Coforge FY26 Annual Earnings Summary

Tariff uncertainties and macro volatility continue to cause oscillation in run-the-enterprise budgets, potentially affecting discretionary spending.

Ramp-up of the largest deal and increased visa costs, subcontractor expenses, and depreciation weighed on margins in Q1; wage hike in Q3 could pose further headwinds.

Annual wage hike effective October 1, 2025, expected to cause a 100-150 bps margin drop in Q3, partially offset by other levers.

EMEA has seen delays and slowdowns in deal sign-offs, though management expects recovery in the next two quarters.

Integration of Encora may face challenges in achieving synergies and margin targets, with integration expenses expected in Q4 and Q1.

Hedge losses of INR 434 million in Q3 adversely impacted reported EBIT by 26bps; management is revisiting hedging strategy but no final decision yet.

BFS revenue grew only 12% in FY26, stuck at ~$120-123M for five quarters due to a large client account issue. Recovery depends on management's refactoring efforts.

Industry-wide AI-driven code generation could compress billing rates, though management argues total cost of ownership remains high and managed services will offset.

The merger closure depends on regulatory approvals, which could slip beyond the December-January timeline.

Higher CapEx for the AI data center deal impacted free cash flow; while management expects normalization, sustained asset-heavy deals could strain cash generation.

Management expects furloughs at the same scale as previous years, which could affect Q4 revenue sequentially.

Hedge losses doubled to INR 307 million in Q2, creating a 150 bps gap between constant currency and dollar revenue growth.