Tech Mahindra (TECHM) Q1 25/26 earnings summary

Executive summary

• Q1 FY26 revenue reached $1,564 million, up 0.4% YoY and 1.0% QoQ, with EBIT margin at 11.1% and PAT margin at 8.5%.

• Large deal TCV for the quarter was $809 million, up 44% YoY LTM and 51% YoY, with broad-based wins across verticals.

• Margin expansion continued for the seventh consecutive quarter, driven by operational rigor, Project Fortius, and cost efficiency.

• Strategic focus on AI, innovation, top client acquisition, and global partnerships, with new leadership hires and industry recognitions.

• Communications, Retail, and BFSI verticals drove growth, while Automotive and Hi-Tech faced headwinds.

Financial highlights

• EBIT margin improved to 11.1% from 10.5% last quarter; EBIT dollars grew 30.2% YoY in USD terms.

• Profit after tax was $133 million, up 30.2% YoY, with PAT margin at 8.5%.

• Return on capital employed rose to 23.8%, up 120 bps sequentially and 600 bps YoY.

• Free cash flow was $86 million; FCF to PAT at 65% for the quarter and 111% on LTM basis.

• Days sales outstanding increased to 95 from 88 in Q4 FY25.

Outlook and guidance

• Management expects FY26 to be better than FY25, with sequential revenue growth from Q2 as large deal wins accrue.

• Margin improvement program remains on track for FY27 targets, with levers including productivity, offshoring, and portfolio integration.

• Project Fortius and AI-driven initiatives are expected to drive further operational improvements.

• Deal pipeline remains strong, with a 44% increase in LTM deal wins.