Tech Mahindra Limited — Q1 FY27 earnings call

Call held 16 Jul 2026

Management summary

Tech Mahindra delivered a strong Q1 FY27, reporting US$1.66 billion in revenue with robust 6.6% constant currency YoY growth and a significant 14.4% EBIT margin. The quarter saw broad-based vertical growth and US$1.078 billion in deal wins, reflecting successful execution of its turnaround plan. While facing some one-off benefits and competitive pressures, the company remains confident in sustaining growth and margin expansion towards its 15% target for the fiscal year.

Highlights

  • Reported revenues of US$1.66 billion, a 6.1% year-on-year growth on a reported basis and 6.6% in constant currency, reflecting continued momentum.

  • Operating margins stood at 14.4%, expanding 60 bps QoQ and 330 bps YoY, driven by sustained execution discipline and Project Fortius savings.

  • Total deal wins reached US$1.078 billion, a 33.3% increase year-on-year, indicating strong client confidence and broad-based demand.

  • All key verticals (Communications, BFSI, Manufacturing, Retail/Travel/Logistics, Healthcare) delivered year-on-year growth, with Manufacturing leading at 17.2% YoY.

  • Free Cash Flow generated US$167 million, up 94% year-on-year, and DSO improved by 5 days QoQ to 84 days, reflecting better collection efficiency.

Concerns

  • A one-off accelerated delivery in the European auto business contributed 1-1.3% to Q1 revenue, which will not repeat in Q2, potentially impacting sequential growth.

  • The Technology, Media, and Entertainment vertical declined 1.7% quarter-on-quarter due to continued volatility in client spend.

  • Management noted instances of 'irrational competition' leading to aggressive pricing and unrealistic productivity commitments in some deals.

  • Anticipated wage bill increases and potential productivity pressures from AI are expected in Q2, which management aims to offset with continued efficiency gains.

Key financials

  1. Revenue 1,660 Mn +6.1%YoY
  2. Revenue (CC) 1,660 Mn +6.6%YoY
  3. Revenue ₹15,712 Cr +17.7%YoY
  4. EBIT Margin 14.4%
  5. Operating Profit ₹2,264 Cr +53.3%YoY
  6. PAT 154 Mn +16.2%YoY
  7. PAT ₹1,465 Cr
  8. PAT Margin 9.3%
  9. ROCE 28.3%
  10. DSO 84 days
  11. Free Cash Flow 167 Mn +94%YoY
  12. Effective Tax Rate 27.2%

What they filed

Q1 FY27: revenue up 17.7%, net profit up 31.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue13,313 13,286 13,384 13,351 13,995 +5%14,393 +8%15,076 +13%15,712 +18%
EBITDA1,750 1,809 1,839 1,935 2,165 +24%2,366 +31%2,565 +39%2,738 +41%
Net profit1,258 989 1,142 1,129 1,202 −4%1,119 +13%1,356 +19%1,486 +32%
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

  • Communications
    1.3% Revenue Growth
  • BFSI
    8.1% Revenue Growth2.7% Revenue Growth
  • Manufacturing
    17.2% Revenue Growth9% Revenue Growth
  • Retail, Travel & Logistics
    8.6% Revenue Growth
  • Healthcare & Life Sciences
    7.2% Revenue Growth2.5% Revenue Growth
  • Technology, Media & Entertainment
    -1.7% Revenue Growth

Order book

high confidence

Inflow this quarter

$1,078 Mn

Composition

  • Manufacturing (vertical)
  • HLS (vertical)

Pipeline

deal pipeline tcv

Strong pipeline

Management is very happy with the TCV feeding through to growth and will continue to be competitive in deals that make long-term economic sense.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Debt disclosed
    Our hedge book as of June 30th stands at US$0.72 billion.
  • M&A Avant Techno Solutions Acquisition · Announced

    Aligned with strategy of deepening presence in payments and wealth segments, strengthening position in high-growth segment.

    During the quarter, we also announced the acquisition of Avant Techno Solutions, a Canada-based firm specializing in payments modernization and wealth platforms. This acquisition is aligned with our stated strategy of deepening our presence in payments and the wealth segments, which we have consistently identified as important growth areas for TechM.
  • Liquidity Liquidity disclosed Generated US$167 million of free cash flow during the quarter, up 94% on a Y-o-Y basis.
    We generated US$167 million of free cash flow during the quarter, up 94% on a Y-o-Y basis.

Guidance & targets

Profitability

  • EBIT Margin Profitability · FY27 · High confidence 15%
    For the year, I think 15 is a number we're comfortable with, and obviously for beyond FY27, we will have to spell out a path.

