractive service packages, Teleperformance could lose market share or be forced to accept less favorable contract terms. Competition can affect Teleperformance in several ways. One important risk is contract renewals. Many of the company's contracts typically last between two and five years, meaning a significant portion of its revenue is regularly up for renewal. When these contracts expire, clients have the opportunity to renegotiate pricing or select another provider. If Teleperformance fails to meet customer expectations or competitors submit more attractive proposals, the company could lose important contracts. This risk is not merely theoretical. In 2025, Teleperformance was unable to renew a major visa processing contract in the United Kingdom, resulting in approximately €140 million of lost revenue. Such events demonstrate that even long-standing contracts are not guaranteed to continue indefinitely. Pricing pressure is another important competitive risk. Because many clients view outsourcing as a way to reduce costs, contracts are often awarded through competitive bidding processes where price plays a significant role. In a more challenging economic environment, clients may become even more focused on lowering costs and use competing offers to negotiate better terms. While Teleperformance benefits from its global scale and operational expertise, it may still face pressure to lower prices in order to retain key accounts or win new business. Lower pricing can help preserve revenue but may also reduce profitability. The competitive landscape is also changing because technology is becoming increasingly important. Many competitors are investing heavily in artificial intelligence, automation, cloud-based customer experience platforms, and advanced analytics. Companies that successfully combine these technologies with traditional outsourcing services may be able to offer more efficient and integrated solutions. If competitors develop superior technological capabilities or adapt more quickly to changing customer needs, Teleperformance could struggle to maintain its competitive position. Therefore, despite its market leadership, global footprint, and long-standing client relationships, competition remains a significant risk that could affect the company's future growth, profitability, and market share.

Reasons to invest

AI and human connection is a reason to invest in Teleperformance because the company is positioning itself not as a traditional call center operator but as a platform that combines artificial intelligence with human expertise to deliver better outcomes for its clients. While many investors view AI primarily as a threat to the business process outsourcing industry, Teleperformance believes that the greatest value will come from orchestrating AI and human agents rather than replacing one with the other. Management argues that artificial intelligence is not simply a software product that companies purchase but a tool that must be integrated into complex business processes to create measurable value. This positions Teleperformance as a strategic partner that helps clients implement AI while ensuring that human judgment, empathy, and expertise remain part of the customer experience. One reason this strategy is attractive is that Teleperformance has decades of experience managing customer interactions across thousands of clients and numerous industries. The company understands how customer service processes work, where automation creates value, where human intervention remains necessary, and how the transition between AI and human agents should be managed. This knowledge becomes increasingly valuable as businesses seek to deploy artificial intelligence at scale. Management has emphasized that the challenge is not simply deciding whether a customer should interact with AI or a human agent but designing the entire workflow so that each performs the tasks where they create the greatest value. Teleperformance is already executing this strategy through its proprietary TP.ai FAB platform, which integrates artificial intelligence into the company's service offerings. Rather than developing technology for demonstration purposes, the platform is designed to improve measurable business outcomes for clients. During 2025 alone, the company launched more than 500 AI projects across its operations, with hundreds focused on augmenting human employees through AI-powered tools. These solutions help employees access information faster, automate repetitive tasks, improve decision making, and ultimately provide better customer experiences. The company is also using AI to win new business rather than simply reduce costs. Management highlighted several examples where the combination of AI and human expertise enabled Teleperformance to secure contracts that might otherwise have been difficult to win. For a large financial institution, the company combined human customer support with AI-powered agents to manage high volumes of customer interactions while maintaining quality and compliance. For a telecommunications company, Teleperformance developed an AI-enabled collections solution where automated systems handle routine interactions before seamlessly transferring more complex cases to human specialists. Management believes that this orchestration between artificial intelligence and human expertise creates better outcomes than relying on either alone.

