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Tech Mahindra — Q2 FY26
Tech Mahindra reported Q2 FY26 revenue of INR 13,995 crore, up 5.1% YoY, with PAT of INR 1,194 crore (+28.2% YoY).
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Tech Mahindra reported Q2 FY26 revenue of INR 13,995 crore, up 5.1% YoY, with PAT of INR 1,194 crore (+28.2% YoY). EBIT margin expanded 108bps to 12.1%, marking the eighth consecutive quarter of improvement. Growth was broad-based across manufacturing, BFSI, and retail, while communications remained soft. Net new deal TCV reached $816 million, up 57% LTM, and the $20M+ client bucket surpassed $1 billion in revenue. Management highlighted steady progress toward the FY27 margin target of 15%, driven by fixed-price productivity and SG&A optimization. AI investments, including the TechMRI platform and participation in India's AI Mission, are positioning the company for future growth. However, macro uncertainty and a muted discretionary spending environment remain headwinds. The second half is expected to be stronger than the first, aided by deal conversions and operational rigor.
टेक महिंद्रा ने Q2 FY26 में 13,995 करोड़ रुपये का राजस्व दर्ज किया, जो पिछले साल से 5.1% अधिक है। कंपनी का मुनाफा (PAT) 1,194 करोड़ रुपये रहा, जो 28.2% बढ़ा। परिचालन लाभ (EBIT) मार्जिन 12.1% हो गया, जो लगातार आठवीं तिमाही में सुधार है। विनिर्माण, बैंकिंग-बीमा और खुदरा क्षेत्रों में अच्छी बढ़त हुई, लेकिन संचार क्षेत्र कमजोर रहा। नए सौदों का मूल्य 816 मिलियन डॉलर रहा, जो पिछले 12 महीनों में 57% अधिक है। कंपनी का लक्ष्य FY27 तक 15% मार्जिन हासिल करना है, जिसके लिए लागत कम करने और AI निवेश पर ध्यान दिया जा रहा है। हालांकि, बाजार में अनिश्चितता और कम खर्च चुनौती बने हुए हैं। दूसरी छमाही पहली से बेहतर रहने की उम्मीद है।
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Macro uncertainty and muted discretionary spending
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Net New Deal TCV
$816M
+57% LTM
Net new total deal revenue for the quarter, reflecting strong broad-based deal wins across verticals.
EBIT Margin
12.1%
+108bps QoQ
Eighth consecutive quarter of margin expansion, driven by operational efficiency and cost optimization.
Must-Have Accounts Added (YTD FY26)
21
+21 accounts
New must-have accounts added in first two quarters of FY26; 17 have already generated over $1M revenue each.
Free Cash Flow to PAT Ratio (YTD)
120.8%
N/A
Year-to-date free cash flow to PAT ratio, indicating strong cash generation and working capital management.
What Changed vs Last Quarter
NEW
Second half of FY26 expected to be better than first half
Management expects improved performance in H2 driven by operational efficiencies and improved demand visibility, despite seasonal furloughs in Q3.
NEW
Net new deal TCV expected to approach $1 billion
Management aims to increase quarterly net new deal TCV closer to $1 billion, up from current $816 million, driven by a rich pipeline.
NEW
Capital allocation policy: return 85%+ of free cash flow to shareholders
Board recommended dividend of INR 15 per share; committed to returning at least 85% of free cash flow to shareholders.
UPDATED
EBIT margin target of 15% by FY27 remains intact
Management reiterated commitment to reaching 15% EBIT margin by FY27, with continued margin expansion each quarter.
DROPPED
FY26 revenue to be better than FY25
Management expects FY26 revenue growth to exceed FY25 levels, driven by deal conversions and stabilization in key verticals.
DROPPED
Revenue growth to improve from Q2 FY26
Large deal wins from previous quarters are expected to start contributing to revenue from Q2 onwards.
DROPPED
Effective tax rate of ~27% for FY26
CFO guided that the effective tax rate for FY26 will be around 27%, normalizing from a one-time refund in Q4.
NEW RISK
Macro uncertainty and muted discretionary spending
Management noted that the macro environment remains slow, with no dramatic growth expected next year, which could impact revenue growth.
NEW RISK
H1B visa regulation changes
Under 1% of global workforce on H1B visas; potential regulatory changes could increase costs or limit talent availability, though management considers it manageable.
NEW RISK
Client concentration and ramp-down risk
A semiconductor client significantly scaled down operations last quarter, impacting revenue; similar events could recur in the $20M+ client bucket.
NEW RISK
Communications vertical weakness in Europe
European telecom business faced localized challenges, causing a decline in the communications vertical; recovery expected but uncertain.
RISK GONE
Sustained weakness in Manufacturing and Auto verticals
Tariff uncertainty and client spending cuts continue to pressure the Manufacturing vertical, which declined 4% YoY.
RISK GONE
Hi-Tech vertical headwinds from semiconductor client restructuring
A key semiconductor client implemented sharp budget cuts and workforce reductions, causing a 3.3% YoY decline in Hi-Tech.
RISK GONE
Revenue growth may not materialize as expected
Despite strong deal wins, revenue momentum has lagged; management's expectation of improvement from Q2 may be delayed if macro worsens.
RISK GONE
Margin target dependent on growth assumptions
CFO acknowledged that the FY27 margin target of 15% assumes a certain growth trajectory; if growth disappoints, margins may be revisited.
🤫 Topics management stopped discussing
Mentioned in Q2 FY25, Q4 FY25
Analyst questioned whether prudent deal strategy could be a risk if competitors become more aggressive on pricing.
Mentioned in Q3 FY25, Q4 FY25
Planned investments in service line capabilities, ecosystem, and talent, including consulting and AI, with ~1% margin impact from wage hikes and investments.
Mentioned in Q1 FY25, Q1 FY26
CFO guided that the effective tax rate for FY26 will be around 27%, normalizing from a one-time refund in Q4.
Mentioned in Q2 FY25, Q4 FY25
Management noted softness in US high-tech and auto sectors, with delayed BPS ramp-ups and cautious discretionary spending.
Fast read
Guidance and risk preview
Management expects improved performance in H2 driven by operational efficiencies and improved demand visibility, despite seasonal furloughs in Q3.
Management noted that the macro environment remains slow, with no dramatic growth expected next year, which could impact revenue growth.
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