LTIMindtree Ltd (NSE: LTIM) Q3 2025 Earnings Call dated Jan. 16, 2025
Corporate Participants:
Vikas Jadhav — Head of Investor Relations
Debashis Chatterjee — Chief Executive Officer and Managing Director
Vipul Chandra — Chief Financial Officer.
Nachiket Deshpande — Chief Operating Officer
Sudhir Chaturvedi — President, Global Markets
Analysts:
Abhishek Pathak — Analyst
Yogesh Aggarwal — Analyst
Kawaljeet Saluja — Analyst
Vibhor Singhal — Analyst
Manik Taneja — Analyst
Sandeep Shah — Analyst
Rishi Jhunjhunwala — Analyst
Ravi Menon — Analyst
Abhishek Kumar — Analyst
Rohan Nagpal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the LTIMindtree Q3 FY ’25 Results Call. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Vikas Jadhav, Head of Investor Relations, LTIMindtree. Thank you, and over to you.
Vikas Jadhav — Head of Investor Relations
Thanks Yashasri. Welcome to LTI Mindtree’s Quarter three FY ’25 earnings call. Today on the call we have with us Mr. Debashis Chatterjee, who is the Chief Executive Officer and Managing Director; Mr. Sudhir Chaturvedi, President, Global Markets; Mr. Nachiket Deshpande, Chief Operating Officer; and Mr. Vipul Chandra, who is our Chief Financial Officer.
We’ll begin the call by providing a brief overview on the company’s Q3 performance, after which we’ll open the floor for Q&A. During the call we could make forward looking statements. The statements consider the environment as we see as of today, and carry risk and uncertainties that could cause our actual results to differ materially from those expressed in today’s call. We do not undertake to update any forward-looking statements made on this call. I now turn the call over to D.C. for his opening remarks.
Debashis Chatterjee — Chief Executive Officer and Managing Director
Thank you, Vikas. Good evening and good morning to everyone. I wish you all a very happy New Year, and thank you for joining us today. I am pleased to report that the growth momentum from the previous two quarters continued into Q3. Revenue for Q3 increased by 1.8% sequentially and 5.6% year-over-year in constant currency, reaching $1.14 billion. The quarter marked multiple accomplishments including year-over-year growth across all verticals, with particular traction in the BFSI vertical which we have consistently highlighted.
Additionally, we signed record TCV amounting to $1.68 billion, up 29% quarter over quarter. These wins included a new logo in manufacturing vertical worth over $50 million as well as two large deals in the BFS vertical. We also opened 17 new logos during this quarter. Furthermore, we enhanced our cash generation and increased employee headcount for the third consecutive quarter. These positive outcomes were achieved despite seasonal challenges including furloughs and fewer billing days.
The EBIT margin for the quarter was 13.8%, down from 15.5% in Q2. The 170-basis points decline was mainly due to wage hikes, which we estimated would impact margins by approximately 200 basis points. In recent quarters, we have extensively discussed our AI strategy and its potential impact on our growth. With this context, I would like to take this opportunity to explain how we are actively implementing our AI strategy. Our framework, AI in Everything, Everything for AI and AI for Everyone, not only continues to resonate strongly, driving innovation and delivering value for our stakeholders, but is also helping us win deals.
From a customer penetration standpoint, we are now engaged with the majority of our customer base across verticals on AI initiatives, demonstrating growing trust in our ability to drive impactful AI led transformations. In the current landscape, every major deal is assessed through an AI lens, as we discussed during our Investor Day held in November last year. While AI may cannibalize some revenue, it offers substantial opportunity for growth and increased market share when strategically leveraged. Our recent record deal wins demonstrate our capabilities and positioning, and we remain committed to viewing AI as a key opportunity for growth.
Here’s an account for account of some critical deal wins this quarter where AI played a crucial role. Let me begin with AI in Everything Deal Wins. A global manufacturer chose LTIMindtree to manage its end-to-end IT landscape using LTIMindtree’s AI in Operations platform. A leading global investment firm has selected LTIMindtree’s proprietary AI in Infrastructure platform to manage its end-to-end infrastructure services. A Middle East nuclear energy company chose LTIMindtree for its end-to-end IT landscape, leveraging our AI in Operations platform.
I would like to now highlight our Everything for AI wins. A state-owned insurance company selected LTIMindtree to implement data fabric and development of AI use cases including data governance. A leading U.S. headquartered software company that provides enterprise cloud computing solutions has entrusted LTIMindtree with managing its next gen data fabric. A leading Middle East oil and gas major has partnered with LTIMindtree to implement an advanced data governance platform.
The third pillar of our strategy is AI for Everyone which focuses on empowering people and humanizing AI. We are happy to share that we have achieved nearly company-wide completion of foundational AI training. In addition to expanding the breadth of training, we have curated and invested in advanced skill building programs that focus on specializations tailored to customers’ needs, such as hyperscaler platforms, enterprise applications and both closed and open source LLMs.
In Q3, we depend on partnerships focused on building more AI led transformative services and solutions for our clients. Here’s an account — LTIMindtree and GitHub established a strategic alliance to enhance AI driven software engineering. LTIMindtree and Microsoft entered a partnership to accelerate AI innovation and drive digital transformation for global enterprises. LTIMindtree collaborated with AWS to launch industry specific Gen AI solutions. Our Gen AI platform, AI frameworks and accelerators, combined with AWS’s robust Gen AI capabilities enable rapid development and deployment of customized Gen AI solutions across industries.
