KPIT Technologies: Strong deal flow, but can it keep the engine running?
Organic revenue dips as global automakers slow IT investments; KPIT banks on European deal and Caresoft-led diversification to offset impact amid margin pressure and muted growth outlook.
Midcap IT company KPIT Technologies, which has carved a niche in automotive software services, is set to bear the brunt of planned cuts in IT investments by automobile OEM clients. The company reported a revenue impact of around $65 million recently, of which $45 million stemmed from clients deprioritizing older programmes across the US, Asia, and parts of Europe, it said in its September quarter (Q2FY26) call.
KPIT expects to cushion the blow through strong order wins—including a large three-year deal from a European automaker—and expansion in the commercial vehicle segment via its Caresoft acquisition.
But this may be easier said than done as the challenges in the global auto industry make clients skeptical of discretionary IT spending.
“KPIT’s strong revenue growth in FY22–25 reflected its first-mover advantage in autonomous and EV software, where technology spend was critical," said a report by Elara Securities (India). The brokerage expects revenue growth to moderate over the next two to three years from its historical CAGR of nearly 25%.
Flat near term, hope in Q4
Sequentially, KPIT’s constant currency (CC) revenue in Q2FY26 grew 0.3%, though organic CC revenue fell 2.3% due to client-led program delays. The company expects flat-to-slightly positive sequential growth in Q3 amid furloughs, with meaningful revenue growth likely from Q4 as large deal ramp-ups begin and client sentiment improves.
Deals up, conversion down
Total contract value (TCV) of deal wins rose 12% year-on-year in Q2FY26 to $232 million—marking the seventh straight quarter above $200 million. But conversion to actual revenue has weakened.
“Type of KPIT’s work—shorter tenured, development-linked— meant its book-to-bill conversion was almost 100% (limited leakage) earlier. This relationship however broke over the past four quarters, with leakage (gap between TCV-implied and actual revenues) expanding to double digits, per our estimates," said JM Financial Institutional Securities.
Q2FY26 Ebit margin fell 60 basis points sequentially to 16.4%, below consensus of 16.7%, dragged by forex losses and amortisation from the Caresoft acquisition. Wage hikes in the second half of FY26 could further weigh on profitability.
KPIT is transitioning from a traditional IT services provider to an AI-driven, IP-led engineering solutions company—a strategic shift expected to deliver benefits in the long run. With the stock down 18% so far in 2025, valuations have eased, but remain expensive. As per Elara’s estimates, KPIT trades at around 38 times FY27 earnings.
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