Mphasis Ltd (NSE: MPHASIS) Q1 2026 Earnings Call dated Jul. 25, 2025
Corporate Participants:
Unidentified Speaker
Nitin Rakesh — Chief Executive Officer and Managing Director
Aravind Viswanathan — Chief Financial Officer
Vinay Kalingara — Head Investor Relations
Analysts:
Unidentified Participant
Sudheer Guntupalli — Analyst
Nitin Padmanabhan — Analyst
Rishi Jhunjhunwala — Analyst
Manik Taneja — Analyst
Abhishek Gupta — Analyst
Sandeep Shah — Analyst
Kavaljit Saluja — Analyst
Presentation:
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The conference is now being recorded.
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operator
Good morning ladies and gentlemen and thank you for joining the emphasis Q1 FY26 Shromy’s conference call. I’m Neera, your moderator for the day. We have with us today Mr. Nitin Bhatir, CEO of Emphasis, Mr. Arvind Vishwanathan, CFO and Mr. Vinay Kalingara, head of Investor Relations. As a reminder, the webcast link to call invite is in the mail that the Emphasis Management team will be referring to today. The same presentation is also available on the website of the emphasis, I.e. www.emphasis.com in the investor section under the Financial and Fairly as well as both on BSE and MSE websites.
Request you to have the presentation handy. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star and zero on your Touchstone phone. Please note that this conference is being recorded. Before we begin, I would like to state that some of the statements made in today’s discussion may be forward looking in nature and may involve risks and uncertainties. A detailed statement in regards to this is available in the Q1 results release that was sent out to all of you earlier.
I now hand over the floor to Mr. Undertin to begin the proceedings of this call. Thank you. And over to you, Nitin.
Nitin Rakesh — Chief Executive Officer and Managing Director
Thank you, Neera. Good morning everyone. Good to have you all on the call again. The tech industry is evolving rapidly, driven by innovation. Global uncertainty, macroeconomic complexity and geopolitical tensions shape a cautious business environment. Technology remains a top priority for enterprises navigating this environment while balancing growth with operational resilience. The rise of Gen AI is driving a global shift toward AI First. Digital Native Business Models Enabled by the democratization of intelligence, both legacy enterprises and digital native companies are accelerating investments in feature led technology. Over the past quarter, the demand environment has demonstrated some resilience but only selected strength.
Despite sustained macroeconomic uncertainties, decision making continues to be more deliberate as enterprises navigate the current environment. With the overhanging threat of sophisticated cybercrime and need to comply with legislation, it’s an urgent priority for organizations to defend and protect.
Nitin Rakesh — Chief Executive Officer and Managing Director
Why?
Nitin Rakesh — Chief Executive Officer and Managing Director
For reprioritizing their spending, focusing on must have capabilities and creating efficiencies and cost savings to program that demonstrate a clear ROI while at the same time minimizing project execution risk. Business teams are wanting to move forward with at scale AI programs EMBEDDING AI into products, into decision making and customer experience within tight budgets. Since there is now an imperative to fund these AI programs from within the existing overall budgets, the demand for enhanced value at a reduced cost continues. At the same time they see continuous release of new features, fast trend to market and the ability to quickly launch innovative products and services to stay ahead in the competitive environments.
Technology teams are looking for means to modernize their legacy monolithic systems with disjointed data architectures while servicing the high technology debt that has built up over decades. At the same time, tech teams are also under constant pressure to deliver enhanced value and reduce cost. Moving Forward with the Transformation Agenda ECC is an evolving theme with multiple models at play including carve outs, build out and manage captives. Traditional people based service models are under pressure to reinvent and survive. AI is recalibrating how IT services operates. A broadly published estimate is believed that 25 to 30% of all working hours could be impacted by large language models.
It is fast becoming an imperative for businesses to move beyond experimentation in establish the structures and processes needed to turn AI into tangible impact reality. At Emphasis, we understand that differentiation and investments are needed to pursue large AI LED opportunities. We continue to drive remaking that needs planned investment as rapid changes in AI tech are leading to services being delivered as software. We continue to invest in areas where we see long term demand even in the face of economic uncertainty. We remain committed to disciplined execution at a micro level, ensuring that every client engagement the solution is holistically to capture efficiencies, accelerate speed to market and reduce risk.
