Tech Mahindra Limited — Q4 FY26 earnings call

Call held 28 Apr 2026

Management summary

Tech Mahindra delivered a strong Q4 and FY26, marked by record deal wins and significant margin expansion. The company's strategic focus on AI-led transformation, operational efficiency, and client relationship deepening yielded positive results, despite headwinds in certain verticals like Hi-Tech and Healthcare. Management expressed confidence in achieving FY27 targets, including 15% EBIT margin and above-peer average constant currency revenue growth, supported by a robust pipeline and diversified business model.

Highlights

  • Highest ever deal wins in many years, securing two mega deals over consecutive quarters, driving end-to-end digital transformation for enterprises.

  • Operating profit for FY26 grew 31.4% YoY to USD 797 million, with margins expanding by 290 basis points to 12.6%.

  • Q4 operating profit margin improved by 70 basis points QoQ to 13.8%, driven by Project Fortius, FX tailwinds, and Comviva seasonality.

  • Full-year deal wins increased by 42% YoY to USD 3.79 billion, reflecting strong client confidence and solution-led go-to-market approach.

  • NPS score improved from median to top quartile last year, and is now the highest in the industry, indicating strong customer satisfaction and deeper engagement.

  • Highest ever total dividend for FY26 at Rs. 51 per share, with a payout ratio of 104% of PAT and 91% of free cash flow.

Concerns

  • Hi-Tech vertical declined 2.7% year-on-year for FY26, facing headwinds from restructuring at a semiconductor client and muted discretionary spend.

  • Healthcare revenues declined by 0.6% year-on-year due to regulatory policy challenges across Provider and Life sciences segments.

  • The global backdrop remains demanding with geopolitical volatility, though management expressed confidence in their ability to navigate it.

Key financials

3 periods

Headline

  • Revenue (USD)
    6.385 Bn
    YoY +1.9%
  • Revenue (USD CC)
    6.385 Bn
    YoY +0.6%
  • Operating Profit (USD)
    797 Mn
    YoY +31.4%
  • EBIT Margin
    12.6%
  • DSO
    89 days

Q4

  • Revenue (USD)
    1.625 Bn
    YoY +4.9% QoQ +0.9%
  • Revenue (USD CC)
    1.625 Bn
    QoQ +0.6%
  • Revenue (INR)
    ₹15,076 Cr
    YoY +12.6% QoQ +4.7%
  • Operating Profit (USD)
    223 Mn
    QoQ +5.5%
  • Operating Profit (INR)
    ₹2,084 Cr
    YoY +48%
  • EBIT Margin
    13.8%
  • PAT (USD)
    145 Mn
    YoY +6.7% QoQ +15.6%
  • PAT (INR)
    ₹1,354 Cr
  • PAT Margin
    9%

FY26

  • Free Cash Flow
    616 Mn
  • Cash & Equivalents
    892 Mn

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

  • Manufacturing (FY26)
    0.059 yoy_pct Revenue Growth
  • BFSI (FY26)
    0.037 yoy_pct Revenue Growth
  • Communications (FY26)
    0.026 yoy_pct Revenue Growth
  • Retail, Travel, Transportation, Logistics (FY26)
    0.073 yoy_pct Revenue Growth
  • Hi-Tech (FY26)
    -0.027 yoy_pct Revenue Growth
  • Healthcare (FY26)
    -0.006 yoy_pct Revenue Growth
  • BFSI (Q4 FY26)
    0.08 qoq_pct Revenue Growth
  • Hi-Tech (Q4 FY26)
    0.025 qoq_pct Revenue Growth
  • Communication (Q4 FY26)
    0.018 qoq_pct Revenue Growth
  • Manufacturing (Q4 FY26)
    0.118 yoy_pct Revenue Growth
  • Retail (Q4 FY26)
    0.062 yoy_pct Revenue Growth
  • Communications (Q4 FY26)
    0.056 yoy_pct Revenue Growth
  • Healthcare (Q4 FY26)
    0.047 yoy_pct Revenue Growth

Order book

high confidence

Total value

$3.79 Bn

as of 2026-03-31 quantified

42% YoY

Inflow this quarter

$1,073 Mn

Pipeline

deal pipeline tcv

Healthy pipeline across sectors including Manufacturing, Financial Services, Healthcare, Retail, CPG, Energy and Utilities.

