KPIT Technologi.

KPIT Technologies reported a mixed Q2 FY26, with overall year-on-year dollar revenue growing 4.4% and constant currency revenue growing 0.4%. However, organic constant currency revenue saw a degrowth of 2.3% quarter-on-quarter. The company maintained a strong EBITDA margin of 21.1% and generated over ₹160 crore in cash, contributing to a net cash position of approximately ₹10.5 billion. Profits from the fully owned business increased from INR 177 crore to INR 191.8 crore, though reported net profit was impacted by losses from associates.

The company experienced a $65 million reduction in revenue over time, attributed to two main factors: $45 million from customer deprioritization of older programs (especially in electrical and middleware across USA, Asia, and Europe) and $20 million from cannibalization as KPIT introduced more holistic, AI-based solutions. These reductions were largely offset by new deal wins, particularly in digital cockpit, validation, and after-sales diagnostics. KPIT is strategically shifting towards solution-based offerings, which now constitute 18% of overall revenues, more than doubling in the last year.

KPIT is confident in maintaining its 21% EBITDA margin for the full year, even with planned increments in the coming quarters. The company's talent strategy involves re-evaluating competencies for the shift to solutions and AI readiness, leading to a net addition of 300 people (800 from Caresoft acquisition offset by a reduction of 500 in existing business where competencies were not aligned). This approach aims to enhance efficiency and productivity while maintaining one of the lowest attrition rates in the industry.

The reported net profit was affected by increased losses from associates, specifically Qorix and N-Dream. Qorix experienced fluctuating revenues, with some expected revenues postponed to the next quarter, partly due to OEMs delaying middleware re-architecture. N-Dream's losses were exacerbated by write-offs of stock option costs. The company's overall DSOs increased to 49 days from 44 days last quarter, primarily due to the higher DSOs of the recently acquired Caresoft, which management expects to normalize over time.

Management noted a positive shift in client discussions, with improved stability regarding tariffs and geopolitical issues. KPIT sees strong opportunities in autonomous, connected, after-sales diagnostics, cybersecurity, and commercial vehicles. Geographically, Europe, India, and China show good traction, with the US commercial vehicle segment expected to grow. The company plans to expand into new verticals like industrial/manufacturing, micromobility, and defense, leveraging existing investments in technologies like Helm.ai and Caresoft to enhance wallet share and market propositions.

A major highlight was a multi-year, multi-domain deal win from a European OEM, valued at over $100 million over three years, which is expected to accelerate future revenues. For Q3 FY26, KPIT anticipates flattish to positive organic constant currency growth with similar EBITDA margins. A meaningful growth is projected for Q4 FY26, driven by existing deals and current visibility. New product development timelines for OEMs have, however, shifted by 1-2 years.