LTIMindtree developed Smart Underwriter, an agentic AI solution powered by ServiceNow. The solution is designed to assist underwriters in making more informed, data driven decisions and enhance efficiency through intelligent automation.
In quarter three, we announced a partnership and strategic investment in Voicing.AI, an advanced agentic AI solution for customer engagement processes. These processes are critical for clients to not only serve their customers for products sold, but also enhance their sales effectiveness. A majority of customer service firms are expected to Adopt Gen AI in 2025. LTIMindtree, in partnership with Voicing.AI’s Agentic AI, intends to disrupt this market and provide significant cost savings to clients, in addition to superior experience. We are actively involved in over 40 client conversations that leverage our combined value proposition. We are pleased about our AI progress, and excited about the opportunities ahead. We remain committed to driving AI innovation for our customers and within our own organization.
Next, I will discuss our industry verticals performance. Quarter three growth was led by BFSI vertical which grew 8% year over year and 4.2% quarter over quarter in constant currency. Both BFS and Insurance witnessed healthy growth. We signed one large deal using LTIMindtree proprietary AI in infrastructure platform to manage clients’ end-to-end infrastructure services.
The manufacturing and resources vertical grew 1% year-over-year and 9.1% quarter-over-quarter in constant currency. This quarter included some pass-through revenue. We also won a deal worth over $50 billion in which we will manage the customer’s application stack, ERP and infrastructure using our AI platform.
Technology, media and communications vertical grew 9.1% year-over-year and declined by 5.5% quarter-over-quarter in constant currency. Tech companies continue to be at the forefront of AI adoption. In the spirit of doing more for less, we are passing on AI driven productivity benefits to our clients.
Customer business grew 2% year-over-year and 0.2% quarter-over-quarter in constant currency. Healthcare, life sciences and public services vertical grew 2.2% year-over-year and 0.4% quarter-over-quarter in constant currency.
We continue to expand our workforce to support growth. This marks our third consecutive quarter of employee additions. In Q3, we onboarded 2,362 employees, bringing the year-to-date count to 5,150 new hires, reflecting a 6.3% increase compared to the previous year’s end headcount. At the end of the quarter, our total headcount stands at 86,800. Attrition remains stable at 14.3%. I will now turn over the call to Vipul for the financial highlights.
Vipul Chandra — Chief Financial Officer.
Thank you, DC. Hello everyone, and thank you for joining the call. Firstly, I would like to wish everyone on the call a very Happy New Year. Let me now walk you through the financial highlights for the third quarter of FY ’25, starting with our revenue performance. Our quarter three revenue stood at $1.14 billion, reflecting a sequential growth of 1.1% and 5.1% year-on-year in dollar terms. The corresponding constant currency growth was 1.8% quarter-on-quarter and 5.6% year-on-year. Our EBIT margin declined by 170 basis points to 13.8% as compared to 15.5% in the previous quarter. The impact on account of wage hikes came in at about 220 basis points. The hikes were effective from 1st October and given to all eligible employees across the company. However, despite the seasonal impact of furlough and lower working days, our ongoing efforts on cost optimization helped margins by 50 basis points sequentially, resulting in the net 170 basis points impact.
The foreign exchange movements negatively impacted the revenue line and positively affected the cost line items at EBIT level. At the PAT level, it has been broadly neutral for us. The effective tax rate for the quarter was 26.2% as compared to 25.8% in Q2. We expect the effective tax rate for FY ’25 to be in the same range.
PAT margin for the quarter was 11.2% as compared to 13.3% in the previous quarter. Basic EPS was at INR36.7 for the quarter as compared to INR42.3 in Q2 FY ’25. Our efforts towards our aspirational DSO target of 75 days are continuing, and in line with this, we closed the total DSO for this quarter at 80 days, compared to 81 days in the previous quarter, where a significant improvement in our cash conversion metrics in Q3, the operating cash flow to PAT improved to 126.3% as against 74.2% in Q2. Furthermore, free cash flow to PAT has shown a strong improvement to 106.8% compared to 54.5% in Q2. Despite a significant cash outflow due to interim dividend payment and midyear variable payouts, I’m pleased to report that our cash and investment balances are up by almost INR500 crores quarter-on-quarter and stood at INR12,488 crores. This corresponds to $1.4 billion. The return on equity for the quarter was at 23.7%.
As of December 31, 2024. Our cash flow hedges stood at $3.88 billion and hedges on the balance sheet were $360 million. Our utilization excluding the trainees dropped further to 85.4% compared to 87.7% last quarter. This aligns with our focus on strengthening the bench capacity, enabling us to support our growth ahead.
We also continue to onboard freshers in line with our strategy to broaden the pyramid. We onboarded over 1,400 freshers this quarter. Our TTM attrition remained stable for the quarter at 14.3% compared to 14.5% last quarter.
