Introduction to Tech Mahindra’s Q1 FY26 Performance
Tech Mahindra, a global leader in digital transformation and IT services, released its Q1 FY26 financial results on July 16, 2025, reflecting a strong performance in profitability despite a muted revenue outlook. The company reported a consolidated net profit of ₹1,141 crore, marking a significant 34% YoY increase from ₹851.5 crore in Q1 FY25. Revenue for the quarter stood at ₹13,351 crore, up 2.7% YoY, driven by growth in key verticals like communications and banking, financial services, and insurance (BFSI). However, the results fell slightly short of market expectations, which anticipated a profit of ₹1,195.1 crore and revenue of ₹13,422.3 crore. Despite this, Tech Mahindra’s consistent margin expansion and robust deal wins underscore its resilience and strategic focus.
This comprehensive analysis explores Tech Mahindra’s financial highlights, operational efficiencies, strategic deal wins, and market outlook, providing investors and stakeholders with a clear perspective on the company’s trajectory in a competitive IT services landscape.
Financial Highlights: Revenue, Profit, and Margins
Revenue Performance: Steady Growth Amid Challenges
Tech Mahindra reported a revenue of ₹13,351 crore in Q1 FY26, reflecting a 2.7% YoY increase from ₹13,005 crore in the corresponding quarter of the previous year. In US dollar terms, revenue reached $1,564 million, up 0.4% YoY, though it experienced a 1.4% decline in constant currency (CC) terms quarter-on-quarter. The revenue growth was primarily fueled by strong performances in the communications and BFSI sectors, despite headwinds in the Americas business, which saw a 5.9% YoY decline due to reduced discretionary spending and uncertainties around US tariffs.
On a QoQ basis, revenue remained nearly flat, dropping marginally by 0.25% from ₹13,384 crore in Q4 FY25. This aligns with market expectations of a sequential decline, attributed to softness in the hi-tech vertical and seasonal weaknesses in the business process outsourcing (BPO) segment. Analysts had projected revenue of approximately ₹13,374 crore to ₹13,453 crore, indicating that Tech Mahindra’s performance was largely in line with estimates, though slightly below the higher end of expectations.
Profit Surge: A 34% YoY Leap
The standout metric of Tech Mahindra’s Q1 FY26 results was its consolidated net profit, which soared 34% YoY to ₹1,141 crore from ₹851.5 crore in Q1 FY25. This growth was driven by improved operational efficiencies and a 34% YoY increase in Earnings Before Interest and Taxes (EBIT) to ₹1,477 crore. However, on a sequential basis, profit dipped by 2.2% from ₹1,378 crore in Q4 FY25, primarily due to a significant increase in tax expenses.
The company incurred ₹490 crore in taxes during Q1 FY26, a sharp 52% jump from ₹322 crore in Q4 FY25 and 56% higher than ₹313 crore in Q1 FY25. This elevated tax burden capped profit growth, preventing it from reaching the market’s estimate of ₹1,211 crore to ₹1,230 crore. Despite this, the 34% YoY profit growth reflects Tech Mahindra’s ability to enhance profitability through cost optimization and strategic initiatives.
Margin Expansion: Seven Consecutive Quarters of Improvement
Tech Mahindra continued its impressive streak of margin expansion, achieving its seventh consecutive quarter of improved EBIT margins. The company’s EBIT margin reached 11.1% in Q1 FY26, up 260 basis points YoY and 50 basis points QoQ, aligning closely with analyst expectations of 10.9%. Profit margins also expanded by 190 basis points YoY to 8.5%. This sustained improvement is a testament to the company’s Project Fortius, a turnaround plan launched in 2023 that emphasizes operational efficiency and cost control.
Chief Financial Officer Rohit Anand highlighted the success of Project Fortius, stating, “We have delivered seven consecutive quarters of margin expansion—a clear reflection of the discipline and focus across our organization. Even in an uncertain environment, our program continues to generate meaningful results and drive operational improvements.” The company’s ability to maintain tight control over expenses, with total expenditure at ₹11,951 crore compared to ₹11,974 crore in Q1 FY25, further supported margin growth.
