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    Datamatics Glob.

    DATAMATICS
    Information Technology·7 Aug 2025
    Management Summary

    Datamatics Global Services Limited delivered a healthy Q1 FY26 performance with strong YoY revenue and profit growth, despite a sequential decline attributed to seasonal factors. The company demonstrated significant margin expansion driven by operational efficiencies and cost optimization. Strategic focus on AI-driven solutions and successful integration of acquisitions like TNQTech are key drivers, though client decision-making slowness and customer transitions in Digital Experiences pose near-term challenges.

    Highlights

    8

    • Revenue stood at Rs. 467.6 crores, reflecting an 18.7% YoY growth but a 6% sequential decline.

    • EBITDA reached Rs. 75.9 crores, growing 1.9% QoQ and 47.7% YoY.

    • EBITDA margin improved to 16.2%, expanding 319 bps YoY and 125 bps QoQ.

    • PAT after non-controlling interest was Rs. 50.4 crores, up 12.3% QoQ.

    • PAT margin stood at 10.5%.

    • EPS for the quarter was Rs. 8.52 per share, reflecting 12.2% QoQ and 15.7% YoY growth.

    • Net cash and investments, net of debts, stood at Rs. 457.3 crores as of June 30, 2025.

    • Billed DSO improved to 56 days from 57 days in the previous quarter.

    What Changed1

    vs Q2 FY26

    Risks discussed1 → 4 (+3)

    Key financials

    Single quarter

    09 metrics
    1. 01Revenue₹467.6 Cr+18.7%YoY
    2. 02EBITDA₹75.9 Cr+47.7%YoY
    3. 03EBITDA Margin16.2%
    4. 04PAT (after NCI)₹50.4 Cr+12.3%QoQ
    5. 05PAT Margin10.5%

    Segment breakdown

    • Digital Technologies₹144.4 Cr30.9%
    • Digital Operations₹255.6 Cr54.7%
    • Digital Experiences₹67.6 Cr14.5%
    Donut· Share of Revenue

    Order Book

    medium confidence

    Pipeline

    deal pipeline tcv

    Healthy deal pipeline, good pipeline of AI-based projects, pilots converting to commercial projects.

    "Management noted a healthy deal pipeline, particularly for AI-based projects, with pilots converting to commercial projects, indicating future growth visibility."

    Source:
    Prepared remarks

    Capital allocation

    3
    high confidence
    CategoryHeadline
    M&A

    TNQTech

    acquisition · integrated

    M&A

    Dextara Datamatics

    acquisition · integrated

    Liquidity

    Cash ₹457.3 crores

    Net cash and investments, net of debts.

    Guidance & targets

    5
    CategoryTargetPriority
    Revenue
    Organic Revenue Growth
    mid-single digits
    		Medium
    Revenue
    Total Revenue Growth (including TNQTech)
    mid-teens
    		Medium
    Revenue
    Growth Outlook (Next 3 Years)
    very good outlook
    		Low
    Margin
    EBITDA Margin Improvement
    50 to 100 basis points
    		High
    Investment
    AI Investment
    Rs. 40 crores to Rs. 50 crores
    		Medium

    Digital Experiences Segment Recovery

    next quarter
    CurrentRevenue and margin decline due to customer migration
    TargetBounce back with new deals and improved margins

    Why it matters

    This segment experienced a decline due to specific customer actions, and its recovery is crucial for overall growth and margin stability.

    We observed revenue and margin decline in Digital Experiences primarily due to one of our top 10 customers transitioning partially some of its operations into their captive unit. ... But on that front, we are on the verge of signing some very good deals. So, I think we will bounce back quite quickly.

    How to verify

    key_financials.segment_breakdown[name='Digital Experiences'].metrics[label='EBIT Margin']

    Risks & concerns

    4
    RiskSeverity

    Macroeconomic challenges and client decision-making slowness

    Macroenvironment challenges and softness in revenue, coupled with slowness in client decision-making due to 'tariff wars and uncertainties', are impacting organic growth. — Management acknowledged

    medium

    Customer migration to captive units (GCCs)

    One top 10 customer in Digital Experiences transitioned operations to their captive unit, and another is expected to do so in Q4 FY26, impacting segment revenue and margins. — Management acknowledged

    medium

    Competition in AI space

    Competition in the AI space is expected to intensify, with competitors likely to catch up quickly. — Management acknowledged

    low

    Transition away from traditional services

    The 'days of traditional services are numbered', necessitating a shift towards AI-integrated offerings. — Management acknowledged

    low

    Q&A highlights

    8

    “The fundamental difference is because Datamatics comes from a services background, we understand how to make sure that these products go live with the customer, whereas the others are purely product companies. So, once they sell a license, then beyond that, the success of that license really lies in the hands of the customer, whereas in Datamatics' case, we are able to ensure that it goes live and gives the customer an ROI. And that is why it gives us an edge.”

    Highlights Datamatics' competitive advantage in AI through its services-led approach, ensuring ROI for customers, unlike pure product companies.

    asked by Srinivasu K

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview

    Datamatics reported a Q1 FY26 revenue of Rs. 467.6 crores, marking an 18.7% year-on-year growth. However, this represented a 6% sequential decline, primarily due to the seasonal benefit from tax processing business in Q4. EBITDA for the quarter stood at Rs. 75.9 crores, growing 1.9% QoQ and 47.7% YoY. The company achieved a healthy EBITDA margin of 16.2%, expanding by 319 basis points YoY and 125 basis points QoQ, driven by operational efficiencies and cost optimization.

    02

    Segmental Performance and Margin Dynamics

    Digital Operations contributed 55% to total revenue with Rs. 255.6 crores and an EBIT margin of 16.4%. Digital Technologies accounted for 31% of revenue (Rs. 144.4 crores) with an EBIT margin of 6.9%, showing margin improvement due to disciplined execution. Digital Experiences, representing 14% of revenue (Rs. 67.6 crores) with a 6.8% EBIT margin, saw a decline primarily due to a top 10 customer transitioning operations to their captive unit, with another expected in Q4 FY26. Management expects Digital Experiences to bounce back quickly with new deals.

    03

    AI-Driven Solutions and Strategic Partnerships

    Datamatics is making significant strides with AI-driven solutions, having built AI agents tailored for key verticals like insurance, banking, and logistics. The company is partnering with a leading UAE bank to define its AI strategy and establish an AI center of excellence. A major Japanese consumer electronics company selected Datamatics' intelligent automation suite (TruCap+, TruBot, TruBI) to drive process automation, validating the strength of their offerings. The company emphasizes its services background as a differentiator, ensuring successful implementation and ROI for AI solutions.

    04

    Organic Growth and Acquisition Integration

    Organic growth for Q1 FY26 was muted at a mid-single-digit YoY rate, attributed to client decision-making slowness and macroeconomic uncertainties. The integration of TNQTech and Dextara Datamatics is progressing smoothly. TNQTech showed 2% YoY growth (Q1 FY25 to Q1 FY26) and stable profits, with sales team integration ongoing. Dextara's cross-sell strategy is yielding results, adding three new customers this quarter, bringing the total to eight.

    05

    Financial Outlook and Investments

    For FY26, Datamatics expects mid-single-digit organic growth, with total revenue growth (including TNQTech) in the mid-teens. The company anticipates an overall EBITDA margin improvement of 50 to 100 basis points for the full year. Management plans to invest Rs. 40-50 crores in AI, particularly Generative AI, pivoting from previous investments in robotics and IDP. The outlook for the next three years is very positive, driven by a significant uptake in AI-led operations across all segments.

    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.