New developments in AI, particularly in gen AI are radically recalibrating the cost and benefits of this modernizing legacy and reducing tech debt as part of a larger set of changes in how IT operates. This is resulting in opportunities where multiple initiatives are brought under a unified transformation program leading to larger outcome driven deals with a self funded approach to transformation. This is an integral part of our savings led transformation features and platform LED constructs that we discussed over the last few quarters. As we drive our growth initiatives forward At Emphasis, we are expanding and deepening our AI LED offerings.
Instead of applying broad strategies across entire industries or regions, we focus on specific needs of individual clients, particular deals and meaningful conversations. This clarity at the micro level combined with our commitment to innovation and IP LED platforms positions us to navigate today’s challenges effectively and support our clients in successfully doing the same. As AI LED deals take center stage, we are doubling down on our proprietary nets and platforms. Emphasis Neo Zeta Emphasis Neo products Emphasis Neo Sabha to name a few from the NEO solar platforms, these solutions combine generative and agent AI to boost human performance, modernize critical systems and accelerate next gen application development for business transformation.
Through AI we are shaping forward looking views and reinforcing the value of our platform led strategy. This is clearly evident in our AI led build pipeline and GCB lines. We are early adopters and implementers of AI based solutions for clients which have positioned us well to help with their AI journey, create efficiencies, cost savings and minimize project risks while at the same time accelerating our business. This is reflected in our highest level of quarterly TCB of million US dollars of 68% is AI led. Since the launch of amphibious AI we have over 250 plus of our AI ML models available on Amazon, Microsoft and Google Marketplace.
As I said on the previous slide, clients are interested in seeing solutions and the value amperes AI brings to our end to end expertise helps organizations to strategize, build and institutionalize these solutions. The timeline of milestones and our development of AI assets which is at the bottom of this slide are all a testament to emphasis long history of AI innovation and our unique positioning to deliver innovation to clients at scale. To give you a sense of how we are making this year as an example we took on a core card platform organization for a large financial firm.
AI interventions boosted overall efficiency by greater than 40%. We took a big monolithic platform using oboe assembler VSAM in a growing mix environment in a high tech debt situation and modernized it into a composable business capability driven architecture that is cloud ready. We took a single code based platform built over 40 plus years ago with 50 million lines of code using complex Sysplex architecture and modernized into a new core design based on bind with the ISO2022 compatibility. We now found 1.4 billion accounts on file, 100 plus APIs, 25 billion authorizations processed annually, extremely low latency of less than 40 milliseconds and re engineered it into an event architecture with real time event driven streaming to replace targeted batch processing.
In a sense we crossed on bespoke implementations requiring specialized domain and intent talent into faster building of composable capabilities and value streams using modern engineering platforms. On the back of this program approach and yearly delivery. This has been one of our fastest growing relationships with the company and has already crossed 50 million annual revenue threshold. Since the launch of MTUS AI our pipeline has grown 2.2x. We currently have the largest ever deal pipeline driven by these platforms as well as the largest MITC event in this quarter led by large deals As I previously mentioned, AI stable stakes for us, whether it is for new deals that are AI led or AI infused, existing clients or even for our own employee productivity.
The solution what we call the emphasis AI super highway which accelerates enterprise AI enablement and adoption of AI at scale, securely delivering models from experimentation to production with organization route edits. This enables 50 to 60% faster time to market, up to 90% accuracy rates and 50% increase in productivity at times. MPhys AI support highway comprises of prefabricated AI strategies, methodologies and innovation lab operating models and include orchestration of cloud, data and security platforms plus our own proprietary accelerators. It delivers an agentic workforce, integrated LLMs, predictive decisions and knowledge graphs, model testing for ethics, trust extendability, security, end to end value stream observability and synthetic data creation.
It’s not a surprise that AI is supercharging the pipeline which in Q1 of FY26 was 68% led with AI deals. Gated pipeline was up 47% year over year. Non gated pipeline is up 108% year over year. Large deal pipeline is up 40% sequentially and 154% year over year. Action in new archetypes include AIOps, AI modernization. As you can see on the chart here, we also continue to see a higher share of racket deal wins as we largely stay focused on deal making. As I said earlier, TCV wins for the quarter were at 760 million USD, our highest ever new TCB wins in a quarter.
We won four large deals in Q1 for a cumulative 14 large deal wins in the last 12 months. Of the four large deals, three of them were over 100 million and one is over 50 million deals. TCV wins have been led by VFS Insurance and tmd. Our PCB to revenue conversion pace has remained steady. Customer propensity to spend budgets on cost takeout efficiency and vendor consolidation is increasing and we continue to make investments in the right areas where we expect customer demand. To give you a sense of the kind of deals we won, I’ll specifically call out one Large win.
