Margin improvement of Tech Mahindra in June quarter driven by cost optimization

Tech Mahindra delivered in-line performance on both revenue and margins for the quarter. The company reported a sequential decline of -1.4% in CC terms, while EBIT margins improved to 11.1% (+56 bps QoQ), marking the seventh consecutive quarter of margin expansion. The revenue dip was primarily due to weakness in the retail vertical and delays in client decision-making amid macroeconomic uncertainty. Despite the revenue pressure, margin improvement was driven by cost optimization under Project Fortius; a favorable offshore mix;  G&A cost rationalization; and portfolio company integration.

New deal wins up by 51.5%

Deal wins for Q1 stood at USD 809mn, reflecting a YoY growth of 51.5%. TechM anticipates better revenue growth in FY26 vs. FY25, supported by a robust deal pipeline, and aims to outperform the peer group average in terms of growth. The company remains committed to its margin targets for FY27 (15%), maintaining discipline in sub-contracting and pricing. Company’s “AI Delivered Right” strategy is gaining traction with clients, emphasizing the shift from proof of concept to production deployments. Management describes the demand environment as dynamic and uncertain, presenting a mixed outlook.

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Source: HDFC Securities Institutional Equities

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