Mastek

Mastek reported a strong start to FY26, with total income growing 13.2% year-on-year in rupee terms. Net profit saw a significant increase of 28.7% year-on-year and 13.5% quarter-on-quarter, reaching INR 92.1 crores. Operating EBITDA grew 10.8% year-on-year, though the margin stood at 15%, declining 31 basis points quarter-on-quarter. The 12-month order backlog was $274 million, reflecting a 3.5% QoQ and 5.5% YoY growth, indicating a healthy pipeline for future growth.

The UK & Europe business was a key growth driver, registering a 27% year-on-year growth in reported currency and 8% quarter-on-quarter growth. This performance was broad-based across all major sectors, including secure government, healthcare, and enterprise. A significant achievement was securing a large $15 million plus TCV deal in the BFSI sector, which is expected to create goodwill and serve as a strong reference point for future growth. The Oracle business in the region also saw good wins, contributing to confidence for growth in the second half of the year.

The US market experienced headwinds, resulting in flat year-on-year revenue and an 8.5% quarter-on-quarter decline in dollar terms. This was primarily due to muted spend from major clients in the healthcare payer space and retail sector, impacted by cost pressures and tariffs. Despite these challenges, management believes the US business has bottomed out and sees green shoots, particularly from AI-led deals. The company is actively restructuring its US team and focusing on account mining and broadening service offerings to drive growth in the second half of the year.

Revenue in the AMEA market declined due to project closures, reflecting a strategic shift towards profitable growth rather than just top-line expansion. Management is focusing on leveraging its Oracle capabilities with healthcare expertise, particularly in the electronic health record space, following Oracle's acquisition of Cerner. This strategy aims to improve profitability in the region, with expectations for better margin performance in the coming quarters as bad debt provisions recover.

Mastek is actively engaged in AI initiatives, particularly in the US, with more than 10 accounts working on various proofs of concept in AI, GenAI, and Agentic AI. The company views AI as a significant growth vector, enabling productivity improvements and new application development. Management emphasizes that their AI-led testing automation capabilities resonate strongly with Oracle clientele, leading to new deals and positioning Mastek as a key partner in leveraging this technology for client outcomes and legacy transformation.

Operating EBITDA margins stood at 15%, a 31 bps decline quarter-on-quarter. This was influenced by a major discount provided to a large UK client and ongoing investments in future technologies and talent. Management is committed to maintaining stable to upward margin performance for the financial year, leveraging productivity improvements and strategic workforce planning, including graduate and apprentice programs, to offset cost pressures and drive future margin expansion.

The company is in advanced stages of onboarding a new President for US operations and a CFO at the corporate level, with shortlisting and interviewing processes underway. Management aims to finalize these key appointments soon to strengthen leadership. Overall headcount saw a 13% year-on-year and 5% quarter-on-quarter reduction, primarily in the offshore population, driven by a focus on productivity and aligning the workforce with specific engagement requirements, though the UK geography saw a net headcount increase.