GlobantInvestors

Dear Globant community,

Our story has always been one of thinking differently. Our daring attitude and rejection of the status quo have been the drivers of our growth to become the largest technology company in Latin America. This innovative spirit has enabled us to grow into a powerhouse for AI, technology and creativity, delivering transformative solutions for organizations worldwide. Today we serve the global market with teams in 33 countries and have delivered more than 1500% shareholder returns, having more than 15X-ed our revenue since our IPO. During a challenging 2023 for our sector, we delivered 17.7% revenue growth, 18 times the average of our peers. Forbes took notice and named us among the fastest growing companies in the world and Brand Finance recognized us as the fastest growing IT services brand. 

This was made possible by our “always in beta” mindset. Our digitally-native and entrepreneurial culture empowered us to build long-lasting relationships and trust with our clients. Our StarMeUp platform has fostered and promoted our core values throughout our organization, ensuring unity and cohesion across our global and rapidly expanding organization. Globant’s inverted org chart promotes autonomy, teamwork and an entrepreneurial mindset from the ground up. Our agile pods of designers, engineers, AI experts and product owners have been the protagonists of our expansion. We collaborate differently by organizing our services around trends and technologies, rather than industry silos. Today, our four studio networks and suite of platforms form our comprehensive offering to help businesses grow:

• The Digital Studio Network encompasses the complete software development lifecycle with the latest breakthroughs and AI. It comprises studios of expertise such as Robotics, Blockchain, Cloud, Data and Engineering, and many more.
• The Enterprise Studio Network streamlines operations and productivity at scale, becoming the perfect partner for CIOs and CFOs.
• The Globant GUT Network brings creativity, strategy, media and technology to elevate brands. This network was created after bringing vibrant agencies to the Globant family; notably GUT, which has just received 21 Lions at the 2024 Cannes Lions International Festival of Creativity.
• The AI Reinvention Network focuses on changing every industry with the power of AI.
• Globant X is our products and platforms division built to ignite growth and enhance digital transformation through AI and next-gen technologies.

Our unique approach to the software development life cycle (SDLC) integrates our proprietary AI Agents to enhance development capabilities. Supervised by humans, these AI Agents are designed to boost Globant's solutions and support various industries in accelerating their AI adoption. They will also contribute to improving user experience, by shifting focus of software development, from designing individual tasks and interactions to understanding users' overarching goals and crafting experiences that seamlessly guide them toward those outcomes. Combined with Globant X’s products, our initial set of Agents tackle different stages of the cycle, including product definition, backend prototyping, design, code testing and code fixing.

From digital to AI transformation: the largest shift humanity has ever seen

I would like to take this opportunity to share our vision of our sector, the disruptive potential of AI and the opportunities it presents for us as we strive to reinvent our industry and become the leading AI and digital solutions partner worldwide.

Although there is significant attention on AI right now, at Globant we have been investing in this technology and delivering digital and AI transformations for over a decade. Today, AI presents us with an opportunity on a scale we haven’t seen since the smartphone revolution. The game-changing launch of the iPhone and the growing ecosystem of the App Store soon after created a space for app creators and brands to connect directly with consumers. Users adopted this technology in a massive and exponential way, opting for convenience and speed of the mobile technology on handheld devices. Companies knew that they had to be there to reach these users and to remain relevant in this new space.

This triggered the first wave of what we know today as the digital transformation. Organizations all over the world launched multi-year projects across different areas of their business, many of which are still ongoing. Today, users continue to dominate the digital trends and companies must keep up with innovation to meet this demand.

The opposite happened with the Metaverse. Major announcements from top brands heralded a new age, notably Facebook changing its name to Meta. However, users have yet to adopt this concept on a massive scale, and organizations therefore have not followed suit by investing massively in the space. Again, the same rationale: if consumers adopt the technology, companies follow.

