L&T Technology Services Limited

L&T Technology Services undertook a significant strategic rebalancing in Q3 FY26, deliberately exiting low-margin and commoditized businesses. This included shutting down Tech segment operations in Israel, small Mobility and Tech areas in Europe, and disengaging from US clients on older technologies and low-value Indian customer orders. This move is in preparation for the upcoming Lakshya 5-year strategy starting FY27, aiming to narrow focus on high-growth, high-profit areas like Engineering Intelligence (EI) and AI-powered solutions, where the company aspires to be the world's first and biggest EI company.

For Q3 FY26, the company reported revenue of $326.3 million (₹2,924 crores), representing a 4.6% YoY growth but a 3.2% sequential decline in USD terms due to the strategic portfolio adjustments. Despite the revenue de-growth, EBIT margins improved by 120 bps QoQ to 14.6%, driven by enhanced quality of revenue, operational efficiencies, discontinuation of strategic support, and rupee depreciation. Net Income (excluding exceptional items^📎) stood at ₹329.1 crores, or 11.3% of revenue.

LTTS continued its strong deal-winning momentum, securing large deal wins with a Total Contract Value (TCV) of $180 million in Q3 FY26. This marks the fifth consecutive quarter of maintaining this TCV trajectory, with 50% of the large deal wins originating from the Mobility segment. Management noted a robust pipeline with multiple deal conversions, and expressed aspirations to increase the TCV run rate from the current $200 million average to $300 million, and eventually to $500 million.

The Sustainability segment was a strong performer, growing 11.4% YoY and quarterly, with its EBIT margins improving by 70 bps QoQ to 28.8%. The Mobility segment showed a modest uptick despite being a furlough quarter, with 80% of its revenue now coming from OEMs, and is expected to see continued growth momentum in CY26, particularly in Software-Defined Vehicle (SDV) offerings. The Tech segment's margins improved by 160 bps QoQ to 10.6%, benefiting from Intelliswift integration and portfolio recalibration.

LTTS is making significant investments in AI and Engineering Intelligence (EI), having filed 229 patents in AI & GenAI alone, contributing to a total patent count of 1,655. The company has trained 30% of its workforce in AI and plans to achieve near-universal AI literacy within the next three quarters. AI is being moved from pilots to production-grade deployments across all verticals, leveraging platforms like NVIDIA's Omniverse and its proprietary AgenticIQ™ platform to deliver full-stack EI solutions.

The company demonstrated improved operational efficiencies, with combined Days Sales Outstanding (DSO) reducing to 112 days from 114 days in Q2, within the target range of 110-115 days. Free Cash Flow for Q3 stood at ₹470 crores, contributing to a healthy YTD Free Cash Flow of ₹886 crores, representing 91% of net income. Cash and Investments at the end of Q3 were ₹3,160 crores, up from ₹2,883 crores in Q2.

For FY26, LTTS is guiding for mid-single-digit overall growth, with focused business areas expected to achieve double-digit growth. The company maintains its aspiration for mid-16% EBIT margins between Q4 FY27 and Q1 FY28. This margin trajectory is expected to be driven by continued capital allocation towards high-margin segments, selective portfolio and geography choices, and further operational efficiencies, including AI-led delivery.