Earnings Per Share (EPS): Reflecting Profit Growth
Tech Mahindra’s EPS for Q1 FY26 stood at ₹12.87, a significant improvement from ₹9.62 in Q1 FY25, though slightly lower than ₹13 in Q4 FY25. The YoY increase in EPS reflects the strong profit growth, despite the sequential dip caused by higher tax expenses. This metric underscores the company’s ability to deliver value to shareholders, even in a challenging economic environment.
Strategic Deal Wins: Fueling Future Growth
Record Deal Wins: $809 Million in Total Contract Value
One of the standout achievements of Tech Mahindra’s Q1 FY26 performance was its 51% YoY growth in deal wins, with a total contract value (TCV) of $809 million. This marks a significant increase from $798 million in Q4 FY25 and reflects the company’s ability to secure high-value contracts across key geographies, including the US, UK, and Japan. Notable deals include a multi-year engagement with a global fashion brand to lead its digital and data transformation efforts and a strategic partnership with a major US-based consumer wireless operator, positioning Tech Mahindra as a “growth partner.”
These deal wins span critical verticals such as telecom, aerospace, healthcare, and enterprise software, reinforcing Tech Mahindra’s diversified portfolio and its ability to capitalize on emerging opportunities. The strong TCV growth signals a robust pipeline for future revenue, with analysts noting that these contracts will bolster the company’s performance in FY27, which is expected to be a pivotal year for growth.
Strategic Focus: Enhancing Predictability and Key Accounts
Tech Mahindra’s leadership emphasized its strategic focus on improving predictability, expanding key accounts, and boosting performance in core geographies. CEO Mohit Joshi noted, “Despite sectoral pressures, our consistent focus on profitability and strategic deal wins positions us well for long-term growth.” The company’s ability to secure large deals amidst a competitive IT services landscape highlights its strong market positioning and client trust.
The company also acknowledged challenges in certain verticals, including a 3.3% YoY decline in the Technology, Media, and Entertainment (Hi-Tech) sector, a 5.2% YoY drop in Healthcare and Lifesciences, and a 4.0% YoY decline in Manufacturing. However, growth in telecom (2.8% YoY) and BFSI sectors helped offset these declines, demonstrating Tech Mahindra’s balanced approach to vertical diversification.
Operational Efficiency: Cost Control and Workforce Dynamics
Cost Management: Keeping Expenses in Check
Tech Mahindra’s ability to control costs played a crucial role in its Q1 FY26 performance. Total expenses for the quarter stood at ₹11,951 crore, slightly down from ₹11,974 crore in Q1 FY25 and significantly lower than ₹12,291 crore in Q4 FY25. This disciplined approach to cost management enabled the company to achieve margin expansion despite flat revenue growth. Key areas of cost optimization included employee benefit expenses, which were tightly managed to support profitability.
Workforce Dynamics: Attrition and Headcount
Tech Mahindra reported a total headcount of 148,517 in Q1 FY26, reflecting a net addition of 897 employees compared to the previous year. However, the company strategically reduced its workforce in specific areas, particularly in IT services, where headcount decreased from 80,417 in Q1 FY25 to 79,987 in Q1 FY26. The sales and support department also saw a reduction of 774 employees, dropping from 9,026 to 8,252 over the same period.
The company’s attrition rate improved to 12.6% in Q1 FY26, signaling greater employee retention compared to previous quarters. CEO Mohit Joshi emphasized a strategic hiring approach, stating, “We will continue to hire a mixture of freshers and experienced talents to build a strategic reserve of employees, which we plan to deploy as demand escalates.” This balanced approach to workforce management ensures Tech Mahindra is well-positioned to meet future demand while maintaining operational efficiency.
Market Reaction and Stock Performance
Tech Mahindra’s shares responded positively to the Q1 FY26 results, closing 1.94% higher at ₹1,609 per share on the BSE on July 16, 2025, despite the financial results being announced after market hours. However, the stock has experienced a 5% decline year-to-date in 2025, reflecting broader market uncertainties and challenges in the IT services sector, including the impact of US tariff policies under the Trump administration.
