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    Mphasis

    MPHASIS
    Information Technology·25 Jul 2025
    Management Summary

    Mphasis reported a strong Q1 FY26, achieving its highest-ever quarterly TCV win of $760 million, largely driven by AI-led opportunities. Revenue grew 6.5% YoY in constant currency to $437 million, with robust performance in key Direct verticals like BFS, Insurance, and TMT. Despite some regional and vertical headwinds, EBIT margins remained stable at 15.3%, and the company maintains a positive outlook for FY26, targeting ~2X industry growth.

    Highlights

    5

    • Highest-ever quarterly TCV win of $760 million, with 68% AI-led, including three $100Mn+ deals and one $50M+ deal.

    • Q1 FY26 revenue of $437 million, reflecting 1.0% QoQ and 6.5% YoY growth in constant currency.

    • Direct business grew 1.6% QoQ and 8.1% YoY in constant currency.

    • BFS, Insurance, and TMT verticals all delivered 20%+ YoY growth in constant currency.

    • EBIT margin remained stable at 15.3%, and reported operating profit grew 11.2% YoY.

    Concerns

    4

    • EMEA region declined 15.5% QoQ in constant currency due to a ramp down of a global customer.

    • Logistics & Transportation vertical was impacted by some customer-specific investments.

    • DSO increased 9 days to 84 due to a marginal delay in collections, though since resolved.

    • Impact from higher ETR due to certain 'Minimum tax expenses' in subsidiaries, expected to normalize.

    What Changed2

    vs Q3 FY26

    Guidance items6 → 2 (-4)Risks discussed3 → 5 (+2)

    Key financials

    Single quarter

    08 metrics
    1. 01Revenue437 Mn+6.5%YoY
    2. 02Direct Revenue Growth—+8.1%YoY
    3. 03EBIT Margin15.3%
    4. 04Reported Operating Profit Growth—+11.2%YoY
    5. 05EPS₹23.2+8.5%YoY

    Segment breakdown

    U.S. (Direct)
    10.3% Revenue Growth3.2% Revenue Growth
    EMEA (Direct)
    -15.5% Revenue Growth
    RoW (Direct)
    30% Revenue Growth6.8% Revenue Growth
    Application (Direct)
    0.036 sequentially Revenue Growth
    BPO (Direct)
    -0.027 sequentially Revenue Growth
    ITO (Direct)
    -0.053 sequentially Revenue Growth
    BFS (Overall Company)
    18% Revenue Growth0.067 sequentially Revenue Growth
    BFS (Direct)
    0.081 sequentially Revenue Growth
    Insurance (Overall Company)
    27.5% Revenue Growth0.2 sequentially Revenue Growth
    TMT (Direct)
    20.6% Revenue Growth0.024 sequentially Revenue Growth
    Top 10 Accounts (LTM)
    7.6% Growth
    Next 20 Accounts (LTM)
    7.4% Growth
    List

    Order Book

    high confidence

    Total Value

    USD 760 million

    as of 2025-06-30

    quantified

    Inflow this qtr

    USD 760 million

    Execution

    Average 1-2 quarters for conversion from TCV to revenue.

    Composition

    AI-led(service line)
    68.0%
    $100Mn+(deal size)
    $50M+(deal size)
    BFS(vertical)
    Insurance(vertical)
    TMT(vertical)

    Pipeline

    deal pipeline tcv

    Overall deal pipeline

    "The deal pipeline is robust and growing, driven by AI-led opportunities and proactive deal-making, with a steady TCV to revenue conversion pace."

    Source:
    Prepared remarks

    Capital allocation

    2
    high confidence
    CategoryHeadline
    M&A

    Aokah

    acquisition · announced · Consideration ₹NaN (cash)

    Liquidity

    Cash USD 24 million

    Operating cash flow for the quarter was $24Mn, with an adjusted normalized cash flow of ~$46Mn after accounting for collection delays and incentive payouts.

    Guidance & targets

    2
    CategoryTargetPriority
    Revenue
    FY26 Industry Growth Multiple
    ~2X industry growth
    		High
    Margin
    EBIT Operating Margin Band
    14.75% to 15.75%
    		High

    Logistics & Transportation vertical recovery

    remainder of the year
    CurrentImpacted by customer-specific investments
    TargetGradual recovery

    Why it matters

    To confirm the expected recovery and contribution to overall growth.