    — Mohit Joshi

  • EBIT Margin Profitability · Q4 FY27 · Medium confidence upwards of 15%
    I mean if you look at Q1, we're at 14.4%, and as we move forward incrementally, as I mentioned, we'll keep on improving margins, so it has to be upwards of 15% for the fourth quarter, and we'll see how each quarter progresses from here and now.

    — Rohit Anand

Revenue

  • Revenue Growth Revenue · full financial year · High confidence ahead of peer average
    we remain confident that the growth momentum that we have set in the first quarter of the year will continue for the remainder of the year and that we will, you know, we will meet or exceed our goal of being ahead of peer average for the full financial year, as we already are in the first quarter of the financial year.

    — Mohit Joshi

Headcount

  • Wage Hike Headcount · Q2 FY27 · High confidence announced and effective
    we expect to be able to announce it effective Q2, obviously in a phased fashion which we will be announcing, to our employees in the days to come, so that will be effective, it'll start becoming effective Q2 in a phased fashion.

    — Mohit Joshi

  • Hiring Headcount · remainder of the year · High confidence hiring will resume
    I assume that that will mean hiring in the remainder of the year absolutely, which will be a mix of fresh talent and experienced talent, so that should -- that should absolutely happen, Surendra.

    — Mohit Joshi

What to watch in Q2 FY27

Wage Hike Implementation and Impact

Q2 FY27
Current Announced and effective in Q2 FY27
Target Observe impact on margins and employee sentiment

Why it matters

Wage hikes are a significant cost component and their impact on profitability and employee retention will be key.

we expect to be able to announce it effective Q2, obviously in a phased fashion which we will be announcing, to our employees in the days to come, so that will be effective, it'll start becoming effective Q2 in a phased fashion.

Risks & concerns

  • Macroeconomic Volatility

    medium

    Operating in an environment with enormous volatility, making it difficult to give specific forward-looking numbers.

    Management acknowledged

  • Irrational Competition and Pricing Pressure

    medium

    Competitors offering unrealistic productivity benefits over long-term deals and guaranteeing prices despite input cost inflation (e.g., chip prices).

    Management acknowledged

  • Client Decision-Making Delays

    medium

    Some clients are questioning multi-year contracts, considering in-house options, or evaluating AI benefits, leading to potential delays in contract signing.

    Management acknowledged

  • Wage Bill Increases and AI Productivity Pressures

    medium

    Anticipated wage bill increases in Q2 and potential productivity pressures from AI are expected to impact margins.

    Management acknowledged

  • European Auto Business Slowdown

    low

    A one-off accelerated delivery in the European auto business in Q1 will show signs of slowdown in Q2, impacting sequential growth by 1-1.3%.

    Management acknowledged

  • Technology, Media, and Entertainment Vertical Volatility

    low

    The TME vertical declined 1.7% QoQ due to continued volatility in client spend.

    Management acknowledged

Q&A highlights

5 direct
Growth Momentum into Q2 and European Auto One-off Impact Direct
The one sort of headwind that we will have is the fact that we had a one-off in our European auto business in this quarter, which will show some signs of slowdown then in Q2. ... around a 1% to 1.3% range would be the impact coming into the next quarter.

Analyst sought clarity on Q2 growth drivers and potential headwinds, with management quantifying the impact of a non-recurring revenue component.

Asked by Kumar Rakesh

Margin Trajectory and Gross Margin Levers Direct
We will continue to drive gross margin on all the actions that we're delivering on Project Fortius, from fixed price productivity to more utilization from a T&M perspective, as well as continued SG&A benefit on portfolio company consolidation. So it will be a mix of both, but actions are all over to make sure that we are on track for the 15%.

Analyst probed on the sustainability of margin expansion, and management detailed the drivers (Project Fortius, SG&A benefits) and reiterated the 15% target.

Asked by Kumar Rakesh

DSO and Free Cash Flow Sustainability Partial
Q1 is a seasonally weak quarter from a cash and DSO perspective. This time there were two or three drivers. Operationally, we did do well, that contributed to the performance, but there were some accelerated payments also that came in which will normalize for the next quarter.

Analyst questioned if strong cash flow and DSO were sustainable, with management attributing some improvement to one-time accelerated payments that will normalize.

Asked by Kumar Rakesh

Comms Vertical Growth Sustainability Direct
one of these deals will only start to ramp up, has not ramped up in Q1 at all, so we will see the impact in subsequent quarters only. ... we remain optimistic about Comms being a growth driver for us for the remainder of the year.

Analyst sought clarity on the ramp-up of large deals in the Comms vertical and its future growth trajectory, given Q1 headwinds.

