Tech Mahindra Ltd embarked on a turnaround journey two years ago under the leadership of CEO Mohit Joshi, who was appointed in 2023. Cut to FY27 and it is gearing up to meet a crucial milestone: delivering revenue growth above its peers and achieving the last leg of margin improvement.
Tech Mahindra has formally concluded the stabilization phase and is pivoting toward an execution-led acceleration phase focused on high-margin growth, management said in the March quarter (Q4FY26) earnings call. This confidence is backed by transformation efforts undertaken in FY26, which led to revenue growth turning positive, sharp margin expansion, and record deal wins.
Integrating portfolio companies, scaling crucial accounts, hiring senior leaders and expanding high-margin service lines have buoyed Tech Mahindra earnings, and should yield meaningful results ahead. Constant-currency (CC) revenue grew 0.6% sequentially in Q4FY26, beating consensus estimates. The BFSI, technology media & entertainment, and communications verticals drove growth, but retail & healthcare was a sore point. Profit after tax was hurt by higher forex loss. Over FY26, Tech Mahindra’s CC revenue grew 0.6%.
Deal wins were strong, with Q4FY26 marking the second straight quarter where total contract value (TCV) exceeded $1 billion. Tech Mahindra bagged a European telecom mega deal in Q3 and another mega deal—a global partnership with Orange Business—in Q4. Consequently, TCV for deal wins rose around 42% year-on-year to $3.8 billion in FY26, its highest ever, which provides growth visibility.
Margin ambition
Earnings before interest and tax (Ebit) margin increased around 70 basis points (bps) sequentially to 13.8% in Q4FY26, marking the 10th consecutive quarter of expansion. Margin improvement was aided by operating efficiencies under Project Fortius, currency tailwinds, and Comviva seasonality, but the benefit was partially offset by continued AI investments and large-deal transition costs. FY26 Ebit margin rose 290 bps, aided by strong cost efficiencies despite flat revenue growth.
But Tech Mahindra needs more margin levers besides cost control from here on. Management reiterated its FY27 margin target of 15% and indicated that expansion is “not too dependent on growth”. Most of the improvement is expected from gross margin, delivery efficiencies and fixed-price contracts which are margin-accretive. But the prevailing macroeconomic uncertainty is a hindrance.
“TechM’s strong deal wins in FY26 positions it well to catch up with (or even beat) large-cap peers on growth in FY27. We still remain sceptical of its 15% margin target in FY27 (we are assuming 14.5%),” said Nuvama Research. Tech Mahindra management sees industry growth around 2-5% and aims to outperform it. Here, timely deal conversions and stability of client budgets are key factors to monitor. “We believe the restructuring exercise has largely calibrated margins to a comfort band, now it requires paddling more on the revenue conversions,” said PL Capital. Tech Mahindra plans to unveil a new three-year FY30 vision once FY27 targets are met.
Meanwhile, HCL Technologies' dismal Q4FY26 results has further soured sentiment across IT stocks, leading to a sharp drop in share prices on Tuesday. Concerns of AI-led deflation and demand uncertainty have dampened hopes of a recovery in FY27.
This meant the positives of Tech Mahindra’s earnings were overshadowed, and the stock fell over 2% on Thursday. It currently trades at 17 times estimated FY28 earnings, according to Bloomberg data. This is largely in-line with or a slight premium to its peers. If Tech Mahindra manages to hit its margin target, there is scope for a re-rating.