Detailed Narrative
Q2 FY26 Financial Performance Overview
Datamatics reported a strong Q2 FY26, with revenue reaching ₹490.2 crores, reflecting a 4.8% quarter-on-quarter and 20.5% year-on-year growth. EBITDA stood at ₹88.8 crores, a 17% QoQ increase, with the EBITDA margin expanding to 18.1%, up 613 basis points YoY. EBIT for the quarter was ₹68.9 crores, growing 22.1% QoQ and 75.2% YoY, resulting in a 14.1% margin. PAT after non-controlling interest increased by 25.5% QoQ and 49.3% YoY to ₹63.2 crores, with EPS at ₹10.7 per share.
Segmental Performance and Drivers
Digital Technologies delivered a robust performance with ₹153.1 crores in revenue, growing 6.1% QoQ, and achieved its best EBIT margin in several quarters at 10.8%. Digital Operations also showed strong growth, with revenue of ₹272.5 crores (up 6.6% QoQ) and an EBIT of 16.7%. Digital Experiences, however, experienced a 4.4% QoQ decline in revenue to ₹64.6 crores due to two clients transitioning work to their captive centers, though its EBIT margin expanded by 402 basis points to 10.8%.
Strategic Investments in AI and Innovation
The company continues to invest significantly in innovative new technologies, particularly AI, with an annual spend of ₹40-50 crores, which is expensed rather than capitalized. These investments are directed towards building operational excellence, accelerators, and platforms, and integrating AI into products like FINATO, TruBot, and TruCap+. Management views this as crucial for staying relevant in the rapidly changing IT landscape and for driving future growth and solving business problems for customers.
Geographical and Client Concentration
The U.S. remains the largest geographical contributor to revenue at 56%, followed by the U.K. and Europe at 21%, India at 15%, and the Rest of World at 8%. Client concentration remains healthy, with the top 5, 10, and 20 clients contributing 26%, 39%, and 52% of revenue, respectively. The company noted that softness in Western markets appears to be bottoming out, leading to promising conversations with new prospects.
Capital Allocation and Balance Sheet Health
Datamatics maintains a healthy balance sheet, with net cash and investments (net of debt) standing at ₹509.4 crores as of September 30, 2025. The billed Days Sales Outstanding (DSO) improved to 55 days from 57 days in March 2025. The company completed two acquisitions (Dextara and TNQTech) last year, with TNQTech having a run rate of ₹73-74 crores when acquired, and continues to explore new acquisition targets, though nothing is currently in the pipeline.
Outlook and Growth Strategy
For the full year FY26, Datamatics expects to achieve mid-teens growth including acquisitions, and mid-single-digit growth on an organic basis. The company is confident in sustaining its profitability momentum through continued focus on operational efficiencies, financial discipline, and prudent cost management. Despite short-term softness in Digital Experiences, management is actively working to backfill client losses and expects a turnaround in the coming quarters, driven by new deal wins and positive traction in Western markets.