LTM Q1 FY27 earnings call

LTM Limited reported Q1 FY27 revenues of USD 1.22 billion, achieving a 0.3% sequential growth and 6.4% year-over-year growth in constant currency. In INR terms, revenue stood at Rs. 11,608 Crores, marking a 2.8% QoQ and 18% YoY increase. The company's EBIT margin expanded by 40 basis points sequentially to 15.5%, and by 120 basis points YoY from 14.3% in Q1 FY26, primarily driven by operational efficiencies from the New Horizons program and favorable forex movements. Profit after tax (PAT) grew 9.5% QoQ to Rs. 1,469 Crores, representing a 17.1% YoY increase, with a PAT margin of 12.7%.

LTM is actively transforming into an AI-centric organization, restructuring its operations around three core lines of business: iRun, iTransform, and Business AI, all underpinned by its BlueVerse™ AI ecosystem. The company reported that AI revenue, specifically from Creative, Industrial, and Business AI, contributed approximately USD 150 million on a quarterly run rate basis. Management emphasized that the 'AI deflation' phase, where productivity gains led to pricing pressure, is largely behind them for top accounts, and new deals are now priced to reflect AI-led productivity at new reference points.

The Financial Services segment demonstrated strong sequential growth of 3.2% in constant currency, while the Technology and Services segment grew 3.4% QoQ (CC) and 10% YoY (CC). However, the Production segment experienced a 5.7% QoQ (CC) decline due to seasonal pass-throughs, and the Consumer segment saw a marginal 0.7% QoQ (CC) decline, attributed to delayed project ramp-ups in India and the Middle East, despite robust 18.2% YoY (CC) growth. The company's client mining efforts yielded positive results, with Top 5 and Top 10 customers recording sequential growth of 4.5% and 4.3% respectively, and the addition of one client in the USD 50 million+ category (total 15) and 11 clients in the USD 20 million+ category (total 52).

LTM's order book remained stable at USD 1.7 billion for the quarter, including two significant large deal wins. Management noted that this stability, despite new pricing models incorporating AI-led productivity, indicates the company is securing more work for the same order value. The company expressed confidence that its growth will accelerate through Q2 and into the second half of the year, alongside further margin expansion. This optimistic outlook is supported by the strong order book, tangible AI proof points, and the completion of productivity-linked pricing transitions with large clients.

The company added 1,308 freshers in Q1 FY27 and plans to maintain similar quarterly additions to build its AI-ready talent pool. A key initiative is 'AI 1000', aimed at training over 1000 Forward Deployed Engineers (FDEs), with the majority of this skilling expected to be completed between Q2 and Q3. Management highlighted the global scarcity of FDEs, viewing this initiative as crucial for accelerating AI adoption and leveraging the company's large engineering talent base. Utilization, excluding trainees, improved to 86.4%, and TTM attrition remained stable at 13.3%.

LTM made a strategic investment in Uniphore, a Business AI company, to accelerate the development and deployment of Small Language Models (SLMs) for clients, mirroring its approach with Voicing.AI, where it also increased its stake via warrants. The company recorded a one-time^📎 gain from the revaluation of its investment in Voicing.AI due to the conversion of investment instruments into preferred stock and equity. The acquisition of Randstad's Technology and Consulting Services business in Europe and Australia is on track for regulatory approval and expected to close by the end of Q2 or early Q3, with management anticipating no significant margin impact and future synergy benefits.

The 40 basis point sequential improvement in EBIT margin was primarily attributed to operational efficiencies stemming from the New Horizons program and favorable forex impact, which largely offset the impact of wage hikes. Management indicated that SG&A expenses are expected to remain stable, below the previous 11-11.5% range, due to AI adoption in internal support functions. The company's focus on AI-driven internal operations, including finance, HR, and sales excellence, has contributed to these productivity benefits and is expected to sustain margin stability.