Tata Elxsi

Tata Elxsi reported an operating revenue of INR 918.1 crores for Q2 FY26, reflecting a growth of 2.9% in actual currencies and 1% in constant currencies quarter-on-quarter. The company achieved an EBITDA of INR 193.3 crores, corresponding to a margin of 21.1%. PBT stood at INR 214.7 crores, with a healthy margin of 22.2%. The US market was a key growth driver, expanding by 7.9% quarter-on-quarter.

The Media & Communication business demonstrated a smart 6.8% sequential growth, bolstered by ramp-ups of large deals. Transportation, accounting for over 53% of revenues, grew by 0.7% in the quarter, supported by a robust pipeline in OEM SDV programs. However, the Healthcare and Life Sciences business saw a decline of 2.3% due to the conclusion of some large regulatory programs. System Integration was a strong performer, recording a growth of 20.5% over the previous quarter and winning an award from Dell Technologies for its infrastructure solutions.

Management expressed confidence in a significantly better H2 for the transportation business, targeting double-digit growth for FY27. While the US automotive market remains muted, Europe, Japan, and India are showing strong traction. The company continues to focus on software-defined vehicles, electrification, AD/ADAS, and even traditional powertrain areas. Key deals include a long-term, multi-million dollar cloud-based hardware and simulation deal with Suzuki and ongoing ramp-ups with European and Mercedes-Benz OEMs.

Despite a Q2 decline, Tata Elxsi is building a strong pipeline of new customers and large deals in Healthcare and Life Sciences. A significant multi-year, multi-million dollar deal with Bayer for devices and radiology, including a dedicated technology center, is expected to provide business stability for at least three years. The company is actively working on advanced radiology devices and technology for early and accurate diagnosis of critical illnesses.

The company is focused on margin recovery, aiming for significantly better margins in H2 compared to H1. Utilization improved from approximately 66% to over 70% in Q2, with a target to reach 75% by the end of the financial year and 80% in the next financial year. While a 90 basis point gain from currency movement was offset by 40 basis points of higher employee costs (due to campus onboarding and sales team strengthening), PBT saw a 110 basis-point sequential increase due to hedging gains and R&D credits.

Tata Elxsi is actively involved with AI-based solutions for on-prem data centers and AI workloads, leveraging its own mini-NVIDIA data center for experimentation. The strategy for AI/GenAI is twofold: enhancing internal productivity and quality, and driving innovation in product features for areas like ADAS and medical imaging. The company focuses on software for semiconductor platforms rather than chip design itself, viewing its partnerships (e.g., Qualcomm) as crucial enablers for OEM engagements.