On the CSR front, I am pleased to announce that LTIMindtree was placed in the top 10% of 50,000 assessed companies in Achilles [Phonetic] networks with an overall ESG score of 84 out of 100. The Achilles average score stands at 56 only. Our commitment to sustainability involves embedding the principles into our culture and long-term strategy. LTIMindtree was featured in Business World magazine for being one of the top 50 India’s most sustainable companies in 2024. We have also been named one of the top 50 companies for women in India, and one of the top 20 best IT companies for women in India. By the 2024, Avtar and Seramount Best Companies for Women in India. These recognitions are a clear acknowledgment of our efforts to create value beyond profits for all our stakeholders. I now hand it back to DC for the business outlook.
Debashis Chatterjee — Chief Executive Officer and Managing Director
Thank you, Vipul. In terms of business outlook, there has been a promising increase in deal activity, and the deal pipeline in Q3 as evidenced by our record order inflow in the quarter. The continuing client focus on cost reduction and vendor consolidation is supporting a strong pipeline. The savings generated from these cost cutting measures are directed towards pilot programs and scaling AI initiatives. AI spends have started shifting from point proof of concepts to scale projects in select areas as well as in foundational data and infrastructure.
As we enter calendar year ’25, political and economic uncertainties persist, with a new government in the U.S. and the possibility of policy changes, predicting spends trending with certainty is challenging. We are optimistic about sustaining growth momentum into the fourth quarter, supported by the deal ramp ups, reversal of most furloughs and continued strength in the BFSI vertical. However, it could be impacted by short-term headwinds on account of AI driven productivity. While we expect to improve margins in Q4, absorbing the full impact of wage hikes may take a bit longer in the current growth environment. With that, let me now open up the floor for questions.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] We’ll take our first question from the line of Abhishek Pathak from Motilal Oswal. Please go ahead.
Abhishek Pathak
Yeah, hi. Thank you for the opportunity. So, I had a couple of questions, DC. Firstly, on the composition of deals, have you started seeing short cycle deals coming in more aggressively in this quarter? A lot of your peers have indicated that discretionary spends are coming back or at least are certainly coming back more strongly than the earlier expected. And considering LTIMindtree has a heritage of transformation, and what you would call discretionary deals, are we seeing more of that as well? That’s one. And the second thing was, I guess the margins were a positive surprise this quarter despite a 3% headcount reduction and the productivity gains that you passed. And now that utilization levels are at 85%, how should we model in margins going forward? Will you be comfortable at this utilization level or should we expect this to dip further? And for FY ’26 then considering, you know, once the productivity benefits are absorbed, how do you expect margins to play out? Thank you.
Debashis Chatterjee
Hi Vishal. So basically, you asked three questions, right?
Abhishek Pathak
Yes, that’s right, DC. One on the deal composition, the second on comfortable level of utilization and likewise the margin outlook because of that.
Debashis Chatterjee
Okay, so let me start with the composition of deals. You know, as you see, the order intake for this particular quarter has been, you know, quite substantial, very positive, and you know, bulk of that, you know, there is a portion of renewals in that, but bulk of the orders are more cost takeout and productivity and vendor consolidation related. Now having said that, there are pockets in which the short cycle deals are back. When I say short cycle deals, you know, we can call it discretionary, but more in terms of the regulatory space and especially in BFSI, and especially in BFS. So those are back, but I won’t say that given the, you know, it’s also a reflection of the portfolio of clients that we have. So given our portfolio of clients, I don’t think it’s fair to say that it’s kind of back, you know, across all the industries in the uniform way. But definitely in BFS, we can see some traction, and we are hoping that it should come back over a period of time. So that kind of gives you a view of what’s happening with respect to the deals.
Second thing, in terms of utilization, you know, we had very clearly called out that we have to lower the utilization. You know, keeping in mind that there is a build up with respect to deals, and now that we have won those deals, I think the utilization may inch up a little further in Q4. You know, keeping in mind that the people that we have got on bench right now, they can be deployed easily. So, you can probably see the utilization inch up a little further which will also have some positive impact in terms of margin as we go along in Q4.
Now, as far as FY ’26 is concerned, specifically a little too early to call out, but if you have heard our commentary before, our intention is to look at profitable growth which means that margin is very important for us. So, though margin is a factor of growth and probably we will be able to take the margin up if we do see a double-digit growth coming back in FY ’26, but it will be always our endeavor to take the margin up slowly based on the framework that we have already put in place, the processes we have already put in place. So, Vipul, you want to add anything?
Vipul Chandra
I think you have covered the points, DC. So given the comment that you made, Abhishek, about this quarter margins being a surprise, I think part of the reason for that, as we called out in the earlier earnings call and the investor day commentary as well, that we are looking at employing other margin levers also in terms of cost optimizations and pyramid optimizations, etc. And those efforts are ongoing, and that’s where we continue to work on.
Abhishek Pathak
If I can just squeeze in one more on the high-tech top client, should we expect 4Q to be the bottom there or do we expect that to spill over to FY ’26? Thank you.
Debashis Chatterjee
No, I think if I, you know, I couldn’t understand the question exactly.
Abhishek Pathak
DC, I was saying in terms of the TMT vertical, the productivity gains that we pass to the client as you said., yeah.
Debashis Chatterjee
Now the productivity gain that we pass to the client and especially the top client, I think that will at least one more quarter, we have to bear that before it stabilizes.
Abhishek Pathak
Got it. Thank you so much.
