Tech Mahindra in focus after Q1FY26 Profit rose 30% YoY

On Thursday, Tech Mahindra shares fell 1.5 percent, touching a day’s low price of Rs. 1572.30 on NSE after it released its Q1FY26 financial results. The performance showed an uncertain demand environment, reporting a strong 30.52 percent year-on-year jump in consolidated net profit to Rs 1,141 crore for Q1FY26, compared to Rs 865 crore a year earlier. The company’s revenue from operations grew modestly by 2.7 percent to Rs 13,351 crore, against Rs 13,005 crore in the same quarter last year, reflecting increased client caution in deal decisions in key markets, but Tech Mahindra has maintained the top-line momentum. 

A sharp increase in profitability was underpinned by cost control, as total expenses fell marginally to Rs 11,952 crore, thus helping to keep operating margins intact. Notably, the company achieved an EBIT of Rs 1,618 crore, surging 37.35 percent year-on-year, and expanded its EBIT margin by 305 basis points to 12.11 percent. The cost-takeout initiatives, such as the Project Fortius program, continued to improve margins for the company. On the segment front, the IT business provided a solid anchor, posting Rs 11,263.7 crore in revenue, up 3.55 percent YoY, while the Business Process Services segment moderated slightly, slipping 1.88 percent to Rs 2,087.5 crore. 

Geographically, the Americas contributed a major share at 49.2 percent but suffered a revenue drop of 5.9 percent YoY, whereas Europe, with a 26 percent share, showed resilience with double-digit 11.7 percent growth and the rest of the world contributed 24.8 percent of revenues, up 2.9 percent YoY. The pace of deals accelerated considerably, with the total contract value of new deals booked in the quarter soaring 51 percent YoY to $809 million, and trailing twelve-month (TTM) deal wins rising 44 percent, led by large broad based verticals and geographies. Management cited a broad-based improvement in win rates and strong engagement for new integrated offerings, especially in digital transformation and AI-enabled services.

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Meanwhile, Tech Mahindra’s client base remained healthy, with two more clients signing on for annual engagements exceeding $50 million, taking the tally to 26, and the company’s total active client count continuing to diversify across verticals and geographies. The workforce ended the quarter at 1,48,517, up 897 on a yearly basis but down sequentially as the company sharpened focus on operational efficiency and project utilisation. Attrition edged up slightly to 12.6 percent from 11.8 percent in the prior quarter, reflecting typical industry pressures, but management remains committed to robust engagement and talent retention strategies. 

The quarter saw tech investments, particularly in artificial intelligence and automation, as the “AI Delivered Right” value proposition, launched last quarter, generated significant client interest, which accelerated multiple fresh deal wins. On cash flow, free cash flow for the quarter stood at $86 million, demonstrating continued capital discipline. 

From a strategic perspective, CEO and MD Mohit Joshi conveyed confidence in the company’s trajectory, stating that the business environment is gradually turning favourable and that recent deal signings would power a return to sequential revenue growth from Q2FY26. He reaffirmed Tech Mahindra’s ambition to achieve a 15 percent EBIT margin by FY27, with a focus on automation, delivery optimisation, and structural cost reduction as primary levers. Management reiterated their view that FY26 would be a stronger year than FY25 on the back of a robust deal pipeline and improved client sentiment. Additionally, the company plans to accelerate investments in generative AI consulting, automation, and partnership ecosystems, focusing on next-gen capabilities to widen differentiation and deepen client relationships.

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