We are now in the midst of a profound transformation with generative AI. With ChatGPT reaching its first million users in less than a week and its first 100 million in two months, this user-dominated revolution is accelerating productivity, creativity and quality across an endless span of possible applications: from legal review to social media posting. Large language models have given people conversational convenience and they are quickly incorporating these technologies into their daily work and personal routines. We are also transitioning from a world where users provide step-by-step instructions to one where they define their desired outcome, leaving the "how" to intelligent systems. This could cause explosive growth to the ecosystem, with some estimates forecasting a 40% CAGR through 2033. Organizations will yet again need to keep up with this user-dominated demand, which could lead to a wave of multi-year genAI transformation programs. 

Private equity has noticed as well, with several firms making significant investments to acquire private companies that are poised to benefit from AI adoption for business operations, efficiency, and value generation. In the first 45 days of 2024, private equity invested more money in generative AI acquisitions than all of the investments from Q1 2023.

Challenges in the AI growth landscape

This sea change is still in its early stages. Although today’s LLMs perform well when compared to standard benchmarks, models like GPT-4 and many of the open source models still require a stronger focus on basic reasoning. Many experts see that current benchmarks are insufficient and call for new, more effective ones with transparent training processes to better evaluate and enhance their reasoning capabilities. Better agents that can augment our capabilities will thereby become essential.

As I’ve stated publicly on Globant’s earnings calls, although companies recognize the need to embrace AI, true implementation and execution are still under review. The barrier to entry for building AI has been lowered, but creating products and systems that are effective beyond a demo remains disappointingly difficult. This trend also resembles what we saw during the digital transformation era. Digital labs were first established by many of our clients to experiment with mobile and social technologies to create proofs-of-concept. We are seeing the same thing happening now, with many new AI labs to explore the potential impact of this emerging technology and gain a deeper understanding of how to harness and incorporate it into their business. These AI labs have already served as a space for Globant to expand. We are seeing high-demand for AI-driven experiences, resulting in over $100 million in revenue for 2023, and we expect to see an increase in spending this year and forward.

Implementation challenges have not dampened growth optimism, with Silicon Valley startups increasingly discussing Artificial General Intelligence (AGI) and Artificial Super Intelligence (ASI). Although these discussions portray these concepts as far off in the future, I believe that we are on our way, and already see certain elements of those concepts emerging today. LLMs can already outperform humans in many aspects. Future improvement will require extensive research beyond foundational models like transformers. It’s key to focus on creating algorithms that can effectively adjudicate content to produce accurate and relevant results, ensuring the safe and ethical use of AI, and exploring interdisciplinary approaches to enhance AI's learning and adaptation capabilities.

Globant’s AI opportunity

This massive opportunity makes me optimistic for Globant’s future, for the following reasons.

1. We’re an AI-first company. From a decade of investing in this technology, we’ve incorporated it throughout our organization from the ground up. All employees have been trained in AI and we apply it to everything to how we recruit people and assemble teams, to how we share knowledge. This inside-first adoption then makes the products, platforms and solutions we develop for our clients more organic and effective. We now have 98% of our agile pods certified in AI, and we have a thorough portfolio of AI agents and products based on proprietary AI and genAI to accelerate software development: Augoor, MagnifAI, Genexus Next and Enterprise AI. APIs and platforms such as Globant’s Enterprise AI have made LLMs more accessible, allowing everyone to build intelligence into their products.
    
2. Productivity gains from AI and genAI have created more demand for our products and services. With tools like Copilot and ChatGPT, teams are producing better and faster work. This is only creating more demand as ambitions for quality and speed increases as well. In the gaming industry, what took 20 engineers about six months to accomplish a decade ago can now be achieved by a team of 2 engineers in just one week using tools like Unreal Engine. However, top-tier games today require significantly larger teams of engineers as this new productivity has raised the bar for quality and complexity. The same thing is happening in the IT industry: as GenAI accelerates the development process it enables the creation of more complex systems and technology that before was impossible to imagine or create. This will open up opportunities for Globant: we will incorporate new and different revenue stream models and new and larger teams to create these new experiences and AI transformation programs.
    