A large North American life insurance company chose Emphasis as the sole provider to consolidate application development and application management vendors to achieve alignment to a new operating model, finite outcome based delivery, improved performance and service quality and predictable cost while driving in savings. And this is we’ll be deploying this new suite of AI platforms as part of this transaction. We have in the recent past called out the fact that AI is a great leveler, especially in areas where we did not historically see a right to win such as large run engagements. This deal is a testimony to that feature starting to play out and we expect it to repeat across multiple other deals as well.
Moving to Revenue performance by segment we continue to push for revenue growth which is anchored in our strong plant mining model and tech led offerings. Q1 26 revenue was US$437 million reflecting a growth of 1% sequential and 6.5% year over year. In constant currency terms. We had an impact of a decrease in revenue from our non strategic ATM business which is reflected in the other secondary market segment. Our direct business contribution continues to inch higher and accounted for 97% of our overall revenue for the quarter. We expect the pace of revenue and deal conversion to remain strong prepared by a salient transformation team.
Direct revenue for the quarter increased 1.6% sequentially and 8.1% year over year in Q1 in constant currency terms. Growth momentum in direct continues to be strong. Angle geography in the US grew 3.2% sequentially and 10.3% year over year in direct. EMEA region declined by 15% sequentially in constant currency terms. The impact seen in EMEA is due to a ramp down of the global customer in this region. In our rest of the world segment we grew 6.8% sequentially and 30% year over year in constant currency terms in the direct business. This metric also includes our increasing presence in the GCC play since many of these deals are structured in the India geography.
Our overall reported revenue for Q4 and and Q1 for rest of the world includes the impact of decrease in our non strategic ATM business. Any contribution from our core service line enterprise apps has increased by 2 percentage points in this quarter. We grew applications by 3.6% sequentially in constant currency terms in direct CPU and itself direct declined by 2.7 and 5.3% sequentially. Moving on to the vertical performance, our BFS Insurance and TMT verticals continue the growth momentum. Specifically in direct all three verticals delivered a 20 plus percent yy growth in constant currency terms. On overall company level, BFS has grown 6.7% sequentially and 18% YoY in Q1 while direct BFS grew 8.1% sequentially.
BFS growth was also driven largely by wallet share gains in existing accounts. Ramp up of new deals won in recent quarters including only in Q1 and continued strong execution in new account wins. As called out in our previous earning calls, our insurance vertical turned into a growth engine and is expected to continue the momentum in FY26 insurance vertical grew 20 plus percent sequentially and 27.5% y in constant currency terms. Direct PMD vertical grew by 2.4% sequentially and 20.6% year over year driven by continued deal wins and conversion from recent last deal wins to revenue. The logistics and transportation vertical was impacted by some customer specific investments.
We believe the impact from these is largely behind us and we expect this vertical to gradually recover through the remainder of the year. We have significant new deals in the pipeline across a broad set of clients in this vertical and across a broad set of sub verticals to support this growth overall. At a company portfolio level, our performance has demonstrated resilience and is in line with our expectations. Our clients to remit continues to improve across the board year over year. We’ve added one client in the 100 plus million category, two clients in the 75 million plus category, two clients in the 50 million plus category and one client in the 20 million plus categories respectively.
We successfully ramped up a couple of new accounts with transition change to 15 million plus accounts. As I stated earlier as well, in addition to multiple customer banks, the middle of the class pyramid has expanded gaining from deal wins and our team focused on next category of growth accounts on an end to end basis. Top 10 accounts grew 7.6% y o y and the next 20 accounts grew 7.4% y o y. Moving on to our quarterly financial metrics, we delivered to our philosophy of maintaining margins in a stated bank while making investments for growth. Our EBIT margin remains stable at 15.3%.
Reported operating profit for the quarter grew 0.7% sequentially and 11.2% YUI. An EPS of 23.2 represents an 8.5% YYO sequentially. There was an impact from high ATR due to certain minimum tax expenses in certain subsidiaries which we believe in normalized for the remainder of FY26. Operating cash flow generation was at $24 million for the quarter. Cash flow for the quarter was impacted by marginal delay in collection from one of our top customers due to changes in their internal systems which have since been resolved and due to the annual incentive payouts which are typical in Q1.