Operator
Thank you. We’ll take our next question from the line of Yogesh Aggarwal from HSBC Securities. Please go ahead.
Yogesh Aggarwal
Hi guys, a couple of questions. Going back to the top, these top high-tech client where you passed on the productivity gain. DC, I’m just curious, it seems a bit counterintuitive. We are talking about an upcycle and you guys obviously are very thick partners with that hyperscaler as well. So, why this sharp cut right now, and was there any volume compensation promised for this productivity gain for future.
Debashis Chatterjee
I’ll request Nachiket to take that.
Nachiket Deshpande
So, if you look at the commentary made by our top client, they are significantly increasing their investments around AI, creating infrastructure all around the world, and there’s a significant capex that has been announced by them over the last one to two quarters. So, as they look at rebalancing some of that investment, there is an expectation of harvesting that from ongoing operations. And also, I think to be honest, it is also the proof of the pudding, right. Some of these AI related efficiencies that we are jointly advocating to our clients, we got to also demonstrate that in the work that we deliver, and that’s really what is driving that productivity expectation in this particular situation. So, it is not that it’s a demand problem that they are seeing, but it is more about one demonstrating that the efficiencies are genuinely generated, and we are able to do that within our own environments, and then continue to reinvest that into the AI related.
Yogesh Aggarwal
So, Nachiket, doesn’t it bode very — not very well because that would mean that the same thing now will be offered to the clients of the client, right, this hyperscaler. Am I understanding it correctly?
Nachiket Deshpande
So, we are already seeing that. So, AI related productivity expectations is, you know, as DC called out in the script that all the deals where we see in that AI and everything related story is where we are able to infuse AI in delivering higher levels of productivity than we could in the past, and that is becoming a key differentiator for us to win some of these vendor consolidation and cost takeout deals. So that’s an expectation from client all around, and that’s been a focus area for us in the last six months.
Yogesh Aggarwal
Okay. On the other note, the deal wins are so impressive especially in the third quarter when usually these are not that strong. Signings are not that good. But still, you guys sound a little more cautious compared to all the other companies who have reported so far. Is it just the high-tech impact or you worry about some other customer issues as well?
Debashis Chatterjee
No, I think, I don’t know what you mean by cautious, but as far as we are concerned, I think we are very clear that the momentum that we have generated in the last two quarters and the growth momentum into this quarter will continue in the next quarter. So, that’s number one. And the other thing is the order inflow that we have and whatever we have in terms of pipeline as we go along, that also gives us the confidence to say that, you know, FY ’26 will be, you know, definitely better than FY ’25. So that’s the confidence we have. Now, calling out specifics is a little difficult because the clients are still going through budgeting sessions, and we are kind of working with them. And you know, as Nachiket rightly called out, I mean, there is a pressure in terms of doing more for less. That’s why there are consolidation initiatives that we are working on. And we have been very well placed in those initiatives because of our understanding of where we can make a difference in terms of AI in everything. Sudhir, you want to add anything?
Yogesh Aggarwal
Okay, great. This is helpful. Thank you.
Operator
Thank you. We’ll take our next question from the line of Kawaljeet Saluja from Kotak Securities. Please go ahead.
Kawaljeet Saluja
Hi. Thank you. I’ve got a couple of questions. DC, first is the productivity benefit that you passed on to the large client. When did that happen? And when was the residual impact? What is the duration of residual impact — residual impact in the fourth quarter from it?
Debashis Chatterjee
Hi, Kawaljeet. So, the entire theme of doing more with less and the productivity benefits that we are talking about, I think you can probably say that it was most of or at least two months within this quarter, and which will also extend into the next quarter.
Kawaljeet Saluja
Okay. And is there a way, obviously there’ll be some impact on profitability. So, what are the measures to recoup some of the hit to profitability from this productivity reset? And by when would you be able to, let’s say, recoup the losses or to margins from it?
Debashis Chatterjee
I think when you talk about profitability, I don’t think the specific productivity benefit that we have passed out is really playing a role in profitability. I think we did, as Vipul commented in his commentary, we did consciously decide to do the wage hike, because I think it was very important for us to do that. We had working days — a few less working days, and also there was a huge forex impact. So those were the factors. But in terms of overall profitability where we are, it can only go higher from this point as we are into the next quarter. Nachiket, you want to add anything?
Nachiket Deshpande
Just for the — where we are passing on the productivity benefit, Kawaljeet, we’re actually generating those benefit and passing on. So that’s why it is relatively margin neutral.
Kawaljeet Saluja
Okay, so it’s not a pricing reset which is going through to your margins from that large account?
Nachiket Deshpande
No.
Kawaljeet Saluja
Okay. The other question for you, DC and Nachiket, is that let’s say in FY ’26 discretionary does not recover and your business portfolio continues to be cost takeout heavy. With that assumption, where do you think you’ll end up with on margins as such.
Debashis Chatterjee
Well, I think that’s an assumption. I think there has been — I have not seen in this industry for almost two years where discretionary is an all-time low. So, I think that is something that will be probably changing. And as I said, you know, it’s not that discretionary is not back. We see we are doing a lot of regulatory related work in BFS which will continue into the next year as well. When I say next year, next fiscal. So, I think you know the margin trajectory will continue as in like we will always try to focus in terms of how to improve the margin, whether it is and the levers are all known to us whether it is pyramid or whether it is utilization. And I don’t think you know there is a proper plan. So, I don’t think there is, you know there is any worry on that front. But yeah, if I can get a double digit growth back in FY ’26 with the discretion coming back, then it will be even more positive on the margin side.
