Expleo Solutions

Expleo Solutions delivered a strong Q2 FY26, with operating revenue growing 8.9% sequentially to INR 2,827 million and 9% year-on-year. Constant currency operating revenue also saw a healthy 6% QoQ growth. This performance was significantly bolstered by an expansion in EBITDA margins, which rose from 12.8% in Q1 FY26 to 17.1% in Q2 FY26, primarily due to operational efficiencies, optimized operating costs, and a 2-3% boost from favorable forex movements.

The company's strategy revolves around four key pillars: growing existing accounts, focusing on high-growth geographies like the U.S. and Middle East, leveraging digital and AI services as differentiators, and maintaining lean operations. Investments in AI are beginning to yield results, with new revenue streams and renewed customer confidence. The Middle East and U.S. regions have shown strong growth, contributing to the overall positive performance.

The BFSI, insurance, and defense verticals continue to be promising, with a healthy pipeline for 2026. BFSI growth is particularly driven by AI-infused legacy modernization and data analytics. In contrast, the auto vertical experienced degrowth, and the company has strategically decided to cease new investments in this segment for 2026 due to ongoing challenges like competition, tariffs, and shifts in engine technology. Aerospace, however, shows an uptick, especially from the group business.

Management clarified that while the nature of Quality Assurance (QA) is changing, its importance is increasing due to AI. The shift from manual to AI-infused testing, including test case generation and automation, is making QA more critical for verifying AI-generated outputs. Expleo, as a leader in independent software testing, aims to differentiate itself through continuous innovation in AI-infused QA services.

Expleo is actively pursuing inorganic growth, with due diligence underway for two potential acquisition targets. A decision on at least one is expected by January (Q1 FY27). The M&A strategy focuses on acquiring assets that supplement existing skills in specific industries, geographies, or service lines. For the current FY26, the company maintains its guidance of high single-digit revenue growth, while targeting healthy double-digit growth for the next financial year (FY27).

The company is embracing a non-linear growth model, aiming for higher revenue with a lower headcount by focusing on value-based, high-margin, and high-stickiness services. To support this, an ambitious program is in place to make 100% of employees AI literate by the end of next year (FY27), ensuring internal capabilities meet AI demands and enhance service differentiation.