Adjusting for these, normalized cash flow is around $46 million for the quarter. As noted, the delay in collections has impacted our DSO which increased by nine days to 84. In summary, we have seen growth momentum through resiliency and deal wins which was led by the BFF in turns and 2020 verticals. We are also seeing ramp up from our recent flower field wins. Playing into this outcome, we focus on investing in air driven growth initiatives and as I mentioned the patterns at the record levels 16% growth sequentially and 84% growth yy pipeline. We are very pleased with the highest 73 million of 760 million USD in Q1 which included 300 million plus and 150 million plus PE and as I mentioned we also continue to deliver stable margins.
Coming to the Outlook we remain steadfast in our commitment to client centricity and technology led transformation, an approach that has consistently delivered results for us. We will continue to focus on the workflow cycle grounded in micro level execution, pursuing winning and executing at the account level while continuing to build the propositions using our tech drive and MPS AI investments. This model has been instrumental in driving momentum evident by robust yield wins and consistent execution across quarters even as the macro environment remains uncertain. As we focus on investing in AI driven growth initiatives, we continue to strengthen and expand our AIR offering and propositions.
We will continue our efforts on conversion of pipeline to TCB and TCB revenue for FY26. We expect to be at 2x industry growth on the back of our Q1 performance and steady conversion of TCP revenue as well as a steady ramp up of last year in ongoing quarters. Our target EBIT operating brand would stay within 14.95 to 15.95 as stated earlier. With this I’d like to open it up for questions.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchdown telephone. If you wish to remove yourself from the question key, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles participants. You may press Star and one to answer question. The first question is from the man of Sadh from Court of Mahindra. Please go ahead.
Sudheer Guntupalli
Thanks for the opportunity and nitin. Congrats on great dealings in Outlook. First question it looks almost like 80% of your revenue seems to have grown at 20 percentage less on an average, probably the highest growth rate in the industry on an organic basis. Now that you are calling out that in logistics and transportation also will be growth recovery going ahead. Do you think with the current very good intake order intake in this quarter, do you think we’ll have a real shot at converging with the growth rates of some of our similar sized peers where their growth rate has been significantly higher in the last couple of years compared to us.
Nitin Rakesh
I think the way I would address that is that the direction of travel is absolutely in the right direction. I think we’ve recovered the business. We’ve had some headwinds to deal with in the last couple of years. Most of them, at least as we stand today, seem to be behind us. So there’s no reason to believe that this trajectory will not continue. The only reason why we are at this point guiding to what we are guiding to is that the environment hasn’t really changed. There is still a bunch of uncertainties. There are still things that require a significant push.
But at a micro level I think we’re very pleased with where we are and as I mentioned in I think the last quarter call leading indicator of pipeline turned into a great quarter close for tcv and if that execution continues then I think we will potentially be in a better place this time next quarter. But we want to take that time to make sure that we have the same rigorous and the same outcome to drive that confidence as we go forward through the remainder of the year. Still too early in the year for us to have a definitive view on what the next three quarters will bring.
But the direction of travel is absolutely what he just mentioned.
Sudheer Guntupalli
Sure. And so while you are guiding for a growth recovery in logistics, are there any, let’s say weak spots in BFS or insurance or PMT at this stage where we are concerned that some of these macro uncertainties will push these weak spots into the page kind of a situation.
Sudheer Guntupalli
As we stand today?
Nitin Rakesh
The answer is no, we don’t see any of those weak spots and I think our approach to dealing with any headwinds has been sell our way out of that by actually creating deals using the propositions and differentiation and using that momentum to work around these issues. But as we stand, nothing is imminent.
Sudheer Guntupalli
Even sure Nitin and 760 million dollar kind of net new PCBs in first quarter almost 2x that of your run rate in the last two quarters. So is there any signs of a fatigue in terms of deal booking or given that especially these two three verticals, bfs, Insurance and Tech have been doing well in the last few quarters. Any fatigue of client spending here that you’re picking up or things are still going on strongly in these areas?
Nitin Rakesh
Sunil I think again lead indicator pipeline. We’ve broken out the pipeline by BFS, non BFS. We’ve broken out the pipeline by top 10 non top 10 and I don’t think we use the word fatigue in deal making in our lexicon because that’s just not the way we can sustain the growth. The remember when we bottomed our business in December 23rd called for BFS and TMT to lead growth. Then a couple of quarters ago we called for insurance turnaround visible and as you can see Insurance has grown 20 plus percent sequentially this quarter. Because we converted these, I think pipeline is fairly active across multiple segments including logistics, including healthcare.
