Zensar Tech.

Zensar Technologies reported Q3 FY26 revenue of $160.5 million, reflecting a 2.2% YoY growth in reported currency and 1.3% in constant currency. However, the company experienced a sequential degrowth of 1.4% (reported) and 1.3% (constant currency). Despite this, the quarter saw healthy volume growth, predominantly driven from offshore, with overall volume growth at 1.7% and offshore volume growth at 3.1%. Management anticipates that sustainable volume growth, coupled with higher working days, should lead to a reflection in revenue numbers next quarter.

The company achieved strong profitability, with Gross Profit improving to 33.7% (up 270 basis points QoQ) and EBITDA expanding to 17.4% (up 200 basis points QoQ). This margin expansion was primarily driven by a 1.4% improvement in offshore effort mix, a 1.0% benefit from leave utilization, and 0.7% from other operational efficiencies. These gains were partially offset by a 1.0% impact from furloughs and 0.9% from ESOP costs. Management emphasized a long-term commitment to mid-teen EBITDA margins and double-digit profit growth, with dollar profit growth at 18.2% YoY and EPS growth at 24.1% YoY.

The order book for Q3 FY26 stood at $180.2 million, representing a sequential growth of 13.6%, with a book-to-bill ratio of 1.12. Zensar reported that 20% of its order book is AI-influenced, specifically counting new and existing new deals. The company has made strategic investments in AI, with nearly 60% of its workforce AI certified and over 7,300 employees impacted by its Ignite AI Academy, demonstrating a commitment to becoming an AI-native technology services company.

While Banking and Financial Services grew robustly at 12.2% YoY and Healthcare and Life Sciences at 5.2% YoY, the Telecommunication, Media and Technology (TMT) vertical continued to be a significant stress area, declining 11.6% YoY and now representing less than 10% of total revenue. Management expressed a cautious outlook for TMT, expecting it to remain flat at best. Life Sciences also faced continued headwinds due to client consolidation, with some impact anticipated in Q4.

Zensar maintained a strong financial position with net cash and cash equivalents of $322.4 million, a sequential increase of $29.4 million. The Board declared an interim dividend of INR 2.4 per share. Management reiterated its focus on maximizing shareholder value through profitable growth and is actively evaluating strategic inorganic opportunities that are accretive to the bottom line, rather than pursuing revenue growth at any cost.

Operational efficiency was evident with utilization at 83.5%, despite a 130 basis points QoQ decline due to seasonal furloughs. Voluntary attrition improved to 9.5%, marking the fourth consecutive quarter below 10%, reflecting strong talent retention. The company continues to invest in capability enrichment, particularly in AI, with significant employee training initiatives.