Tech Mahindra Defies Weak Seasonality With Strong Q3, Record Deal Wins Lift Outlook

Tech Mahindra has delivered a combination for an Indian IT services company navigating a cautious demand environment, growth in a furlough-heavy quarter, improving margins, and record deal wins, signalling that its long-awaited turnaround may finally be taking shape.

In the third quarter of FY26, the company reported $1.61 billion in revenue, marking a 1.7% quarter-on-quarter growth in constant currency terms, even as the period is typically impacted by furloughs across global clients. Growth was broad-based, spanning communications, manufacturing, hi-tech, retail, and healthcare.

The standout, however, was profitability. EBIT margins expanded by 100 basis points sequentially to 13.1%, representing a nearly 290 basis-point improvement year-on-year. The margin expansion was driven by cost cuts and improved execution in fixed-price contracts, automation, and tighter pricing discipline, according to the report by Anand Rathi Research.

Record Deal Momentum Reshapes Outlook

Tech Mahindra’s net new deal bookings surged to $1.09 billion in Q3, up 47% year-on-year, while last-twelve-month deal wins climbed to $3.5 billion, the highest level in five years. The highlight was a $500 million, five-year telecom modernisation deal in Europe, expected to start ramping up from the first half of FY27.

The deal, secured with an existing European telecom client, is seen as a pivotal win that improves growth visibility in the region while limiting execution risk. Europe, which accounts for about 26% of Tech Mahindra’s revenue, is expected to shift from stability to growth, aided by vendor consolidation opportunities in the telecom sector.

Also read: Silver Futures Surges 4.71% To Surpass ₹3 Lakh Mark Amid Trump's Tariff

Telecom Strength, Diversification Underway

Communications remained Tech Mahindra’s largest vertical, contributing roughly 33% of revenues, and grew 2.8% quarter-on-quarter. Manufacturing followed closely, rising 2.6%, supported by aerospace and industrial clients in the US and automotive ramp-ups in Europe. Retail and logistics posted the fastest growth at 3.9%, aided by seasonal strength in business process services.

BFSI saw a temporary decline due to furloughs in specific geographies and contract-related productivity adjustments. However, the company indicated that underlying demand across data analytics, cybersecurity, and AI-driven transformation remains intact.

AI Shifts From Pilot To Production

A key theme emerging from the quarter was the operational deployment of artificial intelligence, rather than experimental pilots. Tech Mahindra noted that AI is increasingly being embedded into delivery models, pricing, and automation, helping improve productivity in fixed-price contracts. The company also highlighted its partnership with Google to accelerate enterprise adoption of Gemini-based AI solutions.

In its BPS business, which grew faster than IT services at 2.7% quarter-on-quarter, Tech Mahindra has begun integrating agentic AI and automation to offset disruption risks while improving margins.

Valuation And Risks

Following the strong quarter, Anand Rathi Research raised its revenue and earnings estimates for FY26–FY28 and retained a ‘BUY’ rating with a target price of ₹1,964, implying a 17.5% upside from the current market price of ₹1,672. The brokerage expects 20% compounded growth in adjusted earnings per share over FY26–FY28, supported by margin expansion and improving return ratios.

However, risks remain. Large telecom contracts tend to be lower-margin initially, AI-led productivity gains could pressure pricing, and a delay in the revival of discretionary technology spending could temper growth momentum.

Also read: World Markets Jolted, Dollar Dips As Trump Vows Tariffs On Europe