So all we have to do is just diligently work. Each of these verticals operates at a different rhythm. But I would not say that we’re at a point where despite converting 760 million in the quarter, our sequential growth in pipeline is 16% which means our propensity of originating conversations, turning them into qualified deals and running them through the qualification, the solution process continues to be fairly high. So that virtual cycle of originate, solution, sell and execute something that we’re very focused on.
Sudheer Guntupalli
Sure sir. One last bookkeeping question to Arvind. So what is this other assets increase? It increased very sharply during the quarter. Any color on this?
Nitin Rakesh
Sure. So we have two, three factors coming in, right? One is that you know under IFRS 15 where you have a fixed price project where you have completed deliverable on a percentage of completion till the deliverable is accepted, it comes as contract cost. And as you know, you know you’ve seen a sharp increase in our fixed price revenue. So that is one of the big contributors for this. This will get translated to unbuild, you know, as soon as the deliverable happens.
Sudheer Guntupalli
Most of these are completed projects and we expect that to move to unbuild in in Q2.
Nitin Rakesh
The second element is some of the large deals requires savings to be kind of given upfront which ends up being a contract acquisition cost. You’ve seen the kind of PCBs that we declared in this quarter. So that has kind of come in. But there is not a similar level of cash out source.
Aravind Viswanathan
If you really look at it you would see the other liabilities also go up because it’s more a balance sheet.
Aravind Viswanathan
Item in that sense both from an asset standpoint as well as the liability standpoint.
Sudheer Guntupalli
Yeah, thanks. Thanks Arvind. All the very best.
Aravind Viswanathan
Thanks Vid.
operator
Thank you very much. A request to all the participants. Kindly restrict to one question per participant and one follow up question. The next question is from the line of Nitin Padmanabhan from Investec India. Please go ahead.
Nitin Padmanabhan
Yeah, hi, good morning. Congrats on a solid quarter. It looks like a very tightly executed quarter because. And quite impressive at that because if you look at EMEA has sort of declined. We have had the top customer decline wherever the ATM business has declined and still we sort of delivered this solid growth. Just if you could just contextualize the growth that we saw in both BFS and insurance. All of these are just closures of the earlier wins or they were something that incrementally came through the quarter which surprised positively and just as a follow up is from a deal win perspective overall, I know you said this in different bits and bits over the quarters.
What’s driving this change for us structurally, wherein our deal wins are extremely solid, our pipeline still continues to grow. So from an organizational perspective, if you could just quickly summarize the changes that you made that’s sort of really driving this in a quick short summary would be very helpful.
Aravind Viswanathan
Both great questions on the first one. I think as I mentioned in my script, it was expected that we should be able to mitigate any headwinds because we saw the momentum of closures even in Q4 early in Q1 and some of that significantly played into the conversion of revenue. Now every deal is not the same. Some deals convert quicker than the others. If there’s an element of large scale transition, you will see that deal will have some element of one to two quarters of conversion. If there is an element of taking over an existing asset that is a set of applications that move to you as a provider or you consolidate a bunch of providers out, then the revenue impact is much bigger.
So I think that’s played into the revenue impact that you’ve seen in all the three verticals that grew more than 20% wider. The only correction I want to make to your comment is that the large client decline and EMEA decline are actually linked. That’s really what’s driving the EMEA because we classify GEOs by origin of contract, so it could be a global customer, but if there is a bunch of work that we do for them out of Europe, it will go under emea. It’s an anomaly, but from a consistency standpoint that’s just the way we continue to report the net net.
The reason we were fairly comfortable in giving you a certain outlook two months ago and all through the quarter was based on the fact that we had a visibility into the pipeline and deal conversion and we did execute it very tightly, as you rightly said through the quarter. The second question that you asked me around what’s changed and what is driving the growth? I think the reason I geeked out a little bit on this call when I explained to you what we did with the large financial services customer was to give you a peek of what kind of technical expertise is driving these kind of opportunities.
I think long are the days where clients had a need. You would meet that need through potentially a series of engagements that were in one shape or form a combination of capacity, ride shoring and even if it was a fixed price or a managed services contract, it was really P times Q plus margin pricing. Today I think we are bundling a fairly sophisticated technology solution into every proposition. This doesn’t happen overnight. It’s taken us seven or eight years using our tribes and squad constructs starting 2018, 19, infusing our next lab starting 201718 and then 2023 we announced MPUS AI.
