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    MphasiS Limited

    MPHASIS
    Information Technology·22 Jan 2026
    Management Summary

    MphasiS Limited reported strong Q3 FY26 results, driven by robust deal wins and consistent revenue growth in constant currency. The company's AI-led NeoIP platform is gaining significant traction, contributing to a doubled LTM TCV of $2.1Bn and a $428Mn net new TCV this quarter. While EBIT margins remained stable at 15.2%, an exceptional item of INR355 million impacted the P&L, and DSO saw a slight increase due to unbilled receivables.

    Highlights

    6

    • Net new TCV wins for the quarter were $428Mn, including 4 large deals (2 over $50Mn).

    • LTM TCV doubled in the last 4 quarters, now standing at $2.1Bn.

    • Q3 FY26 revenue came in at $451Mn, growing 1.5% sequentially and 7.4% YoY in constant currency terms.

    • Direct business revenue increased 1.9% sequentially and 9.6% YoY in constant currency terms.

    • EBIT margin remained stable at 15.2%, aligning with the stated band.

    • BFSI vertical grew a strong 3.7% sequentially in CC terms and contributed 66% of revenue.

    Concerns

    3

    • An exceptional item of INR355 million was included in the P&L due to changes in labor laws.

    • DSO for the quarter increased by 2 days QoQ to 91 days, primarily due to unbilled receivables pertaining to milestone contracts.

    • TMT vertical sequential performance was impacted by seasonality.

    Key financials

    Single quarter

    08 metrics
    1. 01Revenue451 Mn+7.4%YoY
    2. 02Annualized Run Rate$1.8B
    3. 03EBIT Margin15.2%
    4. 04Operating Profit6,089 Mn+11.6%YoY
    5. 05Exceptional Item355 Mn

    Segment breakdown

    Direct Business
    98% Revenue Contribution1.9% Sequential Growth (CC)9.6% YoY Growth (CC)
    US (Direct)
    1.4% Sequential Growth10.8% YoY Growth
    EMEA (Direct)
    3.9% Sequential Growth (CC)
    Rest of World (Direct)
    5% Sequential Growth17.4% YoY Growth (CC)
    Enterprise Apps (Service Line)
    75% Revenue Contribution3.7% Sequential Growth
    ITO (Service Line, Direct)
    9% YoY Growth (CC)
    BFSI (Vertical)
    66% Revenue Contribution3.7% Sequential Growth (CC)14.8% YoY Growth (Overall)2.5% Direct BFS Sequential Growth18% Direct BFS YoY Growth
    Insurance (Vertical)
    8.1% Sequential Growth36.6% YoY Growth (CC)
    TMT (Vertical)
    20% YoY Growth
    $100Mn+ Clients
    1 count YoY Additions
    $75Mn+ Clients
    1 count YoY Additions
    $50Mn+ Clients
    3 count YoY Additions
    $20Mn+ Clients
    3 count YoY Additions
    Top 10 Accounts (LTM)
    11.8% YoY Growth3% Sequential Growth (Q3FY26)
    Next 20 Accounts (LTM)
    13.5% YoY Growth5.7% Sequential Growth (Q3FY26)
    List

    Order Book

    high confidence

    Total Value

    USD 2.1 billion

    as of 2025-12-31

    quantified
    100.0% YoY

    Inflow this qtr

    USD 428 million

    Execution

    Transformation deals, if a $100Mn deal is five-year, may take two or three quarters to get to full run rate.

    Composition

    Large Deals(client type)
    AI-led Pipeline(other)
    69.0%

    Pipeline

    deal pipeline tcv

    Pipeline is 69% AI-led, grew 66% YoY. BFS pipeline is up 98% YoY and non-BFS pipeline up 44% YoY. Large deal pipeline is up 91% YoY. Modernization pipeline is up 4x. Mphasis.ai pipeline grown 2.5x, resulting in the largest ever deal pipeline.

    "The company's LTM TCV has doubled, driven by strong net new TCV wins and a rapidly growing AI-led pipeline, providing strong visibility for future growth."

    Source:
    Prepared remarks

    Capital allocation

    1
    medium confidence
    CategoryHeadline
    Debt

    Debt disclosed

    Guidance & targets

    6
    CategoryTargetPriority
    Profitability
    EBIT Margin Band
    14.75% to 15.75%
    		High
    Working Capital
    DSO Trend
    progressively down
    		High
    Revenue Growth
    Industry Growth Multiplier
    greater than 2x
    		Medium
    Revenue Growth
    Q4 FY26 Sequential Growth
    strongest sequential growth quarter for financial year '26
    		High
    Revenue Growth
    FY26 Performance
    likely to be better than '25
    		High
    Revenue Growth
    FY27 Performance Template
    continue to happen
    		Medium

    What to watch in Q4 FY26

    5

    DSO Trend

    Over 2026 calendar year
    Current91 days (up 2 days QoQ)
    TargetProgressively down

    Why it matters

    Indicates improved cash conversion cycle and working capital management.

    We expect DSO to trend progressively down over the course of 2026 calendar year.

