Hexaware deal ramp-ups and AI engagements support stronger CY26 exit and CY27 growth

Investment View and Revised CY26 Guidance

Motilal Oswal Financial Services (MOFSL), in its August 10, 2026 company update on Hexaware Technologies, reiterates its BUY rating with a target price of Rs 720, compared with a CMP of Rs 570. The target price is based on 25 times CY27E EPS and implies around 26 per cent upside from the CMP.

The broker believes the reduction in CY26 revenue-growth guidance primarily reflects delayed revenue recognition from previously won deals rather than a deterioration in demand. Hexaware has reduced its CY26 revenue-growth guidance to 6-7 per cent year-on-year, including around 50 basis points from the CPS rebadging deal.

Delayed deal ramp-ups and continued weakness in Travel and Transportation have shifted revenue recognition towards late Q3 and Q4CY26. The key execution monitor is whether these projects ramp as expected over the next two quarters.

Demand Outlook, AI Monetisation and CY27 Base

Following 2QCY26, management discussed the revised guidance, demand conditions, AI monetisation and the medium-term outlook with MOFSL. Management commentary, as interpreted by the broker, indicated that the pipeline remains healthy and is led by modernisation, vendor-consolidation and AI-led transformation programmes.

MOFSL expects a stronger CY26 exit despite the seasonally weaker fourth quarter, with delayed programmes contributing to sequential growth and improving the base for CY27. The broker estimates USD revenue growth of 6.4 per cent year-on-year in constant currency in CY26 and 9.7 per cent in CY27E. In a separate discussion of the guidance, its CY26 estimate of USD revenue growth is stated at 6.6 per cent.

• The pipeline remains healthy, supported by modernisation, vendor consolidation and AI-led transformation.
• Delayed programmes are expected to support sequential growth towards the end of CY26.
• AI-led opportunities are expected to contribute to medium-term growth, although Hexaware continues to invest in AI and talent.

2QCY26 Operating Performance

Reported 2QCY26 USD revenue increased 4.4 per cent quarter-on-quarter in constant currency. The increase was driven by underlying volume growth of around USD 9 million and a calendar and billing-day benefit of around USD 5 million.

Large-Account Mining and Medium-Term Growth

Large-account expansion is central to the broker's medium-term thesis. Approximately 13 of Hexaware's top 20 clients underwent vendor consolidation over the past five quarters, supporting wallet-share expansion and preferred-partner positioning.

Hexaware had 34 clients contributing more than USD 10 million annually in 2QCY26, up three year-on-year. This included 16 clients above USD 20 million and four above USD 50 million. Management indicated that several USD 20-30 million relationships could scale towards USD 50-100 million over the next two to three years through consolidation, consulting and AI-led engagements.

However, MOFSL notes that client mining has been gradual. USD 10 million-plus clients increased from 29 in 4QCY23 to 34 in 2QCY26, representing a more measured pace than Coforge and Persistent.

Customer and Business Mix

Revenue concentration has moderated. The top five customers represented 25 per cent of revenue and the top 10 represented 36 per cent in June 2026. Non-top-10 accounts contributed about 64 per cent of CY25 revenue and delivered a 15 per cent USD revenue CAGR over CY19-25, versus 6 per cent for the top five customers.

MOFSL Estimates and Valuation

MOFSL expects continued large-account mining, improving execution and AI-led opportunities to support growth. The broker also notes that Hexaware has retained its margin guidance despite investments in AI and talent.

The Rs 720 target price is based on 25 times CY27E EPS and implies around 26 per cent upside from the Rs 570 CMP.

Key Risks to the Thesis

• Further delays in deal ramp-ups could defer expected revenue recognition.
• Weakness in Travel and Transportation could persist.
• Execution shortfalls could limit the scaling of large accounts.
• Continued AI and talent investments could place pressure on margins.