L&T Technology Services (LTTS) began the fiscal year on a decent note with Q1FY27 results showing the benefits of portfolio restructuring and steady execution. The stock surged nearly 9% on Wednesday.
Sequential constant currency revenue grew 1.5%, led by the sustainability segment. The vertical clocked 4.3% sequential revenue growth, aided by ramp-up of previously won deals in plant engineering and industrial products. LTTS expects the segment to clock double-digit year-on-year growth in FY27.
Despite oil price volatility and geopolitical tensions, customers in this business have not pulled back on IT spends, though there are small execution delays, the management said.
The mobility segment (up 2.3% sequentially) is showing signs of improvement driven by broad-based strength across aero, rail, and trucks/off-highway sub-segments, despite weakness in the European automobile market.
Revenue from the hi-tech segment, which has been under pressure lately, fell 3.1% quarter-on-quarter as a couple of large telecom and medtech (medical device engineering) deals slipped into early Q2FY27. LTTS expects hi-tech to return to growth in Q2FY27. If it does, it could be a re-rating trigger for the stock, which is down 20% so far in 2026.
LTTS won several large deals last quarter: it signed one deal worth over $30 million, another over $20 million, and four deals above $10 million. This compares with a large deal total contract value of $182 million in Q4FY26.
The management said demand environment continues to improve, with a healthy and broad-based deal pipeline across industries and geographies. While LTTS is confident of sequential revenue growth in Q2FY27 and through FY27, it hasn’t given an annual guidance.
LTTS reiterated its target of 13-15% revenue CAGR over the next five years while maintaining earnings before interest and tax (Ebit) margin of 16-17%. Q1FY27 Ebit margin expanded 50 basis points sequentially to 15.7%, helped by a favourable business mix and operational efficiency.
The company aims a mid-16% Ebit margin by Q4FY27. As per Motilal Oswal Financial Services, further margin improvement will depend on hi-tech recovery, a richer business mix and execution of higher-margin outcome-based deals. The brokerage is pencilling in FY27 Ebit margin at 15.8%, implying a gradual rather than sharp expansion.
The strategic portfolio restructuring under project Lakshya 31 is largely complete, with the Smart World & Communication (SWC) divestment expected to close in Q2FY27. LTTS is turning over a new leaf with the divestment of SWC business, improving growth trajectory and renewed focus on profitability, said Nuvama Research.
However, the ERD (engineering research & development) industry shall take time to recover from weak macro and headwinds in specific sectors such as auto, it added.
Its efforts to transition from a traditional ERD company to an engineering intelligence solutions provider are gaining traction. LTTS feels its early investments into artificial intelligence (AI) have given it at least six to nine months' lead time over peers in the engineering intelligence space and expects to gain market share. In an attempt to differentiate from other ERD peers, LLTS has made strategic partnerships with Anthropic and Databricks.
The stock trades at FY28 price-to-earnings multiple of around 22, showed Bloomberg data. Its valuation is a steep premium to tier-I IT companies and leaves no room for disappointment on earnings growth.
“We bake in conservative growth of 5% for FY27E, given the volatile macro environment; we expect revenue acceleration from FY28,” said an ICICI Securities report dated 15 July.