Kawaljeet Saluja
Right. DC, see in the past whenever you had, whenever you used to give wage increases, you would recoup the impact of wage revisions into the subsequent quarter. I mean does that still hold true or life has changed?
Debashis Chatterjee
Absolutely, absolutely. It holds good, and normally takes two to three quarters.
Kawaljeet Saluja
Okay, just a final question. A couple of questions for Vipul. Vipul, first is that what is the rate at which you have your $3.8 billion of hedges? And second is that where do you think the depreciation charge stabilizes that you know, it’s a capitalization of most of the facility over.
Vipul Chandra
On the first question, Kawaljeet, I don’t think we talk about the specific rates at the hedges. We do follow a systematic hedge program, and we build up the hedges over a period of time as we go along. It’s a systematically taken up hedge program which continues. So, it’s not a one-time hedge where you can specify a rate because every quarter the rates keep changing, the average rates keep changing as we average in more hedges, and assume some of the hedges which have already kind of come into maturity. So, but, I think our track record in terms of our hedging program, you know, I’m sure you must be tracking that, and it does show its efficacy over the last, you know, multiple years.
Coming to the second point about the depreciation, I think our investments in our office spaces and building up further capacity as we have been calling out, we have been investing into our business and those investments, some of those investments are still continuing. Some of our office buildings are still under construction. So, we will see some more additions to the capital stock and consequently maybe a bit higher depreciation. But at the same time, as the buildings get commissioned and we get into our own buildings, some of the lease rentals also may see some rationalization. So, I think suffice it to say that in answer to your question, the depreciation is not yet, I would say, come to a stable state. It will probably go up a bit more before it stabilizes.
Kawaljeet Saluja
Okay, that’s fair. Thank you so much for taking my question.
Operator
Thank you. We’ll take our next question from the line of Vibhor Singhal from Nuvama Equities. Please go ahead.
Vibhor Singhal
Yeah, hi, thanks for taking my question, and congrats to the team for very solid deliverance in the quarter. DC, my question was on the manufacturing and the retail vertical. Manufacturing may — in the manufacturing vertical, we’ve reached back the $200 million, $220 million quarterly run rate after almost three to four quarters. So, I mean very solid growth in this quarter. But I think from overall market participants we’re hitting a lot of negative commentary regarding the auto segment while the ex-auto remains quite decent. What are our clients talking about it? How is our portfolio aligned towards that basically direction that this will take? And secondly…
Debashis Chatterjee
I will request Sudhir to answer that question.
Sudhir Chaturvedi
Sure, yeah. So, on manufacturing I think, you know, just call out a couple of things. Firstly, you know, we signed our largest ever or deal win last quarter in manufacturing and some of that, and even in this quarter we’ve actually had a couple of good large deal wins in the manufacturing sector which are about $50 million in size. So, you know, that’s sort of contributing to us having a good order of book in manufacturing and the pipeline being there. I think our exposure to the auto vertical in manufacturing is relatively low. We do a lot of work with industrial manufacturing clients. So, I think you know for us, we see that there is continuing sort of good pipeline there and continuing momentum.
Vibhor Singhal
Given the deals that you mentioned in this vertical this quarter, can we expect the growth momentum in this vertical to continue in the coming quarters?
Debashis Chatterjee
So, there is an element of some pass through in this quarter. So, you know, I think but, but if we look at it from a year-on-year perspective, you’ll see good growth.
Vibhor Singhal
Got it, got it. And since we are at it, I’ll just pick your brains on the retail vertical as well. I think in this quarter we have seen multiple — some of your peers talk about retail vertical bottoming out. Another peer reported quite good growth in that again. So, any color on that, what we are seeing, of course we club CPG, retail and pharma, so you might want to break that down. But in the overall vertical, what is the kind of traction that we’re looking at, and if you think it has bottomed out for us?
Debashis Chatterjee
Yeah, for us, you know it’s primarily consumer goods and pharmaceutical, and you know there’s some exposure detail but quite small. And there we are seeing a more or less a stable sort of demand environment. There are some deals in the pipeline but I would say it’s more stable.
Vibhor Singhal
Got it, got it. Thank you so much for taking my question. Just one quick last question for Vipul if I may. Vipul, we’ve seen another round of headcount addition in this quarter, and our headcount addition has been quite good over the past two to three quarters, along with the lines that you had mentioned earlier that we would be adding this. So, when do you think, I mean basically the benefits of the, I mean, I’m assuming a bit of them are in the fresher side as well. So, when do you think the balance between incremental hiring, utilization and basically is going to play out in the margins? This quarter, of course the wage hike impact was there. Can we expect the pyramid rationalization and the hiring to basically decelerate a bit over the next coming quarters, and hence help us in our margins?
