Happiest Minds Technologies Limited — Q3 FY26 earnings call

Call held 10 Feb 2026

Management summary

Happiest Minds reported a resilient Q3 FY26, with revenue growing 2.4% QoQ in INR and EBITDA margins expanding to 20.4%. The company launched its 'AI First, Agile Always' strategy, driving strong momentum in GBS and AI services (up ~50% QoQ) and a significant increase in the deal pipeline. While hi-tech and edtech verticals saw declines, management expressed confidence in stabilization and future growth, reaffirming its 10%+ constant currency revenue growth and 20-22% EBITDA margin guidance for FY26.

Highlights

  • Q3 revenue of ₹588 crores, up 2.4% QoQ and 10.7% YoY (INR terms).

  • EBITDA margin expanded to 20.4% in Q3 from 20.2% in Q2.

  • Operating margin improved to 17.4%, up 40 basis points sequentially.

  • Utilization rate increased to 82%, the highest in recent times.

  • Adjusted PAT (excluding one-time wage code impact) was 11.6% of revenue, up from 11% in Q2.

  • Liquidity increased to ₹1520 crores.

Concerns

  • Hi-tech vertical declined due to completion of a startup project and the end of a support contract.

  • Edtech vertical declined, becoming the third largest, due to challenges in the higher education space globally.

  • DSO increased to 92 days from 87 days in the previous quarter, with a target to reduce to 85 days.

  • A one-time charge of ₹22.3 crores was incurred due to the new wage code impact.

Key financials

3 periods

Headline

  • Revenue
    65.7 Mn
    YoY +7.1% QoQ +1.2%
  • Revenue
    ₹588 Cr
    YoY +10.7% QoQ +2.4%
  • Total Income
    ₹604 Cr
    YoY +8.9% QoQ +1.4%
  • EBITDA
    ₹123 Cr
  • EBITDA Margin
    20.4%
  • Operating Margin
    17.4%
  • PBT
    ₹54.2 Cr
  • PAT
    ₹40.3 Cr
  • Adjusted PAT (as % of revenue)
    11.6%
  • Utilization
    82%
  • DSO
    92 days
  • Headcount
    6,548 employees
  • ROCE
    22%
  • ROE
    12%

9M

  • Revenue
    195.2 Mn
    YoY +10.2%
  • Revenue
    ₹1,711 Cr
    YoY +12.8%
  • EBITDA
    ₹367 Cr
  • EBITDA Margin
    20.6%
  • PBT
    ₹204 Cr
  • PAT
    ₹152 Cr
  • Adjusted PAT
    ₹208 Cr

LTM

  • Attrition
    17.4%

What they filed

Q1 FY27: revenue up 14.4%, net profit up 19.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue522 531 545 550 574 +10%588 +11%604 +11%629 +14%
EBITDA92 94 84 94 99 +8%107 +14%104 +24%118 +26%
Net profit50 50 34 57 54 +8%40 −20%61 +79%68 +19%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • GBS and AI Services
    50% Revenue Growth— Profitability

Order book

medium confidence

Execution

quite a few deals that are 3 to 4 years tenure

Pipeline

deal pipeline tcv

Deal pipeline showed a big jump and is healthy, with more longer-term engagements.

The deal pipeline showed a big jump during the quarter, providing greater visibility, and includes longer-term engagements of higher value.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Debt disclosed Cost 4.6%
    Almost all our debt is working capital debt, Mr. Rakesh. And if you look at our current ratio, that's quite healthy. And we get we have a significant amount of cash on our balance sheet. So, it's a little bit of a treasury that's being done, liquidity management that's being done. Receivables are funded through, preferential rate borrowings from banks, because banks support export-oriented industries by giving us 4.6% to 4.7% rate capital -- working capital lines. So, it would be unwise not to use that and so we are doing that. So, we follow we look at the effective cost of borrowings versus the effective cost that we make effective returns we make on investments, and currently we are 1% plus on the income side.
  • Liquidity Cash ₹1,520 Cr
    Liquidity is also kind of gone up to 1520 crores.