Acquisitions is a reason to invest in Teleperformance because the company has consistently used acquisitions to strengthen its competitive position, expand into attractive markets, and build new business lines that support long-term growth. Rather than simply increasing revenue through acquisitions, management has generally focused on acquiring businesses that complement Teleperformance’s existing capabilities and can create additional value once integrated into the group. This strategy has allowed the company to broaden its service offering, diversify its customer base, and reinforce its position as the global leader in digital business services. One of the best examples is the acquisition of Majorel in 2023. Majorel was one of Teleperformance’s largest competitors and the transaction significantly strengthened the company’s global market position. Management has explained that large multinational clients increasingly prefer to work with a limited number of strategic outsourcing partners rather than maintaining relationships with numerous providers. By acquiring Majorel, Teleperformance became an even more attractive partner for these clients, increasing its ability to retain existing business while competing for larger and more complex contracts. The acquisition also strengthened Teleperformance’s presence in important markets such as Germany and France, where its exposure had previously been relatively limited, while significantly expanding its operations in the Asia-Pacific region, one of the fastest-growing outsourcing markets in the world. The Majorel acquisition was not only about increasing scale but also about improving profitability over time. At the time of the acquisition, Majorel operated with lower margins than Teleperformance. Management therefore identified significant opportunities to improve efficiency by integrating operations, eliminating duplication, and applying Teleperformance’s operating model across the acquired business. The integration has progressed well, and management has highlighted that many of the expected benefits have already been realized, while additional improvements are still expected. This demonstrates the company’s ability not only to acquire businesses but also to successfully integrate them and create additional value for shareholders. Another example is the acquisition of ZP Better Together, which was completed in 2025. ZP provides communication solutions for the deaf and hard-of-hearing community and has been integrated into Teleperformance’s LanguageLine business. Rather than expanding into an unrelated area, the acquisition strengthens one of the company’s existing Specialized Services businesses, creating a more comprehensive language services platform. These services often benefit from long-term customer relationships, recurring demand, and specialized expertise that can be difficult for competitors to replicate. By combining LanguageLine and ZP Better Together, Teleperformance has further strengthened its position in an attractive niche with high barriers to entry. Finally, acquisitions create benefits beyond simply adding revenue. They allow Teleperformance to enter new markets more quickly, gain specialized expertise, strengthen relationships with global clients, and increase its scale in an industry where size and geographic reach matter. Larger scale enables the company to spread investments in technology and artificial intelligence across a broader revenue base while offering clients a wider range of integrated services. If management continues to execute acquisitions and integrations as successfully as it has in recent years, this strategy could remain an important driver of Teleperformance’s long-term growth and value creation.

Expanding the back office segment is a reason to invest in Teleperformance because it allows the company to move beyond traditional customer service and become a broader provider of high-value digital business services. While Teleperformance has historically been known for front-office activities such as customer support and technical assistance, management is increasingly focusing on back-office functions that help businesses run their day-to-day operations. These include areas such as claims processing, finance and accounting, regulatory compliance, data management, and other administrative processes. Unlike traditional call center services, many of these activities require specialized expertise, deep integration with client systems, and long-term relationships, making them more difficult for competitors to replicate and creating opportunities for more stable and profitable growth. One of the strongest growth drivers within the back-office segment is AI data services. Modern artificial intelligence models require enormous amounts of high-quality training data, and this data must often be labeled, validated, and reviewed by humans before it can be used effectively. Teleperformance has built capabilities in this area and is already experiencing strong double-digit growth. Management highlighted that this business has evolved from general data labeling toward much more specialized work requiring industry-specific expertise, such as medical, automotive, and financial applications. This development is particularly attractive because it positions the company within the rapidly expanding AI value chain rather than simply providing traditional outsourcing services. The company is also expanding its back-office capabilities across several industries, including banking, healthcare, and information technology. These sectors require employees with specialized knowledge who can manage complex workflows while complying with strict regulatory requirements. Rather than simply processing customer inquiries, Teleperformance increasingly supports functions such as claims management, financial processes, and compliance-related activities. This allows the company to become more deeply embedded in its clients' operations and creates stronger relationships that are more difficult to replace than standard customer service contracts. The expansion into back-office services also broadens Teleperformance's addressable market. Management continues to see strong double-digit growth in these activities and believes they will become an increasingly important part of the company's future. Because many back-office functions involve recurring work, long-term contracts, and deep integration into client operations, they can provide more predictable revenue streams and higher switching costs than traditional call center services. As businesses continue to digitize their operations and adopt artificial intelligence, demand for specialized process expertise is likely to increase. Teleperformance's ability to combine global scale, industry knowledge, operational excellence, and AI capabilities therefore positions the company to benefit from this long-term structural trend while further strengthening its competitive position.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 8,40, which is from 2025. I have selected a projected future EPS growth rate of 10%. Finbox expects EPS to grow by 24,9% in the next five years, but I'm more conservative. Additionally, I have selected a projected future P/E ratio of 20, which is twice the growth rate. This decision is based on Teleperformance's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be €107,71. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Teleperformance at a price of €53,86 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 1.614, and capital expenditures were 253. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 177 in our calculations. The tax provision was 289. We have 58,13 outstanding shares. Hence, the calculation will be as follows: (1.614 – 177 + 289) / 58,13 x 10 = €296,92 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Teleperformance's Free Cash Flow Per Share at €23,41 and a growth rate of 10%, if you want to recoup your investment in 8 years, the Payback Time price is €294,49.