I think they’re all coming together combined with the extreme account based focus that we’ve been talking about for many years now where we have a three in a box model at every account, we have a high touch model, a high tech model and we make sure that we have to deliver to what we commit to the customer as well. So that’s a high trust aspect of that as well. So bunch of things that we’ve done over the years, bringing them all together, making it real for the customer, solving a problem that sometimes the customer didn’t see or many times we co created or co ideated into creating the right set of problems to solve for.
So the shift left that we talked about with front to back is actually playing into our strength today. And the product that we’re making is what’s really driving a change and a differentiation. There is a certain degree of fatigue with customers where they have incumbent providers, large providers, the quote unquote tier one providers, who have really in a way started to become a lot more scaled because they haven’t kept up with the level of investment and the level of high touch and intimacy required for transformation programs. So I think it’s a. I gave you a long answer, but it’s a bunch of things that have come together.
But at heart it’s the tech depth and the ability to bundle that tech capability into a proposition that the client is valuing.
Nitin Padmanabhan
Perfect, that’s helpful. I have a lot of questions, but if I can just slip in one more from a margin perspective, I think this quarter has been pretty solid. We have had utilization more up like 400 basis points and then we also have these large deals coming through. So is it fair to assume that one should, at least from a modeling perspective, within the lower end of the band, or do you think you still have room to sort of deliver on margins as well.
Nitin Padmanabhan
You know we’ve given a range recently. Right. And largely operated in the midpoint of the range. I think there are always puts and takes.
Aravind Viswanathan
Right.
Aravind Viswanathan
We had utilization go up, but we made some investments with clients which kind of set each other off. Growth is good, but it also, you know, if you hear what Nitin talked about, you know, there are a lot of investments that we are also doing on areas which are important for growth. We built a large deal team, a lot of investment in our platforms. So I think, you know, it will be range bound. Right. Is what we think at this point of time.
Nitin Padmanabhan
Sure, fair enough. Thank you so much. And all the way.
Aravind Viswanathan
The philosophy doesn’t change. The prioritization for growth by holding margins. That’s the kind of the North Star that we’re still following. So that philosophy doesn’t change.
Nitin Padmanabhan
Got it, got it. Very helpful. Thank.
Nitin Padmanabhan
Thank you.
Nitin Padmanabhan
And all the very best.
Aravind Viswanathan
Thank you.
operator
Thank you. Next question is from Nanoprishi Jindwala from IFO Capital. Please go ahead.
Rishi Jhunjhunwala
Yeah, thanks for the opportunity. Two questions here, Nitin. Firstly, you know, on the deal pipeline, right. So we have won 760 million this quarter and still we are talking about pipeline swelling up on a QOQ basis. You know, I know we formed a large deal team and there’s been a lot of focus around that. But given where the macro is and what the other peers are suggesting in terms of deal pipeline as well as conversion, what do you think is specifically driving this significant growth for us?
Aravind Viswanathan
So Rishi, again, I think Nitin asked a very similar question. Answer is not very different except that at this point in time, for the last four to six quarters we’ve been trying to focus on individual account based activity, highly contextualized solutions while making sure that at a broad level we continue to invest in areas where we think there’s going to be broad adaptability. Things like application transformation using cloud, native tech, legacy modernization, mainframe exit, infusing AI into the way you run operations, both IT and business operations, predictive, preventive, self healing. So I think investing in broad themes that we think will cut across segments and customers, but then customizing those very highly into the account using our account CPU model, I think that level of intimacy and customized solution to the customer is very attractive.
Combine that with the fatigue that they have with some of the legacy providers, that actually makes it a very happy, fertile hunting ground for us. And the role that the large deal team has played really is in institutionalizing the process of ideation, deal origination, deal qualification, deal Positioning, pricing, price benchmarking, and then of course the deal dynamics of how you actually run the deal through a process including reactive deals. So we’ve seen an uptick in our win rate on the reactive side as well where we participate in RFPs. Because not every segment or every industry or every geography is conducive to proactive only.
You may originate, but then go to rfp. So I think it’s a culmination of all the work that we’ve done over the quarters and over the years and.
Aravind Viswanathan
We finally kind of managed to get.
Aravind Viswanathan
That virtual cycle going and we want to just keep feeding it as much as we can. And by the way, what you’re seeing in the pipeline growth is the qualified pipeline.
Rishi Jhunjhunwala
Right.
Aravind Viswanathan
We obviously have a top of the funnel pipeline that we start the deal discussions with. So I think that’s the best way for me to explain it to you. I know it’s a little bit of a qualitative answer, but our business and services, our product is trust and we are expanding that product by actually infusing platforms and repeatability and execution capability into it.