Vipul Chandra
So, I think, part of the answer you have called out yourself that we have always called out that our comfortable range for utilization is 85% to 86%. We have reached those levels. So, from here on the utilization and hiring will be a function of the market conditions, and the demand environment that we see. So, it’s not that we are actively looking to kind of target any other utilization level. It’s a question of how the demand plays out. As far as the pyramid correction is concerned and the pressure intake is concerned, that is one of the levers that we have talked about, and we are continuing to focus on that. Again, it’s a function of how the demand plays out, and how we are able to deploy the pressures after getting them trained up. But I think the fact that we are working on these margin levers, as I covered just a little while back, also is visible even in terms of the margin impact in this quarter. And that is something which we will continue to work upon as we go along.
Vibhor Singhal
Got it, got it. And same thing with offshoring, I suppose. I think we would be comfortable with these levels. Little scope to go beyond these numbers, I suppose.
Vipul Chandra
Yeah. I think offshoring, onshore-offshore ratio is something which we monitor, but I think we are doing reasonably well on that parameter. So again, as the situation requires, we’ll continue to adjust, but it’s again, you know, a function of the ongoing business demand.
Vibhor Singhal
Got it, got it. Great sir, thank you so much for taking my questions, and wish you the very best one for future years.
Operator
Thank you. [Operator Instructions] Next question is from the line of Manik Taneja from Axis Capital. Please go ahead.
Manik Taneja
I thank you for the opportunity. The first question was with regards to these productivity benefits that you passed on to your top customer on the high-tech side. I just want to understand, do you think during such situation that this might be something that might happen with other customers as well? That’s question number one. The second question was on your margins. So, in your analyst meet you spoke about trying to essentially get margins to about 17%, 18% over the medium term given the current margin profile and some of the operating levers. And I would presume that through the course of last 12 months, you would have already seen some G&A consolidation gains. How should we be thinking about as the bigger drivers for us to essentially recover or see a recovery on margins?
Debashis Chatterjee
Let me take the first question. I’ll request Vipul to take the margin question. So, Manik, in terms of, you know, when you talk about productivity benefits, the reason why we called up the top client is because it’s a large client with a large revenue. But if you ask me, what is it that we are doing with respect to AI, if you have seen our strategy rollout during the investor day, we clearly called out that we are doing AI in everything. Which means that whatever we do for our clients and ourselves, we want to infuse AI in everything that we do, which means that we are not waiting for clients to come back, but we want to go to our clients proactively and figure out how can they do more with less. Now, with that approach, even within existing portfolios, we have seen that clients are very excited. And whenever there is an opportunity to expand the portfolio beyond whatever we are doing, we have actually gained market share within that particular client. And even in consolidation initiatives, which is vendor consolidation, our strategy is working well. You know, it also kind of indicates that we have a good handle in terms of what kind of solutions we can propose to the client when it comes to AI and everything. So, we called out the top client specifically because it’s, you know, it’s a substantial impact, but I don’t think there is any substantial impact on any of the other clients. But as a theme, we are going to aggressively push the AI in everything, which will — which we hope that eventually it will be beneficial to us because we’ll be winning more market share in the process.
Manik Taneja
So, does that mean in the near term this could be dilutive to our growth as other customers also look for some of these efficiency gains?
Debashis Chatterjee
No, I don’t think so. I don’t think whatever we have called out for the near term, the only thing I would say that for the top client, we will have an impact in the next quarter as well, but I think we will still grow in the next quarter. As I said, the growth momentum will continue into Q4, so which means that there is enough growth out there in other opportunities, which will be kind of, which will nullify the slight impact that will have at the top client. So, we are very confident that our strategy has to work, and this strategy can actually be a differentiator for us as we go along.
Manik Taneja
Sure.
Vipul Chandra
So, coming to your second question on the margins front, I think in quarter two earnings call, we had already called out the impact of the wage hike, and we had also talked about the fact that a wage hike impact cannot be recovered in one quarter. While we have been working on our cost optimization and other margin levers, and that’s why the full impact of the wage hike is not visible in the margin. It’s lesser than that, but it will take, as DC had said a little while back, maybe a couple of more quarters or two, three quarters to recover back fully. We had also spoken about in the investor day interactions that one of the biggest levers for margin to be recovered back is the growth. And as long as the growth is in single digits, the other levers the pace at which they work versus the growth lever, the pace is different, and to that extent if the growth comes back in double digit, then of course the journey towards margin recovery and going beyond gets faster. Otherwise, it’s a bit of a slow grind in operational lever.
Manik Taneja
Sure. Thank you, and all the best for the future.
Operator
Thank you. We’ll take our next question from the line of Sandeep Shah from Equirus Securities. Please go ahead.
Sandeep Shah
Yeah, thanks for the opportunity. DC, if I look at our growth within the top 10 for the last two three quarters has been slightly volatile. So, you explain most of the growth has been coming through your top 10 clients. Would you explain very well on the high-tech account, is there any other large top 10 client specific issues which makes us slightly cautiously optimistic?
Debashis Chatterjee
The answer is no, I don’t think, and even if you look at the top 10, you know it has fairly remained fairly stable, which means that within my top 10 there are other accounts have grown.
Sandeep Shah
Okay. Okay. And also, in terms of AI related productivity, you are saying the theme which is going is more with less. So, in that scenario, do — one can assume that in the near term, there could be more benefits to be passed on which may lead to an increase in the volume starting at 526.
