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Informist, Friday, Jul. 10, 2026

By Arya S. Biju

MUMBAI – While most information technology companies are expected to begin the financial year 2026-27 (Apr-Mar) on a subdued note, Tech Mahindra Ltd. is likely to outshine its peers, reporting double-digit sequential rise in its bottom line against the sequential fall expected for most of its large-cap peers. Continued cost optimisation under its margin improvement programme, Project Fortius, coupled with depreciation of the rupee against the dollar are expected to support the company's bottom line for the June quarter, according to analysts.

The June quarter earnings of most domestic IT companies are expected to take a hit due to continued weakness in discretionary spending and slower decision-making amid persistent macroeconomic uncertainties. Rising client expectations for artificial intelligence-led efficiency gains in cost optimisation and vendor consolidation deals are also seen affecting the earnings of these companies.

Tech Mahindra's top line, on the other hand, is expected to see a low-single-digit sequential rise during the quarter. Ramp-up of large deals won in FY26, coupled with steady growth across verticals except for hi-tech and automotive, is expected to drive the company's sales for the quarter. However, the rise in total sales is likely to be limited by seasonal weakness in Comviva business, the marginal impact of the West Asia war, and the impact of AI-led deflation, which is starting to flow through.

Tech Mahindra's consolidated net profit for the reporting quarter is expected to rise around 18% sequentially to INR 15.96 billion, according to an average of estimates from 12 brokerages. The estimated sequential growth is lower than the 21% growth reported for the March quarter. On year, the net profit is expected to rise 40%, the fastest pace in five quarters.

The highest estimate for the company's consolidated net profit for the quarter is INR 18 billion from Motilal Oswal Financial Services Ltd. The lowest estimate of INR 14.03 billion is from Kotak Securities Ltd., which expects the company's bottom line to be hit by a foreign exchange loss of $30 million.

The technology consulting and digital solutions company's consolidated revenue for the June quarter is expected to rise 2.5% sequentially to INR 154.54 billion, according to the average of estimates. This would be the slowest sequential growth in four quarters. On year, the company's revenue is expected to jump 16%, the highest year-on-year growth in over three years. The highest estimate for the company's consolidated revenue for the quarter is INR 155.66 billion from Emkay Global Financial Services. The lowest estimate of INR 151 billion is from Nirmal Bang Equities Pvt. Ltd.

In dollar terms, the revenue for the quarter is expected to be $1.64 billion, up around 1% on quarter, according to an average of 10 estimates. In constant currency terms, the company's June quarter revenue is expected to grow 0.3-1.3% sequentially, according to eight estimates. Nirmal Bang has the lowest growth estimate for the company's sales in constant currency terms as it expects some moderation after four quarters of robust sequential growth.

Revenue growth is expected to be led by the communications vertical, which contributed nearly a third of the company's total sales in the trailing quarter, followed by banking, financial services, and insurance, and by retail. The manufacturing vertical is expected to remain stable despite weakness in the US automotive segment, brokerage Motilal Oswal said. Meanwhile, the hi-tech vertical's performance is expected to be volatile through FY27 due to lower IT spending by technology giants, ICICI Securities Ltd. said. 

DEALS, MARGINS

Tech Mahindra's total contract value for the June quarter is estimated between $700 million and $1 billion, according to estimates from seven brokerages. In the past two quarters, the company had reported a total contract value of around $1.1 billion.

Tech Mahindra's earnings before interest and tax margin for the quarter ended June is expected to expand by 30-50 basis points to 14.1-14.3%, as per estimates from 10 brokerages. Benefits from the company's cost optimisation programme and the depreciation of the rupee are seen supporting the margin. Meanwhile, realignment of employee expenses, resulting from changes in labour code provisions, is seen limiting the rise in margin, according to analysts. 

"EBIT margin is expected to expand by 40bps and come in at 14.2% due to the continued integration of portfolio companies, currency tailwinds, and fixed price project productivity," Nirmal Bang said. "Sub-contractor costs will act as headwinds due to increase on account of deal ramp ups," it said. 

FACTORS TO WATCH

Tech Mahindra will announce its March quarter earnings on Thursday. Market participants will watch out for the management's revenue and margin guidance for FY27, trend in demand, and any impact of increased macroeconomic and geopolitical uncertainties in technology spending and decision-making cycles. Updates on ramping up of large deals, order wins, and deal pipeline will also be monitored.

Investors will look out for management comments on changes in hiring and talent strategy with progress in AI, expected revenue compression from AI-led disruption, and new revenue pools identified to negate headwinds emanating from AI. "We will watch out for comments on the communications vertical, which represents (about) 1/3rd of the overall revenue. We would look for increasing capex (capital expenditure) and deal signings as consistent growth for this vertical is crucial for Tech M," Nirmal Bang said.

After reporting a sequential decline in the December quarter, Tech Mahindra's bottom line returned to growth in the March quarter as total expenses rose at a slower pace than sales. The company reported a consolidated net profit of INR 13.54 billion for the March quarter, up around 21% on quarter. Its consolidated revenue grew almost 5% sequentially to INR 150.76 billion. 

Thursday, shares of Tech Mahindra closed at INR 1,426.30 apiece on the National Stock Exchange, marginally down from Wednesday. The stock is down over 2% since the company reported its results for the March quarter on Apr. 22. It has fallen nearly 23% from its all-time high of INR 1,854, hit on Feb. 3.

Of the 17 research reports on the company available with Informist, 13 have a "buy" or equivalent recommendation on the stock while two have a "hold" call and two say "sell". The average target price of the "buy" recommendations is INR 1,681 per share, nearly 18% higher than the stock's current market price.

Following are the June quarter earnings estimates, in INR billion, for Tech Mahindra from 12 brokerage firms in descending order by net profit:

End

US$1 = INR 95.3875

Edited by Shubhayan Bhattacharya

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