MphasiS Limited — Q4 FY26 earnings call

Call held 30 Apr 2026

Management summary

Mphasis delivered strong Q4 FY26 results, with robust revenue growth and record TCV wins, largely driven by its AI-first strategy. EBIT margins expanded sequentially, and the company recommended a significant dividend. While facing some headwinds from hedge losses and a strategic scale-down in ITO, the management expressed confidence in sustaining growth momentum, particularly in BFS and Insurance, and maintaining margins within its target band for FY27.

Highlights

  • Revenue grew 2.5% QoQ and 7.1% YoY in constant currency to $463 million in Q4 FY26, with full year growth at 6.7% CC.

  • Annual net new TCV reached a record $2.1 Bn, a 68% increase YoY, driven by AI-led propositions.

  • EBIT margin expanded 20 basis points sequentially to 15.4% in Q4 FY26, with full-year EBIT margin stable at 15.3%.

  • Direct BFS grew 17.4% YoY CC and Insurance grew 46.5% YoY CC in Q4 FY26, demonstrating strong vertical momentum.

  • Client pyramid strengthened with additions of 1 client in $150M+, 1 in $100M+, 1 in $75M+, 2 in $50M+, and 4 in $20M+ categories.

Concerns

  • ITO service line declined 21.6% YoY due to a strategic decision to scale down non-core ATM business.

  • Operating cash flow for Q4 was $21 Mn, temporarily impacted by approximately $17 Mn due to system-related delays in customer remittances.

  • Hedge losses are expected to continue impacting reported margins in the first half of FY27, tapering down thereafter.

Key financials

  1. Revenue 463 Mn +2.5%QoQ
  2. Revenue Growth (CC) 7.1%
  3. FY Revenue Growth (CC) 6.7%
  4. Direct Revenue 456 Mn
  5. Direct Revenue Growth (CC) 9.2% +3.3%QoQ
  6. EBIT Margin 15.4%
  7. FY EBIT Margin 15.3%
  8. Operating Profit 6,525 Mn +15%YoY
  9. EPS ₹26.7 +13.7%YoY
  10. Operating Cash Flow 21 Mn

What they filed

Q1 FY27: revenue up 20.7%, net profit up 54.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,355 2,350 2,248 2,237 2,367 +1%2,409 +3%2,454 +9%2,701 +21%
EBITDA527 538 469 403 531 +1%511 −5%522 +11%628 +56%
Net profit372 376 369 298 393 +6%339 −10%372 +1%459 +54%
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

  • Enterprise Applications
    76.5% Revenue Contribution14.8% Direct Revenue Growth (CC)
  • ITO Service Line
    -21.6% Revenue Growth
  • BFS Vertical
    15% Revenue Growth17.4% Direct Revenue Growth (CC)18.6% FY Direct Revenue Growth
  • Insurance Vertical
    46.5% Direct Revenue Growth (CC)
  • TMT Vertical
    — Revenue Growth
  • Others Segment
    5.3% Revenue Growth (CC)
  • US Geography
    10.7% Direct Revenue Growth
  • EMEA Geography
    0.8% Direct Revenue Growth
  • Rest of the World Geography
    2.6% Direct Revenue Growth (CC)

Order book

high confidence

Total value

$2.1 Bn

as of 2026-03-31 quantified

68% YoY

Inflow this quarter

$407 Mn

Composition

  • Large deals (> $20 Mn) (deal size)
  • Mid-sized and smaller deals (< $20 Mn) (deal size)
  • AI-led wins (AI led) 64%

Pipeline

deal pipeline tcv

Overall pipeline increased 38% YoY, with 69% AI-led, reaching an all-time high.

The company's AI-first strategy drove significant pipeline expansion and consistent conversion, resulting in record TCV.

Source: Prepared remarks

Capital allocation

high confidence
  • Dividend ₹62/share (final)
    I am also pleased to share that the Board has recommended a dividend of INR 62 per share for FY26.
  • M&A Theory and Practice (Continuum AI) Acquisition · Integrated

    Accelerates the build-out of our AI stack, particularly in decision intelligence, and extends capabilities beyond system modernization into enterprise decision transformation.

    The build-out of our AI stack has been significantly accelerated through the acquisition of Theory and Practice, and its Decision Intelligence platform, Continuum AI. By integrating Continuum AI into our architecture, we are extending our capabilities beyond system modernization into enterprise decision transformation.
  • Liquidity Cash $21 Mn Operating cash flow for the quarter was $21 Mn, temporarily impacted by $17 Mn due to system-related delays in customer remittances. Adjusted operating cash flow for the quarter was approximately $38 Mn.
    Operating cash flow for the quarter was $21 Mn. This was temporarily impacted by approximately $17 Mn due to system-related delays in customer remittances. These collections were realized in early April, and adjusting for this, normalized operating cash flow for the quarter was approximately $38 Mn.

