Mastek Limited — Q2 FY26 earnings call

Call held 17 Oct 2025

Management summary

Mastek delivered a stable Q2 FY26 performance with operating revenue of INR 940 crores and an improved operational EBITDA margin of 15.5%. The company reported a 12-month order backlog of $280 million, reflecting healthy deal wins despite ongoing macro uncertainties. Strategic focus on AI-led efficiency and business transformation, alongside geographical leadership changes, positions Mastek for future growth, though decision-making delays and shorter contract durations remain a concern.

Highlights

  • Operating revenue grew 8.4% YoY and 2.8% QoQ to INR 940 crores, demonstrating stable performance despite macro uncertainties.

  • Operational EBITDA margin expanded by 50 bps QoQ to 15.5%, reaching INR 145.5 crores, driven by operational efficiency.

  • Net Profit increased 6% QoQ to INR 97.4 crores, with normalized YoY growth of 14% after adjusting for an exceptional gain in the base quarter.

  • The 12-month order backlog reached $280 million, showing healthy sequential growth of 2.2% and YoY growth of 6.8%, supported by significant deal wins.

  • Days Sales Outstanding (DSO) improved to 80 days, down from 82 days in Q1 and 95 days in Q2 last year, reflecting strong working capital discipline.

Concerns

  • Reported Net Profit declined 24% YoY due to an exceptional gain of INR 44 crores in the base quarter.

  • North America market continues to face macro uncertainties, leading to a 'right shift in demand' and slower growth than anticipated.

  • Macro uncertainties and client evaluation of AI's impact are causing decision-making delays and a preference for shorter-term contracts (1 year/6 months/1 quarter) over longer-term deals.

Key financials

  1. Operating Revenue ₹940 Cr +8.4%YoY
  2. Operating Revenue (CC Growth) — +0.2%QoQ
  3. Operational EBITDA ₹145.5 Cr +1.7%YoY
  4. Operational EBITDA Margin 15.5% +0.5%QoQ
  5. Net Profit ₹97.4 Cr -24%YoY
  6. Normalized Net Profit (YoY Growth) — +14%YoY
  7. Net Profit Margin 10.2%
  8. 12-month Order Backlog 280 Mn +6.8%YoY
  9. DSO 80 days
  10. Cash & Cash Equivalents ₹656 Cr

What they filed

Q1 FY27: revenue up 7.7%, net profit up 15.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue867 870 905 915 940 +8%906 +4%938 +4%985 +8%
EBITDA143 141 139 137 146 +2%152 +8%151 +9%151 +10%
Net profit129 95 81 92 97 −25%108 +14%106 +31%106 +15%
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.

Order book

high confidence

Total value

$280 Mn

as of 2025-09-30 quantified

6.8% YoY 2.2% QoQ

Execution

executable over the next 12 months

Healthy deal conversions and renewals across all geographies, especially U.K., supported the order backlog growth despite macro uncertainties.

Source: Prepared remarks

Capital allocation

high confidence
  • Liquidity Cash ₹656 Cr Cash and cash equivalents increased from INR 549 crores in Q1.
    Our cash position, which is cash and cash equivalents currently stand at INR 656 crores as compared to the INR 549 crores in Q1.

Guidance & targets

Headcount

  • CFO Joining Headcount · November 2025 · High confidence early next month
    We have a candidate who we are expecting to join early next month, and I'm pretty confident to have a partner with me on this call starting next quarter.

    — Umang Nahata

Revenue

  • North America Revenue Growth Revenue · Ongoing · Medium confidence $3 million to $4 million growth
    As the business comes closer to its optimal number, which will be $3 million to $4 million growth from where we are today, you will start seeing the EBITDA numbers move significantly up.

    — Umang Nahata

Margin

  • North America EBIT Margin Margin · Ongoing · Medium confidence double digit or mid-double-digit
    North America, that's when it will start going up to double digit or mid-double-digit kind of EBIT numbers.

    — Umang Nahata

What to watch in Q3 FY26

CFO Appointment

next quarter
Current Candidate expected early next month
Target CFO onboarded and participating in next earnings call

Why it matters

A new CFO is critical for leadership stability and strategic execution, especially given the current macro environment.

We have a candidate who we are expecting to join early next month, and I'm pretty confident to have a partner with me on this call starting next quarter.

Risks & concerns

  • Continued Geopolitical and Macro Uncertainties

    medium

    These uncertainties are playing a role in client decision-making, leading to slower decisions and a preference for shorter-term contracts.

    Management acknowledged

  • North America Market Macro Uncertainties

    medium

    The North America market still has a lot of macro uncertainties, leading to a 'right shift in demand' and impacting growth.

    Management acknowledged

  • Client Evaluation of AI Impact on IT Roadmaps

    medium

    Clients are evaluating how AI will impact their IT roadmaps and budgets, leading to initial smaller, efficiency-focused projects before larger strategic deals.

    Management acknowledged

  • Potential Reduction in UK Government Spend

    low

    Analyst raised concern about UK fiscal situation potentially leading to reduced spend, but management emphasized long-term trusted relationships and demonstrating AI-led efficiency.

    Analyst downplayed

Q&A highlights

7 direct
UK Geography Performance and Risks Direct
As far as NHS is concerned, the NHS deal that got announced by one of our larger competitors, Mastek was not participating in that deal. It's a deal which was not a deal in our direct focus. And it does not impact any of our other businesses that we have with NHS across the various departments within the NHS that we work for.

Analyst probed on potential softness and vendor consolidation risks in UK, especially NHS, which management clarified was not impacting Mastek's direct business.

Asked by Amit Chandra

Margin Trajectory in US and Middle East Partial
As far as North America specific margins are concerned, like we have been mentioning earlier, there is clearly a heightened S&M spend as compared to our current business, which is in anticipation of the growth that we look at.

