Tech Mahindra Q2 beat and billion-dollar deal wins strengthen growth visibility

Investment View and Target Price

In its October 16, 2026 Q2 FY27 result update on Tech Mahindra, Prabhudas Lilladher retained its BUY recommendation after the company delivered revenue and EBIT margin performance ahead of both the broker's and consensus expectations. The broker highlighted improving execution, robust deal momentum and better growth visibility, and raised its target price to Rs 1,910 from Rs 1,900.

Q2 FY27 Revenue Performance

Tech Mahindra reported Q2 FY27 revenue of US dollars 1.69 billion, with constant-currency revenue growth of 2.4 per cent quarter on quarter. This was ahead of Prabhudas Lilladher's estimate of 1.2 per cent and consensus expectations of 1.0 per cent to 1.5 per cent. Reported net sales were Rs 162 billion, versus the broker's estimate of Rs 160 billion, and were 15.7 per cent higher year on year.

Communications growth was supported by the ramp-up of the Orange large deal and new strategic engagements. Manufacturing declined 3.8 per cent after accelerated execution of a large European automotive programme in Q1.

Profitability and Operating Metrics

Profitability continued to improve. Q2 FY27 EBIT margin expanded 40 basis points quarter on quarter to 14.8 per cent, above the broker and consensus estimate of 14.4 per cent. Strong volume growth and Project Fortius savings more than offset wage-hike effects. EBITDA margin was 17.8 per cent, while adjusted profit after tax was Rs 16 billion, 8.2 per cent higher year on year but 11.1 per cent below the broker's Rs 18 billion estimate.

Utilisation excluding trainees increased 190 basis points quarter on quarter to 88.9 per cent, and last-twelve-month attrition fell 10 basis points to 11.7 per cent. Net employee additions were 5,446, comprising 1,928 software employees and 3,440 BPO employees. Tech Mahindra declared an interim dividend of Rs 15 per equity share and a 1:1 bonus issue.

Deal Momentum and Client Growth

Deal wins remained a central positive. Quarterly net-new deal total contract value was US dollars 1.023 billion, marking the fourth consecutive quarter of wins above US dollars 1 billion. Last-twelve-month deal wins reached US dollars 4.27 billion, up 34.8 per cent year on year.

Top five, top 10 and top 20 client revenues grew 6.0 per cent, 5.7 per cent and 3.8 per cent quarter on quarter respectively.

Management Outlook and Growth Opportunities

Management reiterated confidence that Tech Mahindra can deliver FY27 revenue growth above the peer average, supported by its order book and timely deal ramp-ups. Management identified opportunities in the following areas:

• AI-led operational transformation;
• Fibre and network modernisation;
• B2B platform modernisation;
• AI-led product engineering; and
• Platform modernisation.

Helix investments are progressing from pilots towards larger implementations. Management also discussed building capabilities in specialised AI models, AI agents and commercial AI offerings.

Broker Estimates and Key Considerations

Prabhudas Lilladher expects normalisation of the European automotive programme to weigh modestly on Manufacturing revenue in Q3 FY27, although this should be balanced by Comviva seasonality. The broker expects further H2 FY27 margin expansion from Project Fortius and operating leverage, partly offset by continued investment in AI capabilities and talent.

Following the Q2 beat, the broker retained its FY29E growth estimates. The Rs 1,910 target price is based on an unchanged 20 times price-to-earnings multiple.