L&T Technology Services Limited — Q4 FY26 earnings call

Call held 22 Apr 2026

Management summary

L&T Technology Services concluded Q4 FY26 with a strategic pivot, divesting non-core businesses and realigning its portfolio for profitable growth. Despite a sequential revenue decline to $305.9 Mn for continued operations, EBIT margins expanded to 15.2%. The company secured $182 Mn in large deal wins and outlined an ambitious Lakshya 31-Plan targeting 13-15% CAGR and 16-17% EBIT margins over the next five years, driven by a focus on Engineering Intelligence and AI-led digital services.

Highlights

  • FY26 total large deal wins were $855 Mn, up 40% over the previous year, indicating strong client engagement.

  • EBIT margins expanded by 40 bps sequentially to 15.2% in Q4 FY26, reflecting improved quality of revenue and operational efficiencies.

  • Headcount increased by 522 sequentially to 23,830, with management planning further additions in anticipation of won deals.

  • The company finalized its Lakshya 31-Plan, targeting a 13-15% CAGR and 16-17% EBIT margins over the next 5 years, signaling a clear strategic direction.

  • DSO improved by 10 days sequentially to 83 days in Q4 FY26, demonstrating better collection efficiency.

Concerns

  • Q4 FY26 revenue for continued operations declined 1.7% sequentially to $305.9 Mn, attributed to deliberate portfolio rationalization and divestment.

  • Management was evasive regarding a permanent shift away from providing annual guidance, stating, "Can I take the fifth and say I don't know. See we'll see."

Key financials

  1. Revenue (USD) 305.9 Mn +0.3%YoY
  2. Revenue (INR) ₹2,858 Cr +8.3%YoY
  3. EBIT Margin 15.2%
  4. Net Income (INR) ₹346 Cr
  5. EPS (INR) ₹30.14
  6. DSO 83 days
  7. Headcount 23,830
  8. Attrition Rate 14.7%

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

SegmentEBIT MarginSequential Improvement
Mobility16.1%130 bps
Sustainability28.7%—
Tech12.6%210 bps

Order book

high confidence

Total value

$855 Mn

as of 2026-03-31 quantified

40% YoY

Inflow this quarter

$182 Mn

Composition

Mix 2 segments
  • Mobility 40%
  • Sustainability 50%

Share of order book by segment· partial disclosure (90% of the book)

Consistent deal momentum with healthy TCV wins, indicating deep client relationships and validation of new technology investments.

Source: Prepared remarks

Capital allocation

high confidence
  • Dividend ₹40/share (final) Payout ratio 48%
    The Board today recommended a final dividend of ₹40 per share, taking the total dividend for FY26 to ₹58 per share. This translates to a dividend payout ratio of 48% for FY26.
  • M&A SWC business Divestment · Closed

    Smart Cities component could not be internationalized, while Telco Infra and Cyber parts were successful. Strategic decision to divest non-core, non-globalizable assets.

    Divestment of SWC and other non-strategic businesses (totaling $19 Mn annualized) led to sequential revenue decline in Q4 but improved margins. Restructuring costs for these businesses were recorded in Q4.

    In March of 2026, we announced the disinvestment of SWC business. Accordingly, SWC business has now been classified as discontinued operations beginning quarter 4 FY26.
  • Liquidity Cash ₹3,555 Cr
    Our Cash and Investments improved to ₹3,555 crores end of FY26 versus ₹2,981 crores end of FY25.

Guidance & targets

Revenue

  • CAGR Revenue · next 5 years · High confidence 13%-15%
    as part of our 5-year Lakshya 31-Plan, we aspire to deliver 13% -15% CAGR over the next 5 years with EBIT margins in the range of 16%-17%.

    — Amit Chadha

Profitability

  • EBIT Margin Profitability · next 5 years · High confidence 16%-17%
    as part of our 5-year Lakshya 31-Plan, we aspire to deliver 13% -15% CAGR over the next 5 years with EBIT margins in the range of 16%-17%.

    — Amit Chadha

  • EBIT Margin Profitability · on or before Q4 FY27 · High confidence mid-16%
    With this, we now advance our aspiration to achieve mid-16% EBIT margin levels on or before Q4FY27

    — Rajeev Gupta

Tax Rate

  • Effective Tax Rate (ETR) Tax Rate · going ahead · High confidence 26.5%-27%
    Going ahead, we expect this to be in the range of 26.5% to 27%.