Analysts remain cautiously optimistic about Tech Mahindra’s outlook. While the company’s revenue performance was in line with expectations, the shortfall in profit due to higher tax expenses disappointed some investors. Brokerages like Nuvama have maintained a “Reduce” call on the stock with a target price of ₹1,410, citing muted near-term revenue growth. However, the strong deal wins and margin improvements have fueled optimism for a potential inflection point in FY27.
Challenges and Headwinds
Sectoral Pressures and Tariff Uncertainty
Tech Mahindra faced challenges in Q1 FY26, particularly in its Americas business, which declined 5.9% YoY due to reduced discretionary spending and uncertainties surrounding US tariffs. The Technology, Media, and Entertainment vertical saw a 3.3% YoY decline, while Healthcare and Lifesciences and Manufacturing verticals dropped by 5.2% and 4.0%, respectively. These declines highlight the broader challenges in the IT services sector, including delays in deal closures and reduced client spending in discretionary areas.
Tax Burden Impacting Profitability
The significant increase in tax expenses, which rose 52% QoQ to ₹490 crore, was a key factor limiting profit growth in Q1 FY26. This unexpected tax burden underscores the need for Tech Mahindra to optimize its tax strategy to maximize profitability in future quarters. Despite this, the company’s ability to achieve a 34% YoY profit increase demonstrates its underlying financial strength.
Future Outlook: Positioning for Growth
Project Fortius: Driving Long-Term Success
Tech Mahindra’s Project Fortius continues to be a cornerstone of its turnaround strategy, delivering consistent margin expansion and operational improvements. The program’s focus on cost optimization, process efficiency, and strategic investments positions the company to navigate market uncertainties and capitalize on emerging opportunities in digital transformation and AI-driven solutions.
Strategic Investments in AI and Digital Transformation
As part of its long-term vision, Tech Mahindra is doubling down on investments in artificial intelligence (AI) and digital transformation services. The company’s recent deal wins in enterprise software and digital transformation underscore its expertise in these high-growth areas. With the global IT services market increasingly shifting toward AI-driven solutions, Tech Mahindra’s strategic partnerships and innovation focus position it as a key player in this space.
FY27 as an Inflection Point
Analysts view FY26 as a transition year for Tech Mahindra, with FY27 expected to mark a significant inflection point for revenue growth and profitability. The company’s robust deal pipeline, coupled with its focus on expanding key accounts and improving predictability, sets the stage for accelerated growth in the coming years. The leadership’s commitment to hiring fresh and experienced talent further strengthens its ability to meet rising demand in core markets.
Competitive Landscape: How Tech Mahindra Stacks Up
Tech Mahindra’s Q1 FY26 performance can be contextualized within the broader IT services sector, where peers like TCS and HCLTech have also reported their quarterly results. TCS delivered steady growth with strong deal wins, while HCLTech reported robust revenue growth but faced profitability pressures. Tech Mahindra’s 34% YoY profit growth and 51% YoY increase in deal wins compare favorably to its peers, though its flat QoQ revenue growth reflects similar challenges faced by the industry, including tariff uncertainties and delayed deal closures.
The company’s ability to secure strategic contracts in key verticals and maintain margin expansion sets it apart from competitors. However, addressing sectoral headwinds and optimizing its tax strategy will be critical to sustaining its competitive edge.
Conclusion: A Balanced Performance with Promising Prospects
Tech Mahindra’s Q1 FY26 results reflect a balanced performance, with strong profit growth, significant deal wins, and continued margin expansion, despite challenges in revenue growth and tax expenses. The company’s strategic focus on cost optimization, digital transformation, and key account expansion positions it for long-term success in a competitive IT services landscape. With a robust deal pipeline and a commitment to operational efficiency, Tech Mahindra is well-equipped to navigate market uncertainties and capitalizeMMA 2026 as a transition year, with FY27 poised to be a breakout year for the company.
Investors and stakeholders should keep a close eye on Tech Mahindra’s ability to capitalize on its deal wins and maintain margin discipline. While near-term challenges like tariff uncertainties and sectoral pressures persist, the company’s strategic initiatives and diversified portfolio provide a solid foundation for future growth. As Tech Mahindra continues to innovate and expand its presence in AI and digital transformation, it remains a compelling player in the global IT services market.