Asked by Sudhir

Irrational Competition and Pricing Pressure Direct
I think one example is obviously the level of productivity baked into, 5 to 7 year deals. Now, obviously, we want to make sure that we are aggressive, but getting into a 70%, 80% productivity benefit over a 5-year deal, I feel is getting into productivity benefits that are not visible today... I think a second area is on the infrastructure side. As you know, memory prices and chip prices are increasing significantly, and we are not willing to guarantee those for the customer, right?

Analyst asked for specific examples of 'irrational competition,' and management provided insights into aggressive pricing and unrealistic long-term commitments by competitors.

Asked by Kawaljeet Saluja

IT Services Headcount Decline and Future Trend Direct
The decline so far, which is not a revenue decline, just headcount decline, has been driven by our ability to drive greater efficiencies in our very large fixed price portfolio. ... I assume that that will mean hiring in the remainder of the year absolutely, which will be a mix of fresh talent and experienced talent, so that should -- that should absolutely happen, Surendra.

Analyst questioned the 7% YoY headcount reduction, and management clarified it was due to productivity gains and indicated future hiring plans.

Asked by Surendra Goyal

Pyramid/Offshoring Mix as a Margin Lever Partial
I think as you know, we've signed up a lot of large new deals, and some of these new deals have a rebadge component as well. So I think that will limit very significant changes because obviously for the large deals, initially the headcount ramp-up is much higher onsite and then over time you're able to transition some of that work offshore.

Analyst asked if the offshoring mix was an underutilized margin lever, and management explained that new large deals with rebadge components and onsite-heavy enterprise application work limit immediate changes.

Asked by Sandeep Shah

2 min read 6 chapters

Detailed narrative

Strong Q1 FY27 Performance and Turnaround Progress

Tech Mahindra reported robust Q1 FY27 results, with revenues reaching US$1.66 billion, marking a 6.1% year-on-year growth on a reported basis and 6.6% in constant currency. This performance reflects continued momentum from the company's three-year turnaround plan initiated in April 2024, which aimed for margin expansion and growth outpacing peers. Operating margins stood at 14.4%, expanding 60 basis points quarter-on-quarter and 330 basis points year-on-year, demonstrating sustained execution discipline and operational rigor.

Broad-based Vertical Growth and Key Drivers

All key verticals contributed to the year-on-year growth. Manufacturing led with a 17.2% YoY increase and 9% QoQ growth, driven by aerospace momentum and accelerated execution of a large European automotive program. BFSI grew 8.1% YoY and 2.7% QoQ, while Healthcare and Life Sciences expanded 7.2% YoY and 2.5% QoQ. Retail, Travel, and Logistics grew 8.6% YoY. The Communications business grew 1.3% YoY despite seasonality and a one-time cloud pass-through issue, with management optimistic about its future growth.

AI-led Transformation and TechM Helix

A significant focus was placed on TechM Helix, the company's AI-led transformation initiative, which integrates platforms, talent, partnerships, and innovation. Key developments include the launch of agentic development and modernization services and the scaling of the TechM Orion platform for multi-agent orchestration. Tech Mahindra was recognized as the 2026 Google Cloud Partner of the Year in manufacturing, highlighting its ability to modernize operations with AI. The company now has over 350 deployable AI agents and is expanding its ecosystem with hyperscalers and AI players.

Robust Deal Momentum and Client Engagement

The company secured total deal wins of US$1.078 billion during the quarter, representing a 33.3% year-on-year increase. These wins were broad-based across key verticals and geographies, with significant contributions from manufacturing and HLS. The number of clients generating over US$50 million in revenue increased by seven year-on-year, reflecting deepening client relationships. Notable wins included an integrated applications and infra managed services engagement for a US healthcare system and a deal with an American autonomous driving technology company.

Operational Efficiency and Margin Expansion

The 14.4% EBIT margin was achieved through volume growth and savings from Project Fortius, partially offset by Comviva seasonality and business mix. The company also saw improved collection efficiency, leading to a 5-day quarter-on-quarter reduction in Days Sales Outstanding (DSO) to 84 days. Free Cash Flow for the quarter was US$167 million, a 94% increase year-on-year, underscoring strong financial management.

Outlook and Macroeconomic Environment

Management expressed confidence in sustaining growth momentum for the remainder of the year, aiming to exceed peer average growth and achieve a 15% EBIT margin for FY27, with Q4 margins expected to be upwards of 15%. While acknowledging an environment with 'enormous volatility' and 'irrational competition' in some areas, the company believes its strong order book, execution capabilities, and AI-led offerings position it well for continued profitable growth. Wage hikes are expected to be announced and effective in Q2 FY27.

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