L&T Technology Services Limited — Q3 FY26 earnings call

Call held 15 Jan 2026

Management summary

L&T Technology Services reported Q3 FY26 revenue of $326 million, a 4.6% YoY growth but a 3.2% sequential decline due to strategic portfolio rebalancing. The company achieved a 14.6% EBIT margin, a 120 bps QoQ improvement, driven by operational efficiencies and portfolio recalibration. Large deal wins remained strong at $180 million TCV, and the company is actively investing in AI/EI solutions and workforce training for future growth, while guiding for mid-single digit overall growth for FY26.

Highlights

  • EBIT margins improved by 120 bps QoQ to 14.6%, driven by operational efficiencies and portfolio recalibration.

  • Large deal wins (TCV) of $180 Mn maintained for the fifth consecutive quarter, indicating strong pipeline health.

  • Sustainability segment showed robust growth of 11.4% YoY and quarterly, contributing to higher margins.

  • Mobility segment showed modest uptick and is expected to see continued growth momentum in CY26.

  • Cash and Investments increased to ₹3,160 crores, and Free Cash Flow for the quarter was ₹470 crores.

Concerns

  • Sequential revenue de-growth of 3.2% in USD terms due to deliberate portfolio rebalancing and exit from low-margin businesses.

  • One-time 'exceptional item' of ₹35.4 crores (net of tax ₹26.5 crores) related to the New Wage Code.

  • Mobility segment's Q4 FY25 large deal win did not ramp up as expected, impacting overall growth.

Key financials

  1. Revenue (INR) ₹2,924 Cr +10.2%YoY
  2. Revenue (USD) 326.3 Mn +4.6%YoY
  3. EBIT Margin 14.6% +1.2%QoQ
  4. Net Income (excl exceptional) ₹329.1 Cr
  5. Effective Tax Rate 26%
  6. Combined DSO 112 days
  7. Attrition Rate 14.6%
  8. Headcount 23,639 employees

What they filed

Q1 FY27: revenue up 11.4%, net profit up 13.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,573 2,653 2,638 2,638 2,980 +16%2,787 +5%2,858 +8%2,940 +11%
EBITDA466 495 433 441 491 +5%498 +1%521 +20%548 +24%
Net profit320 320 310 316 329 +3%303 −5%333 +7%357 +13%
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

  • Mobility
    14.8% EBIT Margin
  • Sustainability
    28.8% EBIT Margin11.4% YoY Growth
  • Tech
    10.6% EBIT Margin

Order book

high confidence

Total value

$180 Mn

as of 2025-12-31 quantified

Inflow this quarter

$180 Mn

Pipeline

deal pipeline tcv

Robust pipeline with multiple deal conversions

Cancellations & deferrals

  • cancelled: Shut down business in Tech segment in Israel due to strategic re-evaluation.
  • cancelled: Exited small Mobility and Tech businesses in parts of Europe due to old technology and low margins.
  • cancelled: Discontinued projects with a couple of US clients operating on older technology.
  • cancelled: Stopped accepting new orders from Indian customers that were not adding value.
The company deliberately improved its quality of revenue by rebalancing its portfolio towards futuristic technologies and exiting low-value, commoditized businesses.

Source: Prepared remarks

Capital allocation

high confidence
  • M&A Intelliswift Acquisition · Integrated

    Integration plan continues to show margin improvement and provides platform for leveraging Engineering Intelligence framework.

    Intelliswift integration plan continues to show margin improvement sequentially.

    I think on the second question that you have, that we should have seen probably an acceleration in terms of EBIT improvement. Rightly acknowledge, at this point, there is a little bit of prudence that is baked in. I probably will come back in Q4 to clarify. Our intent is definitely to deliver earlier than what I am guiding for. But at this point, it is more prudence that I have maintained that time period.
  • Liquidity Cash ₹3,160 Cr
    Cash and Investments stood at ₹3,160 crores at the end of Q3, vs ₹2,883 crores at the end of Q2.

Guidance & targets

Margin

  • EBIT Margin Margin · between Q4 FY27 and Q1 FY28 · High confidence mid-16%
    With that, we maintain our aspiration for mid-16% EBIT margins between Q4 FY27 and Q1 FY28.

    — Rajeev Gupta

Revenue

  • Overall Revenue Growth Revenue · FY26 · High confidence mid-single
    With these developments in mind, we are guiding for mid-single overall growth in FY26.

    — Amit Chadha

Working Capital

  • Combined DSO Working Capital · High confidence 110-115 days
    This is within the target range of 110-115 days and expected to improve further.

    — Rajeev Gupta

Tax

  • Effective Tax Rate Tax · for the year · High confidence 26.5%-27.0%
    We expect ETR to be in the range of 26.5%-27.0% for the year, showing an improvement relative to previous year.

