Tech Mahindra’s strong deal wins and broad-based growth support FY28 outlook

Investment View and Valuation

ICICI Securities’ October 16, 2026 results update on Tech Mahindra highlights strong Q2FY27 execution across growth, deal wins and margins. The broker believes Tech Mahindra is positioned to deliver industry-leading growth among large-cap IT services companies in FY28, supported by broad-based vertical performance, four consecutive quarters of deal wins above US dollar 1 billion and improving revenue productivity.

However, ICICI Securities maintains a HOLD recommendation because the stock trades at 19.5 times FY28E EPS, around a 40 per cent premium to TCS and Infosys.

Q2FY27 Financial Performance

Tech Mahindra reported Q2FY27 revenue of US dollar 1,693 million, up 2.4 per cent quarter-on-quarter in constant currency and 7.2 per cent year-on-year in constant currency. This exceeded ICICI Securities’ 1.3 per cent constant-currency growth estimate and consensus of 1.5 per cent.

Reported revenue, EBIT and adjusted PAT were ahead of both the broker’s and consensus expectations.

Broad-Based Vertical Growth

Growth was broad based across most verticals. Communication grew 6.0 per cent quarter-on-quarter in US dollar terms, aided by the Orange deal ramp-up and new strategic engagements. Retail, transport and logistics grew 9.6 per cent on account of new-account scale-up and expansion in existing accounts. Technology, media and entertainment increased 2.8 per cent, supported by AI-led product engineering and platform modernisation.

BFSI grew 0.4 per cent, or 1.0 per cent in constant currency, and management expects growth to return from Q3FY27. Manufacturing declined 3.9 per cent following accelerated execution of a European automotive programme in Q1FY27. Management expects a further approximately 0.5 per cent sequential headwind from this programme in Q3FY27. Avant Techno Solutions added 10 basis points to Q2 revenue after a two-month contribution.

Deal Wins and Operating Metrics

Deal TCV was US dollar 1,023 million, down 5.1 per cent quarter-on-quarter but up 25.4 per cent year-on-year. This was broadly in line with the quarterly average run rate of US dollar 1,016 million.

Last-twelve-month deal wins were US dollar 4,270 million, up 34.8 per cent year-on-year, with wins across communication, BFSI, manufacturing and retail, transport and logistics. Top strategic clients with annual revenue run rates above US dollar 20 million grew 3.1 per cent sequentially and 11.7 per cent year-on-year.

• Revenue per employee rose 8 per cent year-on-year on a trailing-twelve-month basis.
• Utilisation including trainees improved to 88.9 per cent.
• Last-twelve-month IT attrition was 11.7 per cent.

Margin Expansion and AI Strategy

Management sees further gross-margin expansion over H2FY27 and the next three years. It expects AI toolchains to improve productivity in fixed-price and managed-services contracts while releasing headcount for growth. Pyramid rationalisation offers further margin potential, although time-and-material productivity is already near best-in-class.

Tech Mahindra is scaling its Helix AI capabilities, including zero-gravity telco architecture, an AWS agentic process transformation centre and the Indus Terra model. Management cautioned that clients will continue to demand productivity gains and that AI-related price compression in traditional services is largely being driven by competitive intensity.

Estimates, Target Price and Risks

ICICI Securities increased its FY27E and FY28E US dollar revenue estimates by 0.6 per cent and 0.8 per cent respectively. FY27E and FY28E EPS estimates changed by negative 0.1 per cent and positive 0.3 per cent respectively.

The broker rolled valuation forward by two quarters, from Q3FY28 to Q2FY29E EPS of Rs 89, and retained its 18 times target multiple. This produced a revised target price of Rs 1,590, compared with the previous target price of Rs 1,470.

Key downside risks:

• A slowdown in the communication vertical.
• Constrained ability to lift margins beyond 15 per cent in a challenging demand environment.
• Adverse regulation.
• Heightened geopolitical uncertainty.

Potential upside risks: Faster macroeconomic recovery and market-share gains in BFSI and healthcare.