3. The techno-social nature of our work. We go beyond mere technical or creative efforts: our work encompasses a vital aspect of social construction. Only about 40% percent of a programmer's time is dedicated to coding. Humans come together to agree on scope, make decisions, discuss ideas, and build relationships. This process fosters a social fabric with our customers and stakeholders, which feeds into our technical endeavors. GenAI will drive productivity gains in some of the social activities which in turn will unlock valuable time for understanding our customers better so that we can craft more meaningful outcomes.
    
4. AI agents increase corporate productivity. Today, the power of AI productivity lies largely in the hands of individuals. With accessible tools and platforms, people can leverage AI for personal tasks, enhancing efficiency and creativity. However, the future promises a shift toward AI agents that are not only more sophisticated but also augmented and supervised by humans. These AI agents will transform productivity at a corporate level, driving significant gains for companies at scale. The potential unlocking of efficiency rivals the breakthrough of Henry Ford’s assembly line, which made manufacturing more scalable. AI Agents will streamline operations, enhance decision-making, and foster innovation. Human oversight will ensure these AI systems align with company goals and ethical standards, maximizing benefits while mitigating risks. This symbiotic relationship between AI and human expertise is poised to revolutionize business operations. Globant’s agents combined with our suite of AI platforms provide a clear advantage to help organizations benefit from these gains. 
    
5. Companies need enterprise-class genAI solutions. In the journey toward achieving maturity in generative AI, organizations have to re-prioritize certain foundational projects, such as data management and cloud migration. At this critical, foundational stage, there is a great opportunity for Globant to apply its services and talent.

Valuing humanity and authenticity

Although we are firm advocates of AI and its transformative impact on organizations, we are also cognizant of the potential ramifications it can have on the health of our planet and society. Its required energy and resources must be taken into account from a policy perspective. We also need to apply AI in a sustainable, ethical and human-centric way. Globant wants to lead this conversation, and we have taken steps through our AI Manifesto, that aims to chart the way forward and build consensus.

AI also reaches an intrinsic limit regarding authenticity. Authenticity is a fundamental value that resonates deeply with humanity. It is the essence of originality and truthfulness that people gravitate towards. Readers often prefer works penned by authentic authors over those crafted by ghostwriters. Similarly, in music, artists who write and perform their own songs tend to attract more loyal fans.

This preference for authenticity extends beyond the arts and into the corporate world. Companies that embody the vision and creativity of their founders or management teams often cultivate a strong, loyal customer base. Owning an iPhone is not just about possessing a piece of technology; it’s about embracing the innovative spirit of Steve Jobs. The same can be said for driving a Tesla, where the experience is intertwined with Elon Musk’s authentic vision for sustainable transportation with elegant design and high performance. The significance of authenticity will only grow in this age of AI.

Emotional intelligence or the power of gut feelings will also see greater relevance, as these sentiments are inherently human. While AI can undoubtedly enhance efficiency and accelerate certain processes, it lacks the genuine human touch that comes from personal experiences, emotions, and creativity.

Authentic individuals, with their unique perspectives and original thoughts, will stand out in a world where average, AI-generated responses become more prevalent.

Creative Globant

Globant’s capabilities will thrive in the age of AI. From Google, to the Intuit Dome (LA Clippers stadium), to Nissan, we have built our business on connecting people to their brands and to each other in memorable and meaningful ways. Combine this with our can-do culture, we endeavor to be the go-to partner who provides the right tech and ingenuity to face the future. Globant will remain nimble and entrepreneurial, with an authentic DNA as we dare to go beyond. Our inverted organizational pyramid with our client-centric pods at the top, our AI-first approach and our Studio Networks will enable us to lead, once again, this new paradigm shift.

Our society’s need for change will only accelerate as this century continues to throw unexpected turns. As a lifelong entrepreneur, I’ve learned that those with the most daring mindset will be the ones who will take the lead in these changing times.

Thank you again for believing in Globant, and we look forward to growing with you.

Martín Migoya

Co-founder, Chairman & CEO of Globant