Analyst questioned why US/ME margins remained lower, and management attributed it to strategic S&M investments for future growth rather than operational issues.

Asked by Amit Chandra

AI Impact on Employee Count and Operating Costs Direct
So as far as the employee head count is concerned, our strategy is, we are not necessarily going and reducing any head count, but we are also using attrition to our advantage and not backfilling with the exact same numbers, which is leading to constant efficiency and growth.

Analyst inquired about the structural impact of AI on headcount and costs, to which management clarified their strategy of leveraging attrition for efficiency rather than active reductions.

Asked by Mahak

Order Book Growth Slowdown and Decision-Making Delays Direct
So for example, instead of a 3-year, 5-year deal, they're signing up for a 1 year or 6 months or 1 quarter deal, which is reflecting in our order book and our backlog not moving strongly as compared to our expectations in the geography.

Analyst challenged the slowdown in order book growth, and management explained it was due to macro uncertainties leading to shorter contract durations and client evaluation of AI's impact.

Asked by Pulkit Chawla

Impact of Oracle Cloud Growth on Mastek Direct
We believe from a Mastek standpoint, Oracle is our strongest partnership and relationship. The other thing that Oracle is also doing is reorganizing its healthcare business, especially the Cerner acquisition and trying to move a lot of their Cerner, which is now called as Oracle Health to cloud and cloud infrastructure, especially. And that's one area that we have a very strong presence in.

Analyst asked about the benefits from Oracle's significant cloud growth, and management highlighted their strong partnership, particularly in Oracle Health and AI-led infrastructure delivery.

Asked by Pratham Kankariya

Data & AI Horizontal Growth and Margin Improvement Sources Direct
As far as the bottom line performance is concerned, around 10 basis points was the impact of FX and the rest of it is operational efficiency.

Analyst questioned the slowdown in Data & AI growth and the drivers of margin improvement, receiving a clear breakdown of FX vs. operational efficiency contributions.

Asked by Sushovon Nayak

UK Fiscal Situation and Bank of England Work Details Direct
So this is a system where we are consolidating data from lots of banking as well as external and internal centers. It's extremely high volume with near to zero kind of error rate precision data strategy and data execution that we are doing now.

Analyst probed on potential UK government spend reductions and sought clarification on Mastek's specific work for the Bank of England, which management detailed as critical data modernization for fiscal decision-making.

Asked by Sushovon Nayak

AI Impact on Contract Types (Fixed Price vs T&M) and Margins Direct
So as far as margins are concerned, clearly, we are also seeing a lot of efficiency on our side. Some of those efficiencies are flowing down to our bottom line. Like I said, our revenue per resource clearly will be moving north as we go forward. Having said that, some of this is also has to be replowed in the business because the bigger wave that we are all now building up for is Al for business.

Analyst asked about the shift towards outcome-based contracts due to AI and its margin implications, with management explaining internal efficiency gains are partly reinvested into AI for business solutions.

Asked by Varun Gandhi

2 min read 5 chapters

Detailed narrative

Q2 FY26 Performance Overview

Mastek reported a stable Q2 FY26 performance with operating revenue reaching INR 940 crores, marking an 8.4% year-on-year and 2.8% sequential growth, with constant currency growth at 0.2%. Operational EBITDA stood at INR 145.5 crores, translating to a 15.5% margin, a 50 basis points improvement quarter-on-quarter. Net profit for the quarter was INR 97.4 crores, up 6% sequentially, and a normalized 14% year-on-year growth after adjusting for an exceptional gain of INR 44 crores in the base quarter. The 12-month order backlog grew to $280 million, reflecting 2.2% sequential and 6.8% year-on-year growth.

Geographical Performance and Strategic Focus

The UK remains Mastek's strongest and largest geography, with continued strong demand in healthcare and secured government services, including a GBP 50 million-plus AI-led engineering services deal. North America is undergoing a leadership turnaround with Sourabh Mukherjee, aiming for $3-4 million growth and eventual double-digit EBIT margins, focusing on healthcare and life sciences. The APAC and Middle East business continues to focus on healthcare, securing a $7 million-plus deal and a $5 million-plus AI-led transformation deal, while improving profitability and DSO.

AI Strategy: Efficiency and Business Transformation

Mastek's AI strategy is bifurcated into 'AI for tech' and 'AI for business'. 'AI for tech' focuses on delivering efficiency, speed, and quality in technology delivery, with a positive ROI-based approach for clients and internal operational efficiency. 'AI for business' aims for business transformation, with Mastek actively building AI for business transformation roadmaps for customers, anticipating execution in early FY27. The company is reinvesting efficiency gains into developing AI for business solutions.

Operational Efficiency and Balance Sheet Health

Operational excellence and cost control contributed to a stable profitability, with the operational EBITDA margin improving to 15.5%. The company demonstrated strong working capital discipline, reducing Days Sales Outstanding (DSO) to 80 days from 82 days in Q1 and 95 days in Q2 last year. Mastek maintains a very strong and healthy balance sheet, with cash and cash equivalents standing at INR 656 crores, an increase from INR 549 crores in Q1.

Order Book Dynamics and Client Engagement

The 12-month order backlog stands at $280 million, reflecting a 2.2% sequential and 6.8% year-on-year growth, driven by healthy deal conversions and renewals. Despite macro uncertainties, clients are increasingly evaluating AI's impact, leading to a preference for shorter-term contracts (1 year, 6 months, or 1 quarter) over longer 3-5 year deals. Mastek is actively engaging with clients to demonstrate tangible ROI from AI-led efficiencies, aiming to convert smaller projects into larger strategic deals.

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