Tech Mahindra Ltd reversed a two-year revenue decline in 2025-26 despite demand uncertainty weighing on India’s $297-billion information technology (IT) services sector, as it entered the final leg of its three-year road map, aiming to improve profitability and grow faster than the peer average.
The country’s fifth-largest IT services company ended FY26 with $6.39 billion in revenue, up 1.9% year-on-year, beating Bloomberg’s estimate of $6.11 billion from 44 analysts, with a little more than half of its incremental revenue coming from manufacturers, which account for almost a fifth of its business.
The IT outsourcer had ended FY25 and FY24 with revenue declines of 0.21% and 5%, respectively.
Its net profit jumped 7% on-year to $537 million.
“Clearly, there are always situations where an individual client may do discretionary cuts, or an individual client may pull it (tech spending) back, but that is the strength of the portfolio that we have,” said chief executive Mohit Joshi during the company’s post-earnings press conference.
He added that banks and financial institutions, which account for almost a fifth of its revenue, remain a focus area for the company.
“The growth numbers were better than expected, especially on the back of a strong TCV (total contract value). Margin improvement was in line with expectations,” said Amit Chandra, vice-president of HDFC Securities. Its large-deal TCV rose 42% from a year ago to $3.79 billion.
A note of caution
The management appeared sanguine but underlined caution.
“As we step into FY27, we will continue to build on the progress we’ve made over the past two years. While the global backdrop can still be demanding and geopolitical volatility exists, we are encouraged by the way we have strengthened our client offerings, built added trust and deepened our client engagement approaches over the last two years,” said Joshi.
To be sure, the company does not give revenue guidance. The management’s views were echoed by two of its other peers. While Wipro Ltd’s management highlighted geopolitical and trade uncertainties, Tata Consultancy Services’ (TCS) leadership expects long-term deals despite these macroeconomic challenges.
On the other hand, HCL Technologies Ltd’s management has signalled caution on the back of an uncertain demand environment. It outlined slow growth in the current fiscal year and guided for 1-4% growth in constant currency terms.
Margin expansion
Another bright spot in Tech Mahindra’s report card was its operating margins, which jumped 290 basis points (bps) from the preceding year to 12.6%. One basis point is one-hundredth of a percentage point.
Much of this can be attributed to Project Fortius—the company’s three-year plan to increase its operating margins to 15% by March 2027 by eliminating low-margin accounts and cutting costs.
As part of the company’s three-year road map, it will also be looking at “small tuck-in acquisitions rather than large, needle-moving ones”. This marks a reversal from its earlier stance of focusing on organic revenue growth until FY27.
“Margin improvement bore fruit for Tech Mahindra. They have been focusing on higher margin services and becoming efficient in terms of operations in a year with a tough demand environment,” said Ashutosh Sharma, vice-president at Forrester Research.
“Tech Mahindra will look at inorganic growth around AI and engineering sides of their business,” added Sharma.
However, a third expert flagged growth as a concern.
“This is a margin story, not a growth story. The firm has clearly exited stabilization and is now executing on cost discipline and operating leverage. The issue is that growth has not yet caught up, which keeps them behind peers in the current cycle,” said Phil Fersht, chief executive of HFS Research.
Meanwhile, the company’s headcount shrank by 1,108 to 147,623 employees. Much like peers, the company shied away from giving any headcount target for FY27 but said fresher hiring would exceed that of the previous fiscal year.
The company announced the results during market hours on Wednesday, and its shares closed 2.42% lower at ₹1,464 on BSE, against a nearly 1% fall in the Sensex.