Guidance & targets

Revenue

  • Revenue Growth Revenue · current financial year · High confidence 10-plus percentage
    delivering 10-plus percentage on revenue growth in constant currency

    — Venkatraman N

  • Overall Growth Guidance Revenue · after Q4 results · Medium confidence significant increase over 10%

    From 10% today

    And we expect to show significant increase in the guidance we have been giving over and above the 10% growth we have committed for 4 years.

    — Ashok Soota

Margin

  • EBITDA Margin Margin · current financial year · High confidence 20 to 22%
    maintaining EBITDA margins in the 20 to 22% range. This is for the current financial year.

    — Venkatraman N

Headcount

  • AI/GenAI Team Size Headcount · end of FY'27 · High confidence 1,000
    grow our AI/GenAI team to a 1,000 Happiest Minds by the end of FY'27

    — Venkatraman N

Operational

  • DSO Operational · future · Medium confidence 85 days

    From 92 days today

    The idea is to bring that back down to the 85-day number, and that's where we'll be focusing our efforts on.

    — Venkatraman N

Vertical Performance

  • Edtech Vertical Stabilization Vertical Performance · FY '27 · Medium confidence stabilizing

    From declining today

    And I think FY '27, we should see things stabilizing.

    — Joseph Anantharaju

  • Hi-tech Vertical Growth Vertical Performance · coming quarters · Medium confidence growth

    From decline today

    And going forward, what we expect to see is revenues to stabilize and hopefully demonstrate growth in the coming quarters, Aditi.

    — Joseph Anantharaju

What to watch in Q4 FY26

Q4 Revenue Growth

next quarter
Current Implied stronger growth needed for 10%+ FY guidance
Target Stronger QoQ growth in Q4

Why it matters

To meet the full-year 10%+ constant currency revenue growth guidance, Q4 performance needs to accelerate.

For the quarter, revenue stood at $65.7 million, showing a growth sequentially and year-over-year in constant currency of 1.2% and 7.1% respectively... Looking ahead, our priorities remain unchanged: delivering 10-plus percentage on revenue growth in constant currency

Risks & concerns

  • Decline in Edtech vertical

    high

    Edtech, once the largest, is now the third largest and has been declining due to challenges in the higher education space, with stabilization expected in FY27.

    Management acknowledged

  • Turbulence in global markets for software companies due to AI

    medium

    Management views AI as an opportunity, not a threat, reinforcing strategic choices.

    Management downplayed

  • Selective demand environment

    medium

    Demand environment remains selective, but increasingly intentional, focusing on measurable outcomes.

    Management acknowledged

  • Decline in Hi-tech vertical

    medium

    Hi-tech vertical declined due to completion of a startup project and end of a support contract, but stabilization and growth are expected.

    Management acknowledged

  • Increase in Days Sales Outstanding (DSO)

    medium

    DSO increased to 92 days from 87 days, with efforts focused on bringing it down to 85 days.

    Management acknowledged

  • Share price at 52-week lows

    medium

    Analyst expressed dissatisfaction with share price performance; management attributed it to industry-wide hit and cycles, promising accelerated growth with AI strategy.

    Analyst acknowledged

Q&A highlights

7 direct, 1 evasive
Generative AI deals: new spend vs. repivot Direct
nowadays we are seeing more and more large initiatives well-defined as part of their overall budget... that is being enabled by your Agentic AI approach where you can deliver a huge improvement in productivity, that will be a new spend.

Clarifies that GenAI is driving new budget allocation and not just re-prioritization of existing spend, indicating potential for incremental revenue.

Asked by Gaurav Rateria

Engagement models for AI platforms Direct
we are looking at multiple areas. One of them is looking at how do we take these platforms or solutions... and we will be able to get subscription or direct license revenue... The third is obviously fixed price projects... The other area that we are very actively considering... is outcome-based.

Details the diverse and evolving commercial models for AI services, moving beyond traditional effort-based, suggesting higher value capture.

Asked by Gaurav Rateria

Ashok Soota stake sale rumor Evasive
I am here to completely see it through, and there is no change.

Analyst directly asks about market rumors regarding a stake sale by the Chairman, which is a high-signal event for investors. Management denies any change in his commitment.

Asked by Anand Sodhani

Happiest Health IPO timeline Direct
IPO could be easily 6 years away.

Provides a clear, albeit distant, timeline for the IPO of a subsidiary, managing investor expectations.