    Risks & concerns

    5
    RiskSeverity

    Exceptional item due to labor law changes

    INR355 million exceptional item in P&L due to changes in labor laws. — Management acknowledged

    medium

    Increased DSO due to unbilled receivables

    DSO increased by 2 days QoQ to 91 days, primarily due to unbilled receivables from milestone contracts, but expected to trend down. — Management acknowledged

    low

    Seasonality impacting TMT vertical

    TMT vertical sequential performance was impacted by seasonality. — Management acknowledged

    low

    Competition eating into AI-driven margin leverage

    Management states current leverage from AI is reinvested into platform buildup, implying future margin potential. — Analyst downplayed

    medium

    AI efficiency shrinking absolute client tech spend

    Management believes clients will not spend less on tech; rather, spend will shift from people to tech. — Analyst downplayed

    low

    Q&A highlights

    8

    “I think the short answer is it definitely provides us some operating leverage as we start infusing agentic approach into the deal. Because what we're really doing is eliminating a bunch of human effort and crashing down not just the effort, but also the timeline, complexity and the accuracy rates are helping with that. So, the approach will definitely mean that we have operating leverage. But more importantly, what we're doing today is using that approach to unlock deals that probably were so far either too complex for customers to undertake or too prohibitive from a budget standpoint. As we create enough proof points and lighthouse programs, our confidence and our ability to drive forward a rapid deployment will actually help. I think in some archetypes, especially around modernization, we have a very clear idea of what the value capture path is. And can be moved from the way we used to price these to a different model where theoretically, we have the ability to price them better, and we are seeing that play out already in a few deal archetypes, but I think it's a little bit early to see that across all archetypes. But that's the direction of travel for sure. Now the next question from that will be, how much of that do we give back to the customer? How much of that do we keep? I think that's a never-ending debate, but reality being, if you have enough value being created, there's definitely going to be some that you will be able to keep back into your own P&L, and then you can choose to either take it in the P&L or continue to invest. So far whatever leverage we are getting, we are investing it back in the buildup of the platform, but I think at some point we'll have enough critical mass and scale and proof points to be able to drive this in the direction I just talked about.”

    Management confirms AI provides operating leverage and unlocks new deals, but currently, gains are reinvested into platform development, indicating future margin potential.

    asked by Nitin Padmanabhan

    2 min read6 chapters

    Detailed Narrative

    01

    NeoIP Platform Driving AI-led Growth and Deal Wins

    Mphasis's flagship AI platform, NeoIP, is significantly accelerating deal wins and pipeline growth. The company reported that its LTM TCV has doubled in the last four quarters to $2.1 billion, with net new TCV wins of $428 million in Q3 FY26, including two large deals over $50 million. The overall pipeline is now 69% AI-led and has grown 66% YoY, while the modernization pipeline is up 4x, demonstrating strong client adoption and confidence in AI-driven solutions.

    02

    Robust Revenue Performance Across Geographies and Verticals

    For Q3 FY26, Mphasis reported revenue of $451 million, representing a 1.5% sequential growth and 7.4% YoY growth in constant currency terms. The Direct business, which accounts for approximately 98% of total revenue, grew 1.9% sequentially and 9.6% YoY in constant currency. Growth was broad-based, with the US growing 1.4% sequentially (10.8% YoY Direct), EMEA growing 3.9% sequentially (CC), and Rest of World growing 5% sequentially (17.4% YoY CC).

    03

    BFSI and Insurance Verticals Maintain Strong Momentum

    The BFSI vertical continues to be a key growth driver, contributing 66% of total revenue and growing 3.7% sequentially in constant currency. Direct BFS grew 2.5% sequentially and 18% YoY. The Insurance vertical also showed robust performance, growing 8.1% sequentially and 36.6% YoY in constant currency. This momentum is attributed to strong earnings environments in the US, high NIMs, a favorable regulatory environment, and banks being early adopters of new technologies.

    04

    Stable Margins Despite Exceptional Item and DSO Increase

    Mphasis maintained a stable EBIT margin of 15.2% in Q3 FY26, aligning with its stated band of 14.75% to 15.75%. Operating profit grew 2.2% sequentially and 11.6% YoY to INR6,089 million. However, the P&L included an exceptional item📎 of INR355 million due to changes in labor laws. The company also saw its DSO increase by 2 days QoQ to 91 days, primarily due to unbilled receivables from milestone contracts, though management expects this to trend down in 2026.

    05

    Strategic Approach to AI Investments and Client Spend

    Management clarified that AI platform investments are a mix of OpEx and CapEx, with some integrations and third-party platform purchases being capitalized. They noted that discretionary spending is shifting towards AI fabric and efficiency, creating new opportunities for providers. Mphasis believes that overall client spend on technology will not decrease but will instead favor tech over people, positioning the company to capture a disproportionate share of this evolving market.

    06

    Outlook for FY26 and Beyond

    Mphasis expects Q4 FY26 to be the strongest sequential growth quarter for the fiscal year and anticipates its growth to be greater than 2x the industry average. Management stated that FY26 is likely to be better than FY25 and expects the current growth template to continue for the next five to six quarters. Further color on the FY27 outlook will be provided in the April earnings call.

    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.