    — Rajeev Gupta

Working Capital

  • Combined DSO Working Capital · going forward · High confidence 85-90 days
    The combined DSO is expected to be in the range of 85-90 days going forward.

    — Rajeev Gupta

Headcount

  • Headcount Addition Headcount · Q1 FY27, Q2 FY27, Q3 FY27 · High confidence 500
    We do expect to add another 500 sometime in Q1FY27, Q2 FY27, Q3 FY27 as well.

    — Amit Chadha

Revenue Composition

  • Revenue from 6 Bets Revenue Composition · in 5 years · Medium confidence >70%

    From <50% today

    less than 50% of the revenue today comes from these bets. In 5 years', time, we expect more than 70% of business to be coming from these 6 bets.

    — Amit Chadha

What to watch in Q1 FY27

Mobility Segment Growth

Next quarter (Q1 FY27)
Current Almost flat on a sequential basis in Q4 FY26
Target Start seeing growth

Why it matters

Mobility is a key segment, and its turnaround is crucial for overall growth and achieving Lakshya 31-Plan targets.

The Mobility segment remained steady with revenues almost flat on a sequential basis. Over 40% of our large deal wins in Q4 were in the Mobility segment, indicating a turnaround for CY26

Risks & concerns

  • Margin dilution from tuck-in acquisitions

    medium

    Management acknowledged that tuck-in acquisitions might have some dilution impact, but the 16-17% EBIT margin band is designed to maintain profitability despite this.

    Analyst acknowledged

  • Middle East war impact on Plant Engineering

    low

    Management stated Middle East operations are a very small piece and do not expect impact on current/next quarter.

    Analyst downplayed

Q&A highlights

6 direct, 1 evasive
Rationale for SWC business divestment Direct
The Cyber business, which was running actually at record margins, again, we were able to take those capabilities and be able to infuse them within the company and take those forward. Smart Cities, however, we were not able to internationalize because a lot of that work is done with local governments and is done for creating local jobs.

Clarifies the strategic reasons behind divesting a recently acquired business, distinguishing successful from unsuccessful components.

Asked by Vibhor Singhal

Accounting for divested business in FY26 financials Direct
That's correct. So, what you see on the Investor Report is reflecting the continued part of the business and does not have SWC in any of the prior quarters. So, it has comparability and it's like-for-like.

Confirms that reported FY26 numbers are for continued operations, providing clarity on comparability.

Asked by Vibhor Singhal

Impact of restructuring on margins and other divested businesses Partial
So, what -- I mean, we did talk about realignment of portfolio back in Q3. So, what you see as SWC revenues have actually come down from Q3 onwards, and it was a deliberate intent. So, while it assumes that there is only a 40-bps improvement, actually, it's much more than that. It's closer to almost 70 bps to 80 bps of improvement.

Provides more granular detail on the margin impact of restructuring beyond the headline 40 bps, indicating a larger sequential improvement.

Asked by Dipesh Mehta

Outlook for Auto segment, especially in Europe Direct
In Europe, they are still between losing market share in Asia, etcetera. But in Europe, there is a number of deals that we are fighting right now and competing for consolidation against European majors as well as other India Inc. companies. So, there is a lot of that pipeline. So, both have got slightly different, shall I say, context and contours to it, but we are seeing positive momentum in Automotive coming back.

Offers a nuanced view of the European Auto market, highlighting pipeline opportunities despite ongoing challenges.

Asked by Vibhor Singhal

Permanence of moving away from annual guidance Evasive
Again, can I take the fifth and say I don't know. See we'll see. At the end of it, there's no reason to not provide something or provide something. We're comfortable as you look at our 5-year

Management's reluctance to commit on annual guidance suggests ongoing uncertainty or a strategic shift in communication.

Asked by Nitin Padmanabhan

Investment and growth strategy for the 6 Technology Bets Direct
less than 50% of the revenue today comes from these bets. In 5 years', time, we expect more than 70% of business to be coming from these 6 bets.

Quantifies the current and future revenue contribution expected from the new strategic focus areas, indicating a significant pivot.