Management noted continued deal momentum, with FY26 closing with the highest ever deal wins in many years, underlining client confidence in Tech Mahindra's transformation capability and solution-led go-to-market approach.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Debt disclosed
    • Forex hedge Hedge book stands at 0.75 billion versus 1.05 billion the previous quarter. Lower by 62% from 1.96 billion in March '25, in line with change in hedging policy to one year tenure. $0.75 Bn
    As of March 31st, our hedge book stands at 0.75 billion versus 1.05 billion the previous quarter. Compared to March ‘25, which is last year, our hedge book is lower by 62% from 1.96 billion. This is in line with the change we made in our hedging policy last year, where we've reduced our hedge tenure from two years to one year.
  • Dividend ₹36/share (final) Payout ratio 104%
    In line with our stated capital allocation policy, the board has approved final dividend of Rs. 36 per share, taking the total dividend announced for the year at Rs. 51 per share, the highest ever we've done. The full year dividend payout ratio works out at 104% of PAT and 91% of free cash flow, above our stated capital allocation policy.
  • Liquidity Cash $892 Mn
    Free cash flow for the year stood at 616 million, which is 115% of our reported PAT, and cash and cash equivalent stood at 892 million.

Guidance & targets

Profitability

  • EBIT Margin Profitability · FY27 · High confidence 15%
    Moving forward, we continue to remain focused on scaling our capabilities, driving profitable growth and leveraging Al to enhance value delivery for our clients. We are reiterating our FY27 financial targets, sure you're happy to hear that, including achieving organic constant currency revenue growth above our peer group's average and achieving an EBIT margin of 15%.

    — Mohit Joshi

Revenue

  • Organic Constant Currency Revenue Growth Revenue · FY27 · High confidence above peer group's average
    Moving forward, we continue to remain focused on scaling our capabilities, driving profitable growth and leveraging Al to enhance value delivery for our clients. We are reiterating our FY27 financial targets, sure you're happy to hear that, including achieving organic constant currency revenue growth above our peer group's average and achieving an EBIT margin of 15%.

    — Mohit Joshi

Tax Rate

  • Effective Tax Rate Tax Rate · FY27 · Medium confidence similar range as articulated earlier
    The effective tax rate for the quarter was at 24.3%, and on the full-year basis turns out to be an ETR of 27%. For FY27, our normalized effective tax rate should be in a similar range as we had articulated earlier.

    — Rohit Anand

Return on Capital

  • Return on Capital Employed Return on Capital · next year · High confidence 30%
    And then looking at Return on Capital Employed, we are close to 26% and our commitment to all of you is get to 30% for next year. So, we are on track for all of these metrics.

    — Rohit Anand

Industry Growth

  • Industry Growth Range Industry Growth · next year · Low confidence 2%-4% or 3%-5%
    Having said that, if I was out on a limb, I'd probably say maybe the industry growth would be in the 2%-4% or 3%-5% range. That is certainly the estimates that we are seeing now.

    — Mohit Joshi

Margin

  • Fixed Price vs T&M Margin Gap Margin · current · High confidence 8%
    Yeah. So, gap, Kawal, right now is close to 8%, I would say, in T&M fixed price. And that's why we've been continuously reiterating that's the biggest opportunity. The gap is narrowed versus where we started because we've improved on both. But now the improvement is going to be happening most in fixed price project because we've done the foundation in most of it. So, that's where the margin improvement. Next year when you see, that's the biggest lever for us.

    — Atul Soneja

What to watch in Q1 FY27

FY27 Organic Constant Currency Revenue Growth

FY27
Current FY26: 0.6% CC growth
Target Above peer group's average

Why it matters

This is a key strategic target for FY27, indicating a return to market-leading growth.

We are reiterating our FY27 financial targets, sure you're happy to hear that, including achieving organic constant currency revenue growth above our peer group's average and achieving an EBIT margin of 15%.