Debashis Chatterjee
Yeah, absolutely. Nachiket, do you want to take it?
Nachiket Deshpande
Yeah, yeah, I think you’re right. You answered the question.
Sandeep Shah
Okay. Okay. And just on insurance, if I’m not wrong, we work with some of the U.S. logos which also has exposure in terms of California fire. So, any client specific issue you foresee or it’s too early to make this judgment.
Debashis Chatterjee
Too early. Right now, it’s too early.
Sandeep Shah
Okay. Okay. Thank you.
Operator
Thank you. We’ll take our next question from the line of Rishi Jhunjhunwala from IIFL Institutional Equities. Please go ahead.
Rishi Jhunjhunwala
Yeah, thank you for the opportunity. Just a couple of questions. One, you know, your deal number has been reasonably strong at that $1.68 billion. But you haven’t really called out any like $100 million or $200 million kind of deals in that. Just wanted to understand if you can give some more color in terms of the mix of this order inflow, split between maybe qualitatively split between discretionary versus cost takeout, and you know, new versus renew.
Vipul Chandra
So, I think if you look at the $1.7 billion, you know, almost $1.7 billion worth of order intake and you see the makeup of that, there is a significant amount that has come from new large deal wins. If you remember, even in our investor meet that we talked about a good large deal pipeline with deals in the final stages, you also spoke of us being on the right side of several vendor consolidation deals that were underway. So, those are the two major contributors along with the renewals. So Q3 is our renewals quarter, especially in the BFSI vertical. And we saw strong renewals, and again, strong renewals is also a good sign that we continue to maintain the base of clients and seek to grow them further during the year. A majority of this renewals is longer term deals as evidenced by both renewals as well as the large deal makeup of this.
As DC said, you know, we’ve yet to see discretionary come back in a secular fashion. There are projects in certain verticals that are there, but this order intake is, is essentially a combination of deal wins, vendor consolidation and renewables.
Rishi Jhunjhunwala
Got it. And just very quickly, you know, for this quarter at 1.8%, the two headwinds that we saw, one was with the top high-tech client and the other one on the furloughs. Furloughs are going to get reversed in 4Q and the impact of the high-tech client is going to reduce. So, just wanted to understand, I mean, is it possible to quantify, say what the growth in this quarter would be X of that client’s issue, and can we at least get that kind of a growth in 4Q as well?
Debashis Chatterjee
I think it’s, we don’t want to quantify but we can only say that, you know, we, we are very confident about the momentum continuing into Q4 as far as growth is concerned. Keeping in mind that some of the issues that we will have with the top clients, I mean, please remember as I said sometime back, the top client impact was probably for not the full quarter in Q3, but we will have a full quarter impact in Q4. And you know, but the furloughs will be back, may not be fully, but they will be coming back. So, and I think the number of working days also will be, you know, less in Q4. So, keeping all these things in mind, all these headwinds, we are still confident that we will continue the growth momentum.
Rishi Jhunjhunwala
Okay, thank you. All the best.
Operator
Thank you. We’ll take our next question from the line of Ravi Menon from Macquarie. Please go ahead.
Ravi Menon
Hi, thank you for the opportunity. Despite this productivity improvement given to your high-tech customer, your top five revenue is still just barely down 0.7% quarter-over-quarter. So, does that mean that the clients grew despite furloughs and all that?
Debashis Chatterjee
Yes.
Ravi Menon
So, we have seen, I would say consistent growth across most of our client base. So are we seeing broad based pickup across except for this one client?
Nachiket Deshpande
Even on this client, if you compare year on year, there is a still growth. So, it’s a, you know, it’s in one quarter, if a productivity pass back has happened, that’s the reason why we are calling out, because it’s a noticeable number, you know, to not talk about it. Otherwise, I would say that the growth is there.
Ravi Menon
Is this related to a certain revenue size milestone being hit or is this like a contract renewal process every five years or something like that? How should we think about that?
Debashis Chatterjee
Well, I think, as I said, I mean, I think Nachiket articulated very well that when we talk about AI, the top client is pretty much in the forefront of AI. And you know, along with the top client, we are actually working many other clients in terms of how do you really, you know, do the AI in everything. And when it comes to the top client, we need to also do the same thing. So, I think you need to look at it from that perspective that you know, when you say AI in everything, it should be in our own environment, in our top client as well as all the other clients that we work with. So, just that, you know, the top client has a huge revenue and there is some impact. That’s why it’s worth mentioning. But otherwise, I don’t think there is anything that we are concerned about. As we said that even on a Y-o-Y basis, the top line has still grown.
Ravi Menon
Thanks so much. And one last question on the impact of pass through on the margins. Could you quantify that? [Indecipherable]
Vipul Chandra
So, I think, as you are aware that pass-throughs in the past have been a regular phenomenon. I think over a period of time, the pass-through revenues have become a part of the overall revenue makeup for the company. And the impact is also now pretty much factored in into the quarter-on-quarter movement. I think it’s not, and we don’t really call out the impact individually for pass through and services and everything. I would just say that it’s a regular, you know, part of the business revenue now and it’s continuing in the same way.
Ravi Menon
All right, thank you, and best of luck.
Operator
Thank you. Next question is from the line of Abhishek Kumar from JM Financial. Please go ahead.
