Skip to content

    Coforge

    COFORGE
    Information Technology·24 Oct 2025
    Management Summary

    Coforge delivered an exceptional Q2 FY26, marked by robust 5.9% sequential constant currency revenue growth and a strong 14% EBIT margin. The company achieved significant order intake of $514 million and expanded its 12-month executable order book by 26.7% YoY, driven by AI-led transformation and strong execution. Despite currency headwinds impacting EBIT and an increase in DSO, Coforge maintained healthy free cash flow and low attrition, reaffirming its commitment to sustained organic growth and strategic acquisitions.

    Highlights

    5
    • Coforge recorded 5.9% sequential CC growth and registered an EBIT of 14% for the quarter, an increase of 251 bps QoQ and 240 bps YoY.

    • Total order intake during Q2 was $514 million, and the next 12-month signed order book stands at a record $1.63 billion, which is 26.7% higher than at the same time last year.

    • Free cash flow increased to $37.1 million, reflecting an FCF to PAT ratio of 86%, and the company was able to reduce its credit line, leading to reduced interest expenses.

    • The last 12-month attrition for the quarter fell further to 11.4%, positioning Coforge as one of the lowest attrition firms across the industry.

    • The firm signed five large deals in Q2, contributing to a total of 10 large deals in the first half of FY26, indicating strong sales execution.

    Concerns

    2
    • The hedge loss reported for the quarter amounted to INR 307 million, compared to INR 158 million in the previous quarter, reflecting an adverse impact of 78 bps on the reported EBIT.

    • DSO (Days Sales Outstanding) increased to 63 days (billed), with a total working capital cycle of 104 days, though management attributed this to currency movements and 30% YoY growth.

    Key financials

    Metrics

    16

    Periods

    4

    Headline

    13
    • Revenue
      462.1 Mn
      QoQ+4.5%
    • Revenue (INR)
      QoQ+8.1%
    • Revenue (CC)
      QoQ+5.9%
    • EBIT Margin
      14%
    • PAT (% of Revenue)
      9.4%

    Q2

    1
    • EPS
      ₹11.2

    H1 FY26

    1
    • EPS
      ₹20.7
      YoY+101%

    LTM

    1
    • Attrition
      11.4%

    Segment breakdown

    Travel
    0.064 dollar terms Sequential Growth
    Other Verticals (Healthcare, Retail, High-tech, Manufacturing)
    5.9% Growth
    Insurance
    1.8% Sequential Growth
    BFS
    4% Sequential Growth
    Government outside India
    0.004 dollar terms QoQ Growth
    Top 5 Clients
    6.2% QoQ Growth21% Contribution to Revenue
    Top 10 Clients
    9.8% QoQ Growth30.8% Contribution to Revenue
    List

    Order Book

    high confidence

    Total Value

    USD 1.63 billion

    as of 2025-09-30

    quantified
    26.7% YoY

    Inflow this qtr

    USD 514 million

    Execution

    executable over the next 12 months

    Composition

    Mix2 geographys
    • North America Large Deals (Q2)3 number60.0%
    • Asia Pacific Large Deals (Q2)2 number40.0%

    Share of order book by geography (derived from disclosed amounts)

    "Quarter 2 was yet another strong quarter, both from an order intake and a large deals closure perspective, with increasing velocity and median size of large deals."

    Source:
    Prepared remarks

    Capital allocation

    4
    high confidence
    CategoryHeadline
    Capex

    USD 4 million

    Debt

    Debt disclosed

    M&A

    Cigniti

    acquisition · pending regulatory

    Liquidity

    Liquidity disclosed

    Free cash flow increased to $37.1 million reflecting FCF to PAT ratio of 86%.

    Guidance & targets

    8
    CategoryTargetPriority
    Profitability
    EBIT Margin
    14%
    High
    Profitability
    EBIT Margin (Minimum Threshold)
    14%
    High
    Profitability
    EBIT Margin (Primary Aim)
    prioritize growth over further EBIT improvement
    High
    Cash Flow
    FCF to PAT Ratio
    70-80%
    High
    Revenue
    Healthcare Vertical Book of Business
    almost $100 million
    Medium
    Revenue
    Public Sector outside India Run Rate
    nudging $200 million
    Medium
    Revenue
    Revenue per Employee
    continue trending upwards
    Medium
    Tax Rate
    Effective Tax Rate (ETR)
    23.5% to 24%
    High

    Cigniti acquisition completion

    December/January timeframe
    CurrentNCLT approval received, creditors/shareholders meeting pending
    TargetMerger completed

    Why it matters

    Finalization of a key acquisition that is expected to drive cross-sell and talent integration.

