Tech Mahindra rebounds from a two-year revenue decline
Tech Mahindra Ltd has reversed a two-year revenue decline in 2025-26 as it enters the final leg of a three-year roadmap aimed at improving profitability and growing faster than the peer average, despite demand uncertainty on India’s $297 billion information technology (IT) services sector.
The nation’s fifth-largest IT services company finished FY26 with $6.39 billion in revenue, up 1.9% year over year. Bloomberg44 analysts estimate $6.11 billion, with just over half of its incremental revenue coming from manufacturers, which account for nearly a fifth of its business.
The IT outsourcing provider had ended FY25 and FY24 with revenue declines of 0.21% and 5%, respectively.
Net profit increased by 7% annually to $537 million.
“Obviously, there are always situations where an individual customer can make discretionary deductions or an individual customer can pull that (technology spending), but that’s the strength of the portfolio that we have,” CEO Mohit Joshi said during the company’s post-earnings press conference.
He added that banks and financial institutions, which account for almost one-fifth of its revenues, continue to be the company’s focus area.
“Growth figures were better than expected, mainly due to strong TCV (total contract value). Margin improvement was in line with expectations,” said Amit Chandra, vice president, HDFC Securities. Its major deal TCV increased 42% from a year ago to $3.79 billion.
A note of caution
Management seemed optimistic but stressed caution.
“As we enter FY27, we will continue to build on the progress we have made over the last two years. While the global environment may still be challenging and geopolitical volatility exists, we are encouraged by the way we have strengthened the services we offer to our customers over the past two years, building greater trust and deepening our approaches to customer engagement,” Joshi said.
Of course, the company doesn’t give revenue guidance. Management’s views were echoed by two other colleagues. While Wipro Ltd’s management has highlighted geopolitical and trade uncertainties, Tata Consultancy Services (TCS)’s leadership expects long-term deals despite these macroeconomic challenges.
On the other hand, HCL Technologies Ltd’s management has signaled caution due to the uncertain demand environment. It highlighted slow growth in the current financial year, guiding growth of 1-4% in constant currency terms.
Margin expansion
Another bright spot on Tech Mahindra’s report card was its operating margins, which rose 290 basis points (bps) to 12.6% from the previous year. A 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 operating margin to 15% by March 2027 by eliminating low-margin accounts and reducing costs.
As part of the company’s three-year roadmap, it will also look at “smaller acquisitions rather than large, fast-moving ones.” This marks a reversal from its previous stance of focusing on organic revenue growth by FY27.
“Margin expansion has borne fruit for Tech Mahindra. In a year of challenging demand environment, they have focused on higher margin services and become operationally efficient,” said Ashutosh Sharma, vice president of Forrester Research.
“Tech Mahindra will look at inorganic growth around AI and engineering aspects of their business,” added Sharma.
But a third expert flagged the growth as worrying.
“This is not a growth story, it’s a margin story. The firm has clearly gone out of stability and is now executing with cost discipline and operating leverage. The problem is that growth hasn’t caught up yet, which is keeping them behind their rivals in the current cycle,” said Phil Fersht, CEO of HFS Research.
Meanwhile, the company’s number of employees decreased by 1,108 to 147,623. Like its peers, the company refrained from giving any headcount target for FY27 but said new hires would exceed the previous fiscal year’s figures.
The company reported results during market hours on Wednesday, and its shares closed down 2.42%. ₹1,464 on BSE against a decline of around 1% in Sensex.