Rishi Jhunjhunwala
Got it.
Rishi Jhunjhunwala
And second question, if you look at last three, four years, right. I mean we’ve had issues around DXE, Dr. SVB and then this overhang around the logistics client. Is it safe to say that as things stand today, we do not have any major risk around any of any parts of the businesses and from here on growth would be normal and completely based on how we are executing on our overall business?
Aravind Viswanathan
Yeah, I think that’s fair to assume. I think I answered also earlier, as we stand today, we don’t see any of that. Again, that’s a point in time today. And one of the reason why, despite this kind of events, we are still focusing on executing in Q2, Q3 and Q4 is because the environment. So it’s not like there’s any tailwind in the environment at all really. We have to go and create those opportunities and run them through. And as more and more clients adopt these kind of solutions, we just have to make sure that we keep refreshing our existing contracts and engagements with them as well.
Rishi Jhunjhunwala
Got it. So I guess from next quarter onwards we don’t have to look at business X of any other country.
Aravind Viswanathan
We never looked at it that way, but we did.
Rishi Jhunjhunwala
Yeah.
Rishi Jhunjhunwala
All right, thank you. All the best.
Rishi Jhunjhunwala
I know, I know, but we don’t.
Aravind Viswanathan
Thank you.
operator
Thank you. Next question is from Naino Solar from Morgan Stanley. Please go ahead.
Unidentified Speaker
Yeah, hi. Thanks for taking my question and congrats on the strong Deal win number My first question is on the revenue conversion of these deal wins, the ramp up schedule that you expect on the deals that you won. So should we expect the best ever deal win reflecting in a strong bunched up quarter in the coming quarters or would you say that the benefit of these deals would be spread out through this year in FY26?
Aravind Viswanathan
Again, I think the. I didn’t catch your name, so excuse me for that. But the way to think about it is that it depends on the type of deal there is a nuance to Certain deals can ramp quick. Certain deals require a period before they can ramp. I think this is a fairly balanced set of deals that we won. Look at the four large deals. Not all of them will have the same trajectory of ramp up while some of them already actually contributed to Q1 as well. So it’s fair to assume that on an average 1-2-4 is a decent assumption to take for conversion from this TCB to revenue.
Unidentified Speaker
Understood. And then my second question is with respect to some of the operating metrics. So your headcount seems to be largely flat on a sequential basis and the utilization levels have sort of inched up quite a bit and which is sort of a level which we’ve not operated in the last many quarters. So in the context of the deal wins which are very strong, how should one think about the divergence between the two?
Aravind Viswanathan
So we’ve been kind of talking about the increasing divergence between headcount and revenue growth. If you look at there are a couple of shifts that have happened. One is that we’ve seen a significant shift towards compared to what used to be only tm. Your order is not coming clearly. One second. Is it better now?
operator
Yes sir. Go ahead.
Aravind Viswanathan
If you look at it like I said, this is not something that is new in terms of a divergence between revenue growth and headcount. If you’ve seen our business, we’ve seen a significant shift towards fixed price which kind of lends itself towards more productivity and ability to drive revenues with lesser headcount. Supply chain parameters are a little different than how we have historically looked at it is not a single, little more nuanced. It’s not a single strategy of just hiring pressures and you know, playing the entire pyramid in that sense. So you may have to invest in very differentiated skill sets but that may not be at scale.
And to that extent it’s a pretty dynamic approach that we take to supply chain. So I don’t think our growth will be limited from a headcount. It’s no longer a lead indicator. We will do what it takes on the supply chain to deliver what our customers need at the most efficient cost price.
Aravind Viswanathan
And I think also keeping in mind the environment from a supply standpoint, I think it’s fairly conducive for us to run this rolling 90 day plan on supply chain with certain element of internal rotation combined with just in time onboarding. I don’t think we need to run a large bench as we used to do historically because the model itself is shifting from just people based services to platform or technology new services. So that gives us a little bit more operating leverage.
Unidentified Speaker
Understood, Very clear. Thanks for taking my question.
Unidentified Speaker
Thank you.
operator
Thank you. Next question is from line of Manik Tunisia from Access Capital. Please go ahead.
Manik Taneja
I thank you for the opportunity. I actually had a question, just a transition question on the logistics segment. While you talked about expectations of recovery from here on there was some large transaction that you are chasing outside of the large customer or the top customer there. If you could talk about progress on that front. And the second question is how should we be thinking While you could w2 the change in our hiring or delivery model, but given some of the newer opportunities that we are essentially trying to target through a combination of AI and the legacy modernization fees, should we probably be thinking about our utilization rates being sustainably better compared to what we seen in the past?