Asked by Dipesh Mehta

Headcount addition rationale and completion of restructuring Direct
Headcount has gone up. We've added about 500 people net in the company QoQ. We do expect to add another 500 sometime in Q1FY27, Q2 FY27, Q3 FY27 as well. Because we believe that there's this new skill set around the forward deployment engineers that is required.

Confirms that headcount additions are for billable roles and in anticipation of won deals, signaling confidence in future growth, and that restructuring is complete.

Asked by Shradha Agrawal

Impact of Middle East war on Plant Engineering/Sustainability Direct
The Middle East is a very small piece of our operations. Of course, we can look at growth there. We'll see. We hopefully believe that over a 5-year period, we do believe that Plant (Plant Engineering) in Middle East will grow for us but let this situation get resolved.

Assesses a geopolitical risk, with management indicating minimal current impact but acknowledging long-term growth potential if conditions stabilize.

Asked by Karan Uppal

3 min read 7 chapters

Detailed narrative

Strategic Portfolio Realignment and Divestment

L&T Technology Services completed a strategic portfolio realignment in Q4 FY26, including the divestment of the SWC business and other non-strategic, low-margin operations. This move, which involved booking restructuring costs in Q4, resulted in a sequential revenue decline of 1.7% in USD for continued operations to $305.9 Mn. Management emphasized that this realignment was a deliberate shift towards improving the quality of revenue and establishing a more resilient business baseline, with the Smart Cities component of SWC being divested due to its inability to be internationalized.

Robust Profitability and Margin Expansion

Despite the revenue impact from restructuring, the company demonstrated strong profitability, with EBIT margins expanding by 40 bps sequentially to 15.2% in Q4 FY26. Gross margins also improved by 150 bps sequentially, with all three segments—Mobility, Sustainability, and Tech—showing sequential margin improvement. The company has set an aspiration to achieve mid-16% EBIT margin levels on or before Q4 FY27, supported by capital allocation towards high-growth segments and operational efficiencies.

Lakshya 31-Plan and Long-Term Growth Outlook

LTTS unveiled its 5-year Lakshya 31-Plan, targeting a 13-15% CAGR in constant currency over the next five years, coupled with EBIT margins in the 16-17% range. This ambitious plan involves sharpening focus on six key technology bets, including Software-Defined Mobility and Engineering Intelligence. Management expects over 70% of the company's revenue to originate from these strategic bets within five years, a significant increase from less than 50% currently.

Strong Deal Wins and Headcount Growth

The company maintained robust deal momentum, securing $182 million in large deal wins in Q4 FY26, contributing to a total of $855 million in large deal wins for FY26, representing a 40% increase year-over-year. In anticipation of ramp-ups from these won deals, LTTS increased its headcount by 522 sequentially to 23,830 at year-end. The company plans to add another 500 employees in each of the next three quarters (Q1, Q2, Q3 FY27) to support this growth.

Segmental Performance and Turnaround Signals

The Sustainability segment continued its strong performance, growing 11% YoY and accounting for over 50% of Q4 large deal wins. The Mobility segment stabilized sequentially, with over 40% of Q4 large deal wins in this segment, signaling a potential turnaround for CY26, particularly in North America Automotive. The Tech segment, following conscious exits from non-strategic businesses, showed a 210 bps sequential margin improvement and is expected to resume growth from Q1 FY27.

Focus on Engineering Intelligence (EI) and AI Adoption

LTTS is making significant investments in Engineering Intelligence (EI), embedding AI across products, processes, and next-gen manufacturing. This strategy aims to improve productivity by 10-40%, embed AI in client processes, and develop physical AI solutions. The company has trained 65% of its employees on AI tools, with an additional 40% to be trained in the next six months, positioning LTTS 6-8 months ahead of competition in the AI cycle and expecting it to be a net positive tailwind.

Improved Cash Flow and Shareholder Returns

For FY26, Free Cash Flow stood at ₹1,280 crores, representing 100% of net income, and cash and investments increased to ₹3,555 crores by year-end. The Board recommended a final dividend of ₹40 per share, bringing the total FY26 dividend to ₹58 per share, with a payout ratio of 48%. Additionally, the combined DSO improved by 10 days sequentially to 83 days in Q4, with a target range of 85-90 days going forward, reflecting enhanced working capital management.

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