L&T Technology Services Q2 FY26 earnings call

L&T Technology Services reported Q2 FY26 revenue growth of 1.3% sequentially and 10.4% annually in USD constant currency terms, reaching $337 million. The company achieved a record large deal TCV intake of $292 million, including a $100 million and a $60 million deal. EBIT margins saw a slight improvement to 13.4%, and net income stood at 328.7 crores, up 4.1% sequentially. The combined DSO improved by 2 days to 114 days, and cash and investments reached 2,883 crores.

LTTS demonstrated strong progress in its Technology and Innovation Charter, filing 216 patents in AI & GenAI, contributing to an overall patent count exceeding 1,600. The company launched an AI-first delivery model and scaled its AI portfolio with platforms like Qguard.ai and PLxAI, with PLxAI already deployed across 36+ use cases. License revenue from these AI products currently contributes about 1% of trailing 12-month revenue, with a strategic goal to expand this to 5% in the medium term.

The Sustainability segment continued its strong performance with 3.0% sequential and 12.6% annual growth, achieving a $50 million+ annualized account and securing its largest-ever deal of $100 million in the Industrial sub-segment. The Tech segment grew 28.6% annually, benefiting from Intelliswift integration and strong client traction for AI-led solutions. The Mobility segment, however, remained subdued in Automotive but saw growth in Trucks & Off Highways and Aerospace & Rail, with a comeback expected in Q4 FY26 after a muted Q3 due to furloughs.

EBIT margins improved to 13.4% in Q2 FY26, and management expects further improvement in H2 FY26, targeting mid-16% EBIT margins between Q4 FY27 and Q1 FY28. This improvement is driven by growth, higher large deal wins in the profitable Sustainability segment, operational efficiencies (pyramid optimization, AI/automation, offshoring), and the conclusion of strategic client support initiatives in Q2. The effective tax rate was reduced to 26.5%, with an expected range of 26.5% to 27.0% for FY26.

LTTS has strengthened its leadership team with the addition of three new segment heads and a global large deals head, with three of the four new leaders based in the US and having 2-3 decades of industry experience. These appointments aim to enhance delivery and operational depth across verticals and technologies, supporting the company's 'Go Deeper to Scale' strategy and ensuring readiness for the next phase of growth.

While FY26 is anticipated to be a tight year, management observed a revival in deal-related conversations across most sub-segments, excluding Automotive. The company maintains its aspiration for double-digit growth in FY26 and a medium-term revenue target of $2 billion, driven by opportunities in AI, softwarization of products, and reindustrialization in the US. Management expects a pick-up in growth from February onwards, with H2 FY26 performance projected to be better than H1.