Aravind Viswanathan
I think on the post one, I don’t recall that we talked about any specific deal. Normally we don’t talk about deals before they actually close. So maybe there is a little bit.
Aravind Viswanathan
Of.
Aravind Viswanathan
Confusion as to whether it was somebody else. But reality is that pipeline continues to be pretty robust and we have visibility into deals that exist in verticals including logistics and travel. Part of the reason why we believe that we will see a gradual recovery for the remainder of the year is because we think we should be able to move the needle with some of these deals that are in the pipeline and they have been for the last few months. On the second question, I think it’s fair to assume that utilization will probably be elevated compared to let’s the last three year average.
But as I mentioned earlier, it is not a control metric for us. It is actually an outcome of the actions we take on how we onboard and how we manage the supply chain. We typically don’t manage to a utilization, we manage to the visibility of demand on a rolling 90 day basis and between internal rotation reskilling, upskilling and external hiring, we try to meet the 90 day rolling basis through our supply chain teams. So again utilization is A metric that has been important for the last 25 years. But I think it’s not going to be as important.
Not that we will not have people or we will not add people but it’s just that it’s not going to be a linear correlation between utilization and revenue growth.
Manik Taneja
Sure.
Aravind Viswanathan
Thank you.
operator
Thank you. Next question is from Abhishek Gupta from Actors Mutual Fund. Please go ahead.
Abhishek Gupta
Conversations for the strong quarter. Just wanted to get clarification of the dealings. Like what were the components from the new clients or from the existing clients or While like the GCC’s part in the deal. What are the natures of these deals? Just some concepts.
Aravind Viswanathan
Actually we have called out the four deals in our press release as well and they are.
Aravind Viswanathan
Quite.
Aravind Viswanathan
Widely spread between existing customers in the top 10 category, customers that we acquired over the last two years and potentially the pipeline also is fairly widespread across bfs and non bfs as well as top 10 and non top 10. So I think it’s not one vertical, one customer or any specific item. I think it’s been an attempt for us to broad based that over the last many quarters and that’s kind of what’s playing in. But again given that bfs, TMT and insurance have led it, you can assume that you know that’s kind of being the growth driver from a dealing perspective as well and we’ll hopefully as I said expand that to other segments.
Abhishek Gupta
Got it.
Aravind Viswanathan
I think lastly like you might have answered this question but like what we saw huge uptick in the insurance vertical in this quarter.
Abhishek Gupta
So what led to that group?
Aravind Viswanathan
If you can just clarify. Sorry.
Aravind Viswanathan
No, it’s okay. Our business is very simple here. You sell more, you build more, you build more, you blow more. So we sold more deals and we managed to convert them to revenue over the last three months and I think we have a lot more in the pipeline that we continue to focus on closing in that segment as well. Both combination of existing clients giving us a large deal as well as new logos have been signed which again give us the confidence that we will see some more growth in the coming quarters. And of course the quantum of growth on a sequential basis may not look as much because now we already have a new baseline for Q1.
Abhishek Gupta
Thank you so much.
operator
Thank you. Next question is from line of Sandeep Shah from Ecoreys Securities. Please go ahead.
Sandeep Shah
Thanks thanks for the opportunity and congratulations on a great execution especially on deal wins consistently. The first question is on the logistics sector. I think within your initial remarks indicated we have made some investment in Few top clients within this segment. So that could have resulted into a gross margin decline in this sector versus gross margin improvement in the others. So just wanted to understand with this investment, we believe the worst in this segment and our top client is behind not just in the near to medium term, but beyond one to two years in terms of longer term outlook.
Aravind Viswanathan
I think again I broadly answered it. Fortunately or unfortunately, long term is very difficult to call given just the dynamic nature of the environment and every customer going through their own journey of change and transformation. But I think it’s fair to assume that bulk of the impact is behind us. And I think your assumption around gross margin and investment is is fairly concise and reflective of what the status is. So again we take it quarter by quarter. We’ll continue to operate in every account with a view that we should be able to grow, create those opportunities that are talked about in terms of adding value and showing the value to those customers.
And that approach doesn’t change for this vertical and all flat in the segment.
Sandeep Shah
Okay, and just a question in terms of your outlook growing 2x the industry. So if I look at the large peers, they may be growing at 3 to 4% and for us the kind of deal