Risks & concerns

  • Macroeconomic and geopolitical volatility

    medium

    Global backdrop remains demanding, with geopolitical volatility and commodity price impacts.

    Management acknowledged

  • Client discretionary spend cuts

    medium

    Hi-Tech vertical faced headwinds from muted discretionary spend; Healthcare also saw muted discretionary spending due to regulatory challenges.

    Management acknowledged

  • AI as a deflationary factor

    low

    Management believes AI drives modernization and new commercial models, rather than solely being a deflationary factor, and is focused on 'AI delivered right'.

    Management downplayed

  • Dependency on telecom vertical

    low

    Management highlighted diversification within telecom (IT, BPS, network, products) and across 100+ operators globally, reducing dependence on a few large clients.

    Analyst downplayed

Q&A highlights

6 direct
FY27 growth target vs slowing industry growth Direct
I think, look, if you look at our own trajectory, right, we've clearly had a trajectory which gives us a good exit as we get into FY27 because we have gone from being negative year-on-year when we started the journey to being, you know, sort of almost flat to slightly down at the start of the year, to progressing on a positive trajectory. So, that is the number one thing that gives us confidence.

Analyst questioned the achievability of TechM's FY27 growth target given a broader industry slowdown, prompting management to highlight internal momentum and pipeline strength.

Asked by Ankur

Cost-led vs growth-led margin expansion for FY27 Partial
I think we're reasonably sure in our plans that we should be able to cover any logical standard deviation on growth not happening with the cost action. So, I think right now we're comfortable from a dependency...not too much dependency on growth. That's the way I'll answer it.

Analyst probed the drivers of future margin expansion, seeking clarity on the balance between cost efficiencies and revenue growth, which management addressed by emphasizing flexibility and reduced dependency on growth for margin.

Asked by Ankur

Margin profile of mega-deals vs older deals Direct
I think the large deals, as I mentioned in my presentation also, we're extremely conscious on what margins and the risk profile we sign it up. And we're very happy that we've been consistent in the thought process between Mohit, me, Atul on that and been very selective not just on the two large deals that we've announced but even on the deals that we've been ramping up for the last 3-4 quarters. We track this very closely and we show it to the board as well that our as-sold margins on each of these deals from a portfolio perspective are accretive.

Analyst inquired about the profitability of recent large deal wins, and management confirmed that these deals are accretive to margins, indicating disciplined deal-making.

Asked by Ankur

Impact of new AI models (Anthropic/Claude) on client decision-making and pricing Direct
But thankfully, we have not seen any of that. There are obviously some clients who questioned about whether productivity in the outer year should be higher with the evolution that we're seeing of models. But this is not common behavior. And also, we've been encouraging our clients to take a real view of the real savings or the real speed improvements that they can get today rather than a fear of a better option in the future.

Analyst raised concerns about potential client delays or pricing pressure due to rapid AI advancements, which management largely dismissed, stating clients are pragmatic and focused on current savings.

Asked by Sudhir

Margin of safety for FY27 growth targets given telecom sector volatility Direct
Look, one of the benefits for us on the telecom business, for instance, is a lot of our peers have large telco businesses but those telco businesses are based on working with three clients or working with four clients. Our telco business works with 100 plus operators across the world. So, we truly have a scale telco business across multiple clients rather than an excessive dependence on a single client or a single deal.

Analyst questioned the resilience of growth targets given telecom sector risks, and management emphasized diversification within telecom and across other verticals as a key de-risking strategy.

Asked by Sudhir

How the 'inefficient pyramid' became a strategic advantage for margin improvement Direct
But, you know, John Maynard Keynes was once asked a question saying, 'You have changed your position, right?' and he said, 'Sir, when the facts change, I change my mind. What do you do?'. And the reality is that the facts have changed, right. What was earlier, you know, clients were not seeing the experience of the talent as a huge advantage because they were not seeing that expertise that was coming in from an understanding of their systems or the industry as a significant advantage. Now, clients are releasing that advantage. So, clients increasingly are asking for that.

Analyst challenged the shift in strategy regarding the talent pyramid, and management explained that changing client demands for experienced talent and industry expertise have made the existing talent pool a competitive advantage.