Abhishek Kumar
Yeah. Hi, good evening. Again, sorry to harp on the productivity pass back. We have heard of, you know, 20%, 25% productivity coming through AI, especially in product development. In that context, you know, just 5% decline sequentially in your high tech vertical seems small. So, does that mean either we were able to offset some of that pass through or, you know, it is just the beginning of, you know, sharing some of the productivity gains. It might have started in, you know, one section of the relationship, and it can continue, you know, because even we have discussed earlier, the productivity gains are significantly higher than what we are seeing right now in terms of decline.
Nachiket Deshpande
So, I think, you know, all of the above in a way. So, number one, I think the productivity benefits in different parts of the services within the top client also have different characteristics. So hence you will not be able to apply one number. It’s not just one service, but there are variety of things that we do in our engagement. Second, we’ve been also gradually working on it. So, it is beginning, and as DC said in Q4, we will see a full quarter impact of what we are passing through for this particular customer as well. And as I think we talked about the philosophy of more for less, it is also getting compensated by growth in the adjacent areas where we are passing on productivity. So, it’s a combination of all of those three, is why you see a different impact versus what would be the productivity gains that are being passed on.
Abhishek Kumar
Sure. Maybe just to follow up. So, I mean, do we expect growth in FY ’26 or FY ’25, especially in this account or in high tech vertical given the continuation of productivity past that?
Nachiket Deshpande
Yeah, I think on a full year basis in FY ’26 we’ll surely see the momentum. But as I think DC called out, it’s too soon. Budgets are still getting finalized. So, I don’t think we are in a position to sort of confidently say that, but the indications are that we’ll continue to see the momentum.
Abhishek Kumar
Sure. One last question on Europe, we saw decline. I’m not sure how much it declined in constant currency, but you know, any color on what is leading to drag in Europe. Thank you.
Vipul Chandra
In CC terms, Europe grew 3% sequentially.
Abhishek Kumar
Okay, thank you so much.
Operator
Thank you. We’ll take our next question from the line of Rohan Nagpal from Helios Capital India. Please go ahead.
Rohan Nagpal
Hi, thanks for the opportunity. So just — sorry, this is on the productivity pass through again. So, since we’re at a stage where we are generating the productivity gains internally and then passing them on, there has to be a fairly objective way of measuring the kind of productivity gains that we are seeing, because there is a contract that determines payment. So, could you just provide, I mean while we don’t want to get into specifics in terms of exactly how much productivity gain you’re seeing, but could you provide some color on the areas or directionally what sort of quantum of productivity gains you are seeing?
Debashis Chatterjee
No, we may not be able to call out specific quantums, but I think it is fair to say that if you follow our strategy at an overall level, we have been calling it out well ahead of time that we know that when you talk about AI, there has been a lot of conversations about how does AI reflect in terms of productivity and will it cannibalize some revenues in specific areas. And we have been proactive in terms of understanding that and launching our overall strategy, which is AI in everything, knowing very well that, you know, if we do that, which it will, in the short term, maybe there could be certain benefits we need to pass on to the clients. But in the medium to long term, that will only benefit us to get more market share for the client. Like, for example, you know, we have, you know, just the only thing I can call out is that the top client, we have been working, you know, with Copilot adoption like we are using leveraging Copilot very aggressively, which by inherent — by using Copilot inherently you get a significant productivity gain. Now if you imagine the volume that we support, and for that volume, if we leverage Copilot, that’s a significant volume. That’s a significant number. So, it is not a — Copilot is just one example in case of the top client, but there are other levers as well. And as Nachiket articulated, there are multiple areas within the same client in which you work, and the approach is very different in different areas. But overall, we are very confident, and I think we are actually ahead of, you know, ahead in terms of understanding the need to, you know, look at this productivity benefit so that in the long run it will only be beneficial to us.
Operator
Mr. Nagpal, you’re through with your question, right?
Rohan Nagpal
Yeah, sorry, I just have a follow up over here. So, if — so if there is AI in everything, so we just expect like productivity benefits that could have a material impact in the relationship with our top client to effectively diffuse through our entire client base and every work stream. Is that the understanding?
Debashis Chatterjee
Let me take a step back and explain to you. When you say — when you say AI in everything, it is not just top client, it’s pretty much across the entire client base. In fact, we have launched an initiative where almost 60 out of the top clients, we are doing something or the other in the form of AI. Now, typically there are deals which we have won, and I think some of them we announced earlier where we would not have won that vendor consolidation unless we had committed to AI productivity gains. Which means that, even in situations which is a new deal, unless you have a very clear strategy in terms of how can you solution the productivity gain for the client, we may not be able to win that deal. So, the way to look at it is that we know very well that for our existing client base in some areas we may be cannibalizing, but at the same time we are very confident that with our approach when it is appreciated we will actually be able to expand in the same client. That’s the way we are looking at it, and that’s why in spite of all the headwinds, in spite of some of the things that we talked about the forex, the lesser number of working days, productivity gains passing on to the top client, still we are confident that our growth momentum which we have developed over the last two quarters into Q3 will also continue into Q4.
Rohan Nagpal
Wonderful. Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question. On behalf of LTIMindtree, that concludes this conference. [Operator Closing Remarks]