Guidance & targets

Revenue

  • Revenue Growth (CC) Revenue · FY27 · Medium confidence high single-digit to low double-digit growth
    Despite ongoing macro uncertainty, we expect to deliver high single-digit to low double-digit growth, supported by disciplined execution and increasing demand for AI-led transformation in FY27.

    — Nitin Rakesh

Profitability

  • EBIT Margin Band Profitability · FY27 · High confidence 14.75% to 15.75%
    From a margin perspective, we remain committed to operating within our target band of 14.75% to 15.75%, while continuing to invest in platforms and capabilities.

    — Nitin Rakesh

Cash Flow

  • Operating Cash Flow to Net Income Conversion Ratio Cash Flow · FY27 · High confidence approximately 80%
    We also expect to maintain an operating cash flow to net income conversion ratio of approximately 80%.

    — Nitin Rakesh

Dividend

  • Dividend per share Dividend · FY26 · High confidence INR 62
    I am also pleased to share that the Board has recommended a dividend of INR 62 per share for FY26.

    — Nitin Rakesh

What to watch in Q1 FY27

FY27 Revenue Growth (CC)

FY27
Current 6.7% (FY26 CC)
Target High single-digit to low double-digit growth

Why it matters

To verify if the company achieves its stated growth guidance, driven by AI-led transformation.

Despite ongoing macro uncertainty, we expect to deliver high single-digit to low double-digit growth, supported by disciplined execution and increasing demand for AI-led transformation in FY27.

Risks & concerns

  • Macroeconomic uncertainty

    medium

    Ongoing macroeconomic uncertainty persists, but strategic direction remains unchanged.

    Management acknowledged

  • Hedge losses impacting reported margins

    medium

    Hedge losses are expected to continue impacting reported margins in the first half of FY27, tapering down thereafter.

    Management acknowledged

  • Near-term softness in TMT vertical

    low

    Due to project completions and delayed decision cycles linked to macro and geopolitical uncertainty, but expected to return to sequential growth.

    Management acknowledged

Q&A highlights

6 direct
Budget allocation for AI transformation outside IT functions Direct
there is urgency to act. What we are seeing is reprioritization or prioritization, where spend is continuing to shift towards AI-led programs with clear ROI. But clients are going to be selective. However, they're not pulling back on spends. For a good ROI, the business is willing to fund, even if it wasn't in the tech budget.

Addresses how clients are funding AI initiatives, especially those outside traditional IT budgets, and Mphasis's strategy to capture this spend.

Asked by Nitin Padmanabhan

Working capital intensity, free cash flow conversion, and DSO normalization Partial
If you look at from a receivable side, DSO improved by a day. You've seen current receivables go up, but you've also seen contract assets come down, which means basically the unbilled on fixed price prior to milestone has actually moved to a situation, where the customers have accepted the milestone. And to us from a DSO standpoint, we anyway include the contract assets.

Clarifies the dynamics of DSO and operating cash flow, including the impact of contract assets and a one-time delay in remittances.

Asked by Nitin Padmanabhan

Differentiation strategy to win wallet share in AI-led modernization Direct
I think that truly is the ability to create a modernization roadmap executed at scale with very fast time to market. Compared to a typical modernization program that would have taken us years, we are now managing to deliver these in a fraction of the time and, of course, much higher complexity, which means the certainty of outcome is higher as well.

Explains Mphasis's competitive advantage in AI-led modernization through its NeoIP platform and ability to deliver value at speed and scale.

Asked by Sandeep Shah

Sustainability of BFSI growth momentum in FY27 Direct
we are very, very happy that we managed to grow our BFS business in healthy double digits and our Insurance business actually grew even more than that. Both of those have been fairly broad-based. I think you saw the client pyramid and the activity; there are clients that sit in those segments that are driving that growth as well.

Provides management's confidence in sustaining strong growth in key verticals like BFSI and Insurance, citing pipeline buildup and client mining.

Asked by Vibhor Singhal

Outlook and recovery for the logistics vertical Direct
Given the size of the vertical, we can actually make it swing pretty quickly with one or two large deal wins. So, for me, it's the glass half full type of discussion, where instead of focusing on whether the growth will come back and whether it will grow faster or slower than the other segment, just given the size, I think, it has a propensity to show an impact with one or two wins. We have high quality logos.

Indicates potential for recovery in the logistics vertical through new deal wins, despite past churn and softness.

