TaskUs Q2: AI Growth Offsets Trust & Safety Decline, But Margin Compression Persists

What happened

TaskUs reported Q2 revenue of $309M, up 5% year-over-year, as growth in AI Services partially offset declines in Trust & Safety. The AI Services segment grew 26% year-over-year, but this growth rate fell short of the 30% threshold we identified as necessary for a rating increase, and profitability remained lower than legacy businesses. Adjusted EBITDA margin compressed to 18.7% from 21.3% a year ago, driven by higher labor costs and a shift toward more onshore U.S. delivery, which is less leveraged. The company's largest client automation continues to pressure Trust & Safety volumes, and customer concentration remains high (top ten clients at 63% of revenue as of Q1), amplifying the impact. While the Seeking Alpha article rates the stock a buy with an $11.8 price target, our disciplined framework has not yet seen the conditions for an upgrade (AI growth ≥30% and margin ≥19%), so we maintain a WAIT rating.

Implication

The Q2 print shows revenue resilience but confirms that the margin trough is persisting longer than initially modeled, reducing near-term earnings power. AI Services growth of 26% is respectable but below our threshold, suggesting that the offset to Trust & Safety declines may be insufficient to drive a re-rating. The shift in delivery mix toward onshore U.S. locations to serve AI clients is structurally dilutive to margins, and we need evidence of normalization or cost actions to reverse this. With the stock trading around $4.70, the market is pricing in a muted outlook; a buy would require visibility into a stronger second-half rebound in margins and AI signings converting to high-margin revenue. We maintain our WAIT rating and will reassess after Q3 results, focusing on AI Services growth rate, margin recovery, and any signs of reduced customer concentration.

Thesis delta

The new Seeking Alpha article presents a bullish case with a $11.8 price target, but its data does not meet our upgrade criteria: AI Services growth slowed to 26% (below 30%) and adjusted EBITDA margin remained at 18.7% (below 19%). Therefore, our thesis remains unchanged: we maintain a WAIT rating with a base implied value of $6.00, and we will consider upgrading only if AI growth reaccelerates and margins recover in the next quarter.