Firstsource delivered a strong Q3 FY26 characterized by double-digit revenue growth and consistent margin expansion. The company is successfully executing its strategy of shifting work to offshore/nearshore locations and rationalizing low-margin accounts to drive profitability. With a robust $1B+ pipeline and successful acquisition integrations, management has raised full-year guidance for both top-line growth and operating margins.
vs Q4 FY26
Notable Quotes from the Call
Most Confident Moment
Raising both revenue and EBIT margin guidance for the full year despite macroeconomic uncertainties.
Least Confident Moment
Acknowledging that final CMS rates for healthcare will only be known in a few months.
| Metric | Value | YoY |
|---|---|---|
| Revenue | ₹2.4K Cr | +16.2% YoY |
| EBIT Margin | 11.9% | — |
| Adjusted PAT | ₹200 Cr | +26.0% YoY |
| Diluted EPS | ₹2.87 | — |
| DSO | 67 days | — |
| Headcount | 36689 employees | — |
Segment Breakdown
Share of Revenue Growth (CC)
| Metric | Latest | Trend |
|---|---|---|
| Revenue(million) | 25.8 | |
| EBIT Margin | 12.2% | |
| PAT(million) | 180 | |
| Diluted EPS(Rs) | 2.91 | |
| Receivable Days (DSO)(days) | 69 | |
| Net Debt(crores) | 1080 |
| Category | Target | Priority |
|---|---|---|
| Revenue | Constant Currency Revenue Growth (Total)→14.5% to 15.5% | High |
| Margin | EBIT Margin Band→11.5% to 12% | High |
| Margin | Long-term EBIT Margin Target→14% to 15% | Medium |
| Other | Effective Tax Rate→19-21% | High |
| Severity | Risk |
|---|---|
medium | US Regulatory changes (CMS Medicare Advantage rates) Proposed flat rates for Medicare Advantage could pressure payer margins, though management views this as a catalyst for more offshoring. Both |
medium | US Credit Card late fee caps Potential impact on collections business (ARSI) if interest rates/fees are capped; management sees no immediate impact as it's currently a proposal. Analyst |
low | Account rationalization in Healthcare Provider segment Trimming low-margin/low-growth accounts will impact FY26 revenue growth by ~50bps but is expected to improve overall margins. Management |
Areas of Evasion(1)
Firstsource signed five large deals in Q3 with an Annual Contract Value (ACV) exceeding $5 million each. This brings the total for the first nine months of FY26 to 13 large deals, nearly matching the 14 won in the entirety of FY25. Notably, six of these deals came from new logos, highlighting the company's growing competitiveness. The total deal pipeline remains healthy and robust, consistently staying above the $1 billion mark.
The company reported an EBIT margin of 11.9%, representing an 80bps YoY expansion. This marks the fifth consecutive quarter of sequential margin improvement, driven by operational efficiencies and a shift toward offshore delivery. Consequently, management raised its FY26 EBIT margin guidance to 11.5%-12.0%. The company remains committed to its long-term aspiration of reaching a 14%-15% margin band over the next 3-4 years.
A key driver of margin expansion is the aggressive shift of work to lower-cost geographies. Currently, 80% of gross hiring is occurring in offshore and nearshore locations. Over the last four quarters, UK onshore headcount has decreased by approximately 40%, while headcount in South Africa has grown by 50%. While this shift creates an 'optical' headwind to revenue due to lower billing rates per head, it significantly enhances profitability and structural cost advantages.
Healthcare revenue grew 6% YoY but remained flat sequentially as the company intentionally rationalized low-margin, low-growth accounts in the provider segment. This rationalization is expected to impact FY26 revenue growth by about 50 basis points. Simultaneously, the acquisition of TeleMedik strengthens Firstsource's clinical and utilization management capabilities, particularly in the Puerto Rico payer market, providing a structural cost advantage for Medicaid work.
The integration of Pastdue Credit was completed in Q3, contributing roughly 2% to YoY constant currency growth. Management plans to 'double down' on the utility segment using these new capabilities. Furthermore, the company is incubating new growth opportunities in Canada and Australia, with one of the largest Q3 deal wins occurring in the Australian market. The 'Diverse' portfolio, including UK retail and utilities, showed exceptional growth of 21% YoY.