Detailed Narrative
Exceptional Q1 FY26 Performance and Growth Drivers
Coforge reported an exceptional Q1 FY26, achieving 9.6% sequential dollar growth and setting a strong foundation for the fiscal year. This performance is attributed to the firm's unique execution intensity, hyper-specialization in select industries, and deep engineering capabilities. The company's sustained, robust, and accelerating growth story is now entering its ninth year, with management confident in delivering 14% reported EBIT in FY26.
Robust Order Intake and Executable Order Book
The quarter saw strong order intake, with five large deals signed and a total order intake of $507 million. The executable order book, representing locked orders for the next 12 months, reached a record $1.55 billion, marking a 46.9% increase year-over-year. Management aims to close at least 20 large deals in the current fiscal year, building on the 14 signed last year.
Vertical Performance and Client Mining
Growth was primarily led by the Travel vertical, which grew 31.2% sequentially in dollar terms, and other emerging verticals (healthcare, retail, high tech) at 12.8%. While BFS saw a marginal sequential decline of 1.1%, it maintained a strong 32% YoY growth. Top 5 clients grew 24.0% sequentially and 49.5% YoY, contributing 20.7% to Q1 revenue, indicating strong client mining and relationship health.
EBIT Margin Management Amidst Investments and One-offs
Despite a significant ramp-up in a large deal, higher amortization from recent acquisitions, increased depreciation from the AI data center, and a $5.5 million one-time📎 bonus provision, Coforge maintained its EBIT margin at 13.2%. The company also incurred exceptional expense📎s related to a cybersecurity breach, offset by an $8.4 million gain from the AdvantageGo business sale. Management expects margins to expand in Q2 and Q3 due to operating leverage and reduced ESOP costs.
Strategic AI Investments and Data Center Infrastructure
Coforge invested $65 million in capex during Q1, with $58 million allocated to an AI data center project. Over the last two quarters, total investment in the AI-powered data center reached $85 million, partially funded by a $62 million client advance and a $23 million term loan at 3.5% interest. These assets are owned by Coforge, not dedicated to a single client, and are expected to taper down to original capex levels post-investment phase.
Talent Management and Attrition
The company's headcount stood at 34,187, with a net addition of 1,164 people during the quarter. Utilization was healthy at 82.1%. The last 12-month attrition rate further declined to 11.3%, positioning Coforge as one of the lowest attrition firms in the industry. This strong talent retention is a key factor in the firm's sustained growth and execution capabilities.
Cigniti Merger Update and Future Outlook
Exchange approvals have been received for the proposed Coforge and Cigniti merger, with the first motion filing to NCLT underway. The final integration is expected around December 2025 to January 2026. Management expressed high confidence in the BFS vertical's continued strong demand, driven by margin pressures, product innovation, and regulatory changes, expecting it to maintain its share of the firm's revenue.