Conclusion

I believe that Teleperformance is an intriguing company with strong management. The company has built its moat through its global scale, deep client relationships, multilingual capabilities, operational expertise, specialized services, and growing use of technology. ROIC has usually been low, which is largely due to the nature of the business, as Teleperformance operates a labor-intensive service model that requires substantial investments in employees, technology platforms, delivery centers, cybersecurity, compliance systems, and training. Furthermore, the company has completed several major acquisitions in recent years, which have also weighed on ROIC in the short term. Free cash flow has consistently been positive and has grown significantly over time, and I expect the company to remain a strong cash generator going forward. Macroeconomic factors are a risk for Teleperformance because demand for its services depends on the activity levels of its clients. During periods of economic uncertainty, companies often reduce spending, delay expansion plans, and negotiate more aggressively on pricing, which can lead to lower demand for Teleperformance’s services and pressure on its growth and profitability. Technological disruption is a risk for Teleperformance because advances in artificial intelligence and automation could reduce the need for human agents, lowering the volume of outsourced customer interactions. At the same time, AI may increase pricing pressure as clients adopt automated solutions or develop their own capabilities, potentially affecting the company’s growth and profitability. Competition is a risk for Teleperformance because the company operates in a highly competitive industry where it must continually defend existing contracts and win new business against traditional outsourcing firms, consulting companies, and technology providers. Competitors may offer lower prices or more advanced AI-enabled solutions, potentially leading to lost contracts, pricing pressure, and lower profitability. AI and human connection is a reason to invest in Teleperformance because the company is positioning itself as a strategic partner that combines artificial intelligence with human expertise rather than viewing AI as a replacement for people. By integrating AI into complex business processes and customer interactions, Teleperformance can improve outcomes for clients while creating new growth opportunities and strengthening its competitive position. Acquisitions is a reason to invest in Teleperformance because the company has consistently used acquisitions to expand into attractive markets, strengthen its capabilities, and reinforce its position as the global leader in digital business services. By successfully integrating businesses such as Majorel and ZP Better Together, Teleperformance has broadened its service offering, increased its scale, and created opportunities for long-term growth and value creation. Expanding the back office segment is a reason to invest in Teleperformance because it moves the company into higher-value services that require specialized expertise, deeper integration with client operations, and long-term relationships. The rapid growth of areas such as AI data services, finance, healthcare, and compliance broadens Teleperformance’s addressable market while creating more stable revenue streams and stronger competitive advantages. While I believe there are many things to like about Teleperformance and the shares are trading at very attractive levels, I also believe there are too many uncertainties surrounding the company. Hence, I will not be buying Teleperformance at this time.

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