    — Rajeev Gupta

Workforce

  • AI Literacy Workforce · within the next three quarters · High confidence near-universal
    30% of our workforce is already trained in AI, with plans to reach near-universal AI literacy within the next three quarters, ensuring delivery capability and capacity keeps pace with client demand.

    — Amit Chadha

Order Book

  • TCV Run Rate Order Book · future · Medium confidence $300 Mn, then $400 Mn, then $500 Mn

    From $200 Mn today

    So, number one, we aspire from this $ 200 Mn clip, we want to move to a $ 300 Mn clip. But I don't know when because it will take a little time. So, to answer your question, to accelerate growth, we should move from $ 200 Mn to $ 300 Mn clip. Absolutely, and then $ 400 Mn and then $ 500 Mn from there.

    — Amit Chadha

Market context

  • Focused Business Areas Growth Revenue · FY26 · High confidence double-digit
    Meanwhile, our focused business areas will see double-digit growth in the same period.

    — Amit Chadha

What to watch in Q4 FY26

Completion of restructuring exercise

by March 31, 2026
Current Largely completed in Q3 FY26
Target Fully completed by March 31, 2026

Why it matters

Verifies the finalization of the strategic portfolio rebalancing and its full impact on future growth and margins.

We expect to finish all of this by March. See, on grounds of prudence, because we could have actually kept quiet and said, we will tell you in March and all that, right? We decided we are a very clear, honest, transparent management team.

Risks & concerns

  • Commoditization of older technology services

    high

    Management proactively exited businesses in Tech and Mobility segments that were identified as becoming commoditized or low-value.

    Management acknowledged

  • Impact of restructuring on short-term growth

    medium

    The strategic rebalancing led to a 3.2% sequential revenue de-growth and a revised FY26 overall growth guidance to mid-single digits.

    Management acknowledged

  • Seasonally weak and slow quarter for Mobility

    low

    Mobility showed only modest uptick despite being a furlough quarter, but management expects a turnaround in CY26.

    Management acknowledged

Q&A highlights

6 direct
Nature and scope of restructuring exercise Direct
So, we balanced all of that and we said we don't want to play in a commoditized business tomorrow where you can do copy-paste and cut-paste. We want to be people that are known for technology and we want to look ahead so we don't get into a problem in the future.

Clarifies the strategic rationale behind the recent portfolio rebalancing and exits from certain businesses.

Asked by Vibhor Singhal

Completion of restructuring and Q4 impact Partial
I have taken everything into account and telling you the floor is mid-single and you will be done. So, maybe a little bit here or there, we will just play.

Indicates that the major part of the restructuring is complete and its impact is largely factored into the Q4 outlook.

Asked by Vibhor Singhal

Margin expansion and DSO improvement post-restructuring Direct
The margin improvement will continue and that's the reason I provided guidance of mid 16% levels between a range of Q4 FY27 and Q1 FY28... Second on the DSO, yes, we will continue to improve DSO. Our aspiration is much like on our free cash flow.

Provides specific targets and drivers for future margin and working capital improvements, linking them to the strategic changes.

Asked by Vibhor Singhal

Rationale for current restructuring vs. prior Lakshya strategy Direct
We do believe that the market is pivoting on AI. They are pivoting to physical, digital, industrial combined AI. And that's why if we don't pivot now, we will be in a problem in nine months' time or 12 months' time.

Explains the urgency and proactive nature of the restructuring, driven by evolving market dynamics and the need to align with future technology trends like AI/EI.

Asked by Sandeep Shah

Impact of Q4 wage hikes on margins Direct
So, you should see the wage increases in Q4 that Amit talked about could likely have an impact of about a percent. But we will continue to see improvement in margin because we factored this wage increase.

Provides clarity on the expected impact of wage hikes and how the company plans to mitigate it to maintain margin trajectory.

Asked by Nitin Padmanabhan

Sustainable EBITDA for Tech vertical Direct
What I will say that look, we would aspire for between 12% to 13% EBITDA range in Tech sector.

Sets a clear, albeit aspirational, target for the profitability of the Tech segment, which recently underwent significant recalibration.

Asked by Ravi Menon

Confidence in Mobility segment turnaround Direct
We do see the deliberateness coming in Auto, for sure. We do see the wins that we had done earlier ramping up now and leading to the growth that you are seeing or the growth that you are going to see going forward. Plus, the solutions that we had built out in SDV and we talked about the investment that we had done earlier, those are beginning to bear fruit.

Reassures on the expected turnaround in the Mobility segment, citing specific drivers like SDV momentum and ramping deal wins.

Asked by Vibhor Singhal

3 min read 7 chapters

Detailed narrative

Strategic Portfolio Rebalancing and Future Focus

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.

Q3 FY26 Financial Performance Overview

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.

Robust Deal Wins and Pipeline Health

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.

Segmental Performance and Outlook

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.

Investment in AI and Engineering Intelligence (EI)

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.

Operational Efficiency and Cash Flow Management

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.

FY26 Guidance and Long-Term Margin Targets

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.

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