    The Logistics & Transportation vertical was impacted by some customer-specific investments. We believe the impact from these is largely behind us, and we expect this vertical to gradually recover through the remainder of the year.

    How to verify

    key_financials.segment_breakdown[name='Logistics & Transportation'].metrics[label='Revenue Growth']

    Risks & concerns

    5
    RiskSeverity

    Global uncertainty and macroeconomic complexities

    The tech industry faces global uncertainty, macroeconomic complexities, and geopolitical tensions, leading to cautious business environment and deliberate decision-making by enterprises. — Management acknowledged

    medium

    Sophisticated cybercrimes and compliance with legislation

    Overhanging threat of sophisticated cybercrimes and the need to comply with legislation are urgent priorities for organizations. — Management acknowledged

    low

    EMEA revenue decline due to global customer ramp-down

    EMEA region declined 15.5% QoQ in constant currency due to a ramp down of a global customer, which is linked to a large client decline. — Management acknowledged

    low

    Impact on Logistics & Transportation vertical from customer-specific investments

    The Logistics & Transportation vertical was impacted by some customer-specific investments, though management expects gradual recovery. — Management acknowledged

    low

    Higher ETR due to 'Minimum tax expenses'

    There was an impact from higher ETR due to certain 'Minimum tax expenses' in certain subsidiaries, which management believes will normalize through the remainder of FY26. — Management acknowledged

    low

    Q&A highlights

    6

    “It's taken us seven or eight years using our Tribes and Squads construct starting 2018, 2019, infusing our Next Labs starting 2017, 2018, and then 2023, we announced Mphasis.ai. I think they're all coming together combined with the extreme account-based focus that we've been talking about for many years now, where we have a three-in-a-box model at every account.”

    Management detailed the long-term strategic investments and organizational changes that are now yielding significant deal wins and pipeline growth, emphasizing a shift to sophisticated technology solutions and account-based focus.

    asked by Nitin Padmanabhan

    2 min read5 chapters

    Detailed Narrative

    01

    AI-Led Transformation and Record Deal Wins

    Mphasis is strategically focusing on AI-led opportunities, which has resulted in its highest-ever quarterly Total Contract Value (TCV) win of $760 million, with 68% of these deals being AI-led. This includes three deals over $100 million and one over $50 million. The company's proprietary Neo Suite platforms and 'Mphasis AI Superhighway' are central to this strategy, aiming to deliver 50-60% faster time to market and up to 90% accuracy for clients. The pipeline has grown 2.2x since the launch of Mphasis.ai, demonstrating strong traction for these offerings.

    02

    Robust Revenue Growth in Key Direct Verticals

    For Q1 FY26, Mphasis reported a revenue of $437 million, reflecting a 1.0% QoQ and 6.5% YoY growth in constant currency. The Direct business, which constitutes approximately 97% of overall revenue, showed strong momentum with 1.6% QoQ and 8.1% YoY growth in constant currency. All three core verticals—BFS, Insurance, and TMT—delivered over 20% YoY growth in constant currency, driven by wallet share gains, new deal ramp-ups, and strong execution.

    03

    Stable Margins Amidst Strategic Investments

    Despite significant investments in AI-driven growth initiatives and a decline in gross margin within the Logistics sector, Mphasis maintained a stable EBIT margin of 15.3% for the quarter. The company's philosophy is to prioritize growth while keeping margins within the target band of 14.75% to 15.75%. This stability was achieved by offsetting pressures through improved utilization in other business units and disciplined execution at a micro level.

    04

    Operational Efficiency and Headcount Management

    Mphasis is observing an increasing divergence between headcount and revenue growth, primarily due to a strategic shift towards fixed-price projects that enhance productivity and require less headcount. Utilization rates have improved, and the company is adopting a rolling 90-day supply chain plan, leveraging internal rotation and just-in-time onboarding. This approach, coupled with the transition to platform/technology-induced services, provides greater operating leverage and reduces the need for a large employee bench.

    05

    Strategic Investment in GCC Advisory Firm 'Aokah'

    Mphasis made a strategic minority investment of $4 million for a 26% stake in 'Aokah', a GCC advisory firm founded by an ex-founder of the Neo Group. This investment is aimed at shifting left in shaping deals, particularly for Global Capability Centers (GCCs), and creating new client engagements. This move is expected to facilitate follow-up execution of deals and enhance Mphasis's ability to support clients in their GCC strategies.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.