Asked by Vibhor Singhal

Impact of AI-led transformation on on-site revenue mix and gross margins Partial
Many of the large transformation programs, including deployment of the stack, requires the forward deployed capability. That typically happens in client location onshore. And as we scale, we probably will see a little bit more normalization, but we're not charging by headcount or by effort. So, that kind of gets lost in the translation of numbers.

Explains that the shift to AI-led, platform-based transformation programs necessitates on-site presence but doesn't directly correlate to traditional utilization metrics, impacting how revenue mix is interpreted.

Asked by Abhishek Shindadkar

Impact of AI-driven productivity gains on margins and pricing Direct
We may pass a part of the productivity back to the customer, or they may choose to actually shift to a commercial model that incents both parties to operate and align on the outcomes. But a meaningful portion of that productivity gain has to be used and offered in additional automation or AI layers of modernization. So, while productivity is real and increasing, the net effect, at least, for us is not pure deflation. It's driving both efficiency and growth within client accounts.

Clarifies that Mphasis is leveraging AI-driven productivity gains not just for cost pass-backs but also for reinvestment into expanded scope and driving growth, avoiding pure deflation.

Asked by Rishi Jhunjhunwala

Sustainability of margins given hedge losses and investment for growth Direct
The way we've constructed the business at least over the last two, three years is, if you can hold margins steady despite all of the pressure and noise around productivity and deflation and passbacks, we should have the ability to invest back in the business. And I think you've seen the amount of AI investment we've made, the amount of sales and GTM investment and now we are actually making leadership investments as well.

Management explains its strategy of maintaining margins to fund strategic investments in AI, sales, GTM, and leadership, leveraging operating leverage.

Asked by Rishi Jhunjhunwala

3 min read 6 chapters

Detailed narrative

Strong Q4 FY26 Performance Driven by AI-First Strategy

Mphasis reported robust Q4 FY26 results with revenue reaching $463 million, marking a 2.5% sequential growth and 7.1% YoY growth in constant currency. For the full fiscal year, revenues grew 6.7% in constant currency terms. The company's AI-first strategy has been a key driver, with 69% of its pipeline and 64% of Q4 wins being AI-led. This focus translated into a record annual net new TCV of $2.1 billion, a 68% increase YoY, and $407 million in net new TCV for the quarter, including four large deals.

EBIT Margin Expansion and Shareholder Returns

The company's EBIT margin expanded by 20 basis points sequentially to 15.4% in Q4 FY26, with the full-year EBIT margin remaining stable at 15.3%. Operating profit for the quarter grew 7.2% QoQ and 15.0% YoY to INR 6,525 million, while EPS increased 8.6% sequentially and 13.7% YoY to INR 26.7. The Board recommended a dividend of INR 62 per share for FY26, reflecting strong financial performance and commitment to shareholder returns. Management aims to maintain margins within the 14.75% to 15.75% target band for FY27.

Vertical Growth Led by BFS and Insurance

The BFS vertical demonstrated strong performance, growing 5.8% QoQ and 15.0% YoY in Q4 FY26, with Direct BFS growing 17.4% YoY in constant currency for the quarter and 18.6% for the full year. The Insurance vertical also showed robust momentum, with Direct revenues growing 7.3% sequentially and 46.5% YoY in constant currency. These segments are increasingly adopting AI-led transformation programs, driving significant growth. The TMT vertical experienced near-term softness but is expected to return to sequential growth in coming quarters.

Strategic Investments in AI and Platform Capabilities

Mphasis is accelerating its AI capabilities through sustained investments, including the acquisition of Theory and Practice, which brought the Continuum AI decision intelligence platform. This platform is crucial for orchestrating AI-led execution across the enterprise, moving beyond isolated deployments to coordinated, end-to-end transformation. The company emphasizes that 80% of AI-driven transformation occurs outside IT, focusing on business outcomes like revenue optimization and demand forecasting, rather than just cost plays.

Working Capital and Cash Flow Management

Operating cash flow for Q4 FY26 was $21 million, which was temporarily impacted by $17 million due to system-related delays in customer remittances that were realized in early April. Adjusting for this, normalized operating cash flow was approximately $38 million. The company's DSO improved by a day, and contract assets have come down as milestones are accepted. Mphasis targets an operating cash flow to net income conversion ratio of approximately 80% for FY27, acknowledging the working capital investments required for large annuity deals.

Client Pyramid Strengthening and Diversification Efforts

Mphasis continued to strengthen its client pyramid, adding 1 client in the $150M+ category, 1 in $100M+, 1 in $75M+, 2 in $50M+, and 4 in $20M+ categories on a net new basis YoY. The company is also actively diversifying its client base and industry exposure, recently announcing a new leader for its global Insurance business and adding CPG and Retail sectors to its mix through the Continuum AI acquisition. This strategic focus aims to drive growth across various industry segments and geographies.

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