Asked by Anand Sodhani

Hi-tech vertical decline and outlook Direct
One of the customers that we've been working with for the last 1.5-year... we have completed the development of the product for this customer... Airport Authority of India providing support on the platform that we had built for them. That support contract came to an end... revenues to stabilize and hopefully demonstrate growth in the coming quarters.

Explains specific reasons for the decline in a key vertical and provides a forward-looking view on its recovery.

Asked by Aditi Patil

Pricing pressure and renewals Direct
what we are seeing is that customers are driving and we are in many cases proactively going and evangelizing to customers how they can use various productivity tools to improve their quality... we've not seen any customers come back and ramping down because of productivity increases.

Addresses a sector-wide concern about pricing pressure, indicating that productivity gains are being shared with clients rather than leading to project ramp-downs.

Asked by Aditi Patil

Edtech vertical decline and outlook Direct
this is a vertical that has shown a decline in the last few quarters. It used to be our largest vertical and now it's our third largest vertical... And I think FY '27, we should see things stabilizing.

Highlights a significant shift in vertical ranking and provides a timeline for stabilization in a previously strong segment.

Asked by Vinesh Vala

Debt repayment timeline / capital raising Direct
Almost all our debt is working capital debt... Receivables are funded through, preferential rate borrowings from banks, because banks support export-oriented industries by giving us 4.6% to 4.7% rate capital -- working capital lines.

Clarifies the nature and cost of the company's debt, indicating it's primarily for working capital at favorable rates, alleviating concerns about high interest payments.

Asked by Rakesh

2 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

Happiest Minds reported Q3 FY26 revenue of $65.7 million, reflecting a 1.2% sequential and 7.1% year-over-year growth in constant currency. In INR terms, revenue stood at ₹588 crores, up 2.4% sequentially and 10.7% YoY. EBITDA for the quarter was ₹123 crores, translating to a margin of 20.4%, an increase from 20.2% in Q2, remaining within the guided range of 20-22%. Profit after tax was ₹40.3 crores, impacted by a one-time charge of ₹22.3 crores for the new wage code.

AI First, Agile Always Strategy and Impact

The company launched 'AI First, Agile Always' as its 11th strategic transformation, supported by 11 programs, reinforcing its confidence in AI as an opportunity rather than a threat. This strategy is already influencing customer engagement and delivery, with 32 GenAI and Agentic AI use cases moving from prototype to production. The AI Services Delivery Platform is a key enabler, helping customers reduce time to market and scale AI initiatives.

Business Environment and Customer Traction

The demand environment remains selective but is increasingly intentional, with enterprises focusing on AI-embedded workflows and platform modernization. Customer conversations are centered on how AI can be effectively governed and scaled across the enterprise. The company noted growing demand for AI-led productivity and modernization of core platforms, with several AI-led deal wins reflecting this shift, including GenAI-driven vendor compliance and AI-powered sales management solutions.

Vertical Performance Highlights

BFSI and Healthcare verticals led growth in Q3, with Industrial showing a modest uptick. GBS and AI services demonstrated strong momentum, growing close to 50% quarter-over-quarter and turning profitable. However, the Hi-tech vertical saw a decline due to project completions and contract ends, while the Edtech vertical, now the third largest, continued its decline due to challenges in the higher education sector, though stabilization is expected in FY27.

Operational Metrics and Capital Allocation

Utilization improved to 82% in Q3, reflecting better deployment and execution discipline. Trailing 12-month attrition stood stable at 17.4%. Days Sales Outstanding (DSO) increased to 92 days from 87 days, with a target to reduce it to 85 days. Liquidity increased to ₹1520 crores. The company's debt is primarily working capital, funded through preferential rate borrowings from banks at 4.6-4.7%, with effective returns on investments exceeding borrowing costs.

Outlook and Future Growth Drivers

Happiest Minds reaffirmed its guidance of 10-plus percentage revenue growth in constant currency and 20-22% EBITDA margins for the current financial year. Management anticipates a significant increase in growth guidance beyond 10% after Q4 results, driven by the AI First strategy and a strong deal pipeline. Key growth drivers for Q4 include BFSI (especially Arttha license revenues) and Healthcare, with stabilization expected in RCL and Hi-tech.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Information Technology earnings calls