    We expect that to be getting completed by either December, Jan timeframe.

    How to verify

    capital_allocation.m_and_a[target='Cigniti'].status

    Risks & concerns

    5
    RiskSeverity

    Macro uncertainty

    uncertain macros swirling around our industryManagement acknowledged

    low

    Technological confusion and nascent protocols in AI ecosystem

    market will be flooded with competing standards and toolsManagement acknowledged

    medium

    Currency volatility impacting EBIT

    hedge loss of INR 307 million reflecting adverse impact of 78 bps on EBITManagement acknowledged

    medium

    Increased DSO days

    DSO is impacting due to currency and 30% YoY growth, focus on FCF to PATManagement downplayed

    low

    EMEA demand slowdown

    delays and slowdowns in new opportunities and deal sign-offs in EMEAManagement acknowledged

    medium

    Q&A highlights

    8

    “Revenue, our intent, as always, and exemplified by our results over the last nine years, continues to be that over the next two to three years and beyond, we will continue to turn in sustained and robust growth. ... If we do hit the 14% reported EBIT margin plan for the year, we will, at a minimum, irrespective of the changes in the macros, commit ourselves to delivering on that as the minimum threshold going forward in the years to come. ... on a sustained basis, you should expect free cash flow to PAT at around 70% to 80% going forward.”

    Management provided clear long-term targets for key financial metrics (growth, EBIT margin, FCF to PAT) and highlighted revenue per employee as a key indicator of AI-led platform impact.

    asked by Abhishek Pathak

    3 min read6 chapters

    Detailed Narrative

    01

    Exceptional Q2 FY26 Performance and Growth Momentum

    Coforge reported an exceptional Q2 FY26, achieving 5.9% sequential constant currency growth and a 14% EBIT margin, marking a 251 bps QoQ and 240 bps YoY increase. The firm's sustained growth story is now in its ninth year, driven by robust execution across key operating metrics. Total order intake for the quarter was $514 million, contributing to a record $1.63 billion in the next 12-month signed order book, which is 26.7% higher year-on-year. This performance reflects robust health and strong execution intensity.

    02

    AI-Driven Transformation and Delivery Innovation

    Coforge is actively transforming its core business by embedding AI into its delivery models, leveraging proprietary IP such as Code Insight AI, BlueSwan, and ForgeX. These platforms facilitate enhanced software reverse engineering, integrated automation, and rapid transformation, infusing generative AI and intelligent automation into delivery. The company emphasizes AI engineering as crucial for moving clients beyond simple pilot projects to true integrated enterprise adoption, delivering solutions that drive genuine profitable outcomes by combining deep industry knowledge with technical counsel.

    03

    Vertical Performance and Demand Outlook

    The travel vertical led growth with 6.4% sequential dollar growth, while other verticals including healthcare, retail, high-tech, and manufacturing grew 5.9%. Insurance and BFS verticals grew 1.8% and 4% sequentially, respectively. Management noted positive demand trends in banking, driven by lower interest rates and regulatory shifts, and in insurance, with P&C growing at 4.5% annually and L&A at 5% annually. This indicates a solid and improving demand outlook across core verticals.

    04

    Emerging Verticals and Future Reporting Plans

    Coforge's newer verticals, healthcare and public sector outside India, are demonstrating strong growth. The healthcare vertical is projected to achieve a book of business of almost $100 million by the end of FY26, while the public sector outside India is expected to reach a $200 million run rate in the coming quarters. To enhance transparency, Coforge plans to carve out and report these verticals separately in Q1 FY2027, once they attain a critical mass of at least $100 million.

    05

    Cigniti Acquisition Integration Success

    The Cigniti acquisition, initially met with skepticism, is now considered one of Coforge's best strategic decisions. NCLT approval has been received, with the merger expected to be completed by December/January, effective April 1, 2025. The integration has been 'fantastic,' with the largest deal currently pursued originating from Cigniti's client portfolio, and two of its top three clients already signing large deals with Coforge. The acquisition has also brought in key leadership talent, strengthening Coforge's capabilities and cross-selling opportunities.

    06

    Margin Strategy and Capital Efficiency

    Coforge achieved a 14% EBIT margin in Q2 and aims to maintain this as a minimum threshold, prioritizing growth and reinvestment over further margin expansion. Free cash flow increased to $37.1 million, resulting in an 86% FCF to PAT ratio, with a sustained target of 70-80% going forward. Management clarified that the increase in DSO was primarily due to currency movements and 30% YoY growth, rather than operational issues, and that the effective tax rate is expected to stabilize at 23.5-24% on a sustained basis.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.