Tech Mahindra anticipates a slight revenue decline in constant currency for Q1 FY26 due to weakness in the hi-tech sector and seasonal softness in its BPO business. Despite Comviva's support, core segment drags are expected to dominate. However, PAT is projected to increase significantly YoY, with strong deal wins expected, reaching around $750 million.
is expected to post a sequential revenue decline in constant currency terms for the first quarter of FY26, dragged down by weakness in the hi-tech vertical and seasonally soft performance in its BPO business.While seasonality in its Comviva unit is likely to offer some support, the drag from core segments is expected to outweigh that tailwind.
PAT for the quarter is likely to jump by a healthy 42% year-on-year (YoY), according to an average estimate of six brokerages.
Analysts estimate a 0.5%–1.0% QoQ decline in constant currency (CC) revenue, while the dollar revenue may see marginal growth of around 1%. Most expect deal wins to remain strong, with estimated total contract value (TCV) for the quarter at around $750 million — an improvement over the previous quarter and significantly higher on a year-on-year basis.
We forecast c/c revenue decline due to weak hi-tech vertical and seasonal weakness in BPO business. These headwinds will more than offset tailwind from Comviva seasonality. We expect a 30 bps increase in EBIT margin resulting from benefits of project Fortius.This will offset headwinds from wage revisions. Rupee depreciation will help. We forecast net new deal wins of $750 million, an improvement QoQ and material increase YoY. More importantly, new deals are won at a higher margin.We expect a solid FY26E on profitability. Revenue growth will be weaker due to rationalization of low margin businesses. We expect investor focus on— measures to improve margins to 15% by FY27, health of telecom vertical, a segment in which many peers have announced megadeals, growth in keenly watched financial services vertical, reasons for weak hitch and BPO businesses.
TechM shall report -0.8% QoQ CC and +1% QoQ in USD - Comviva seasonality along with headwinds in the hi-tech segment. Margins shall expand +50bp QoQ. We will watch out the management comments on the FY27 revenue and margin guidance, and their progress on it.
Revenue growth may see a decline of 1.0% QoQ CC due to a muted recovery in Telecom and Manufacturing (50% of revenue). While the communications vertical has stabilized, recovery may take time.
Deal wins have picked up pace, with Tech Mahindra outperforming peers. Management sees a sustainable TCV baseline of $600-800 million.
Margins are expected to rise by 20 bp, supported by lower subcontractor costs and SG&A efficiency. That said, weak revenue growth may limit upside.
The outlook on segments such as BFS vertical and CME, especially in US and deal TCV, will be the key monitorable.
We expect CC revenue to decline 0.5% sequentially. Communications vertical to be impacted by Comviva seasonality while Enterprise to be impacted by likely softness in Manufacturing.
We expect margins to expand by 50bps led by efforts under Project Fortius Watch out for: Progress of the strategic initiatives by CEO Mohit Joshi, Telecom vertical outlook, margins levers, discretionary spend outlook
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