Asked by Kawaljeet

Utilization of the 8% margin gap between fixed price and T&M projects Direct
As I said, Al investments, very, very humongous new area that's come in front of us. Growth, obviously, is a priority, as you rightly mentioned. So, I think those two are the priority right now for us, yeah.

Analyst asked how the significant margin opportunity from fixed-price projects would be leveraged, and management indicated it would be directed towards AI investments and accelerating growth.

Asked by Kawal

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Detailed narrative

Strategic Priorities and FY26 Performance Overview

FY26 was a pivotal year for Tech Mahindra, marked by the highest deal wins in many years, totaling USD 3.79 billion, a 42% YoY growth. The company secured two mega deals, including a global partnership with Orange Business, focusing on AI automation and digital transformation. Full-year revenues reached USD 6.385 billion (up 1.9% reported, 0.6% CC), with operating profit at USD 797 million (up 31.4% YoY) and margins expanding by 290 basis points to 12.6%. Q4 FY26 revenues were USD 1.625 billion (up 4.9% YoY, 2.4% CC), with operating profit margin improving by 70 basis points QoQ to 13.8%.

Vertical Performance Analysis

Retail, Travel, Transportation, and Logistics was the highest-growing vertical for FY26, up 7.3% YoY, driven by e-commerce expansion and automation. Manufacturing grew 5.9% YoY, led by aerospace and industrial process manufacturing, despite a softer US auto market. BFSI grew 3.7% YoY, with focus on asset and wealth management and payments yielding results. Communications grew 2.6% YoY, supported by stabilization and increased spend from a large US client. Hi-Tech declined 2.7% YoY due to restructuring and muted discretionary spend, while Healthcare declined 0.6% YoY due to regulatory challenges.

AI Strategy and Transformation Journey

Tech Mahindra is advancing as an AI-first organization, launching an enterprise-wide Claude Core training program and collaborating with University College London for GenAI and quantum computing research. The company's AI strategy focuses on 'AI delivered right,' bridging traditional technology stacks with new AI stacks, and building capabilities across industry use cases, partnership ecosystems, and platforms like TechM Orion. This approach aims to drive modernization, relevance, and profitability, moving clients from POC to large-scale AI adoption.

Commercial Model Evolution and Client Successes

The company is evolving its commercial model from T&M to outcome-based, focusing on 'tokens' of work delivered by a combination of digital and human labor. This approach provides transparency and predictability in pricing, especially for modernization efforts. Client successes include Kroger's AI-powered interactive shopping layer (Kroger Shopping Assistant) and AI Insights in Merchandising, Enbridge's large-scale operational transformation for service desks, and TForce's mainframe modernization using AI. These examples demonstrate the practical application of AI to deliver tangible client outcomes.

Operational Excellence and Margin Expansion

Operational rigor, including focus on utilization and right pricing, contributed to 10 consecutive quarters of margin improvement, with Q4 FY26 EBIT margin reaching 13.8%. The integration of acquired portfolio companies is nearing completion, with 100% integrated from backend, frontend, and middle-end. The company has also invested in an AI-enabled demand and supply management platform to improve responsiveness and fulfillment time. AI-led productivity improvements contributed 7% to overall productivity gains in FY26.

Capital Allocation and Shareholder Returns

Tech Mahindra maintained a disciplined capital allocation policy. For FY26, free cash flow stood at USD 616 million, representing 115% of reported PAT, with cash and cash equivalents at USD 892 million. The board approved a final dividend of Rs. 36 per share, bringing the total dividend for FY26 to Rs. 51 per share, the highest ever. The full-year dividend payout ratio was 104% of PAT and 91% of free cash flow, exceeding the stated policy.

Outlook and FY27 Targets

For FY27, Tech Mahindra reiterated its financial targets: achieving organic constant currency revenue growth above its peer group's average and an EBIT margin of 15%. The company aims to reach 30% Return on Capital Employed by next year, up from 26% in FY26. Management expressed confidence in these targets, citing a strong pipeline, diversified business mix, and continued investments in AI and talent. The effective tax rate for FY27 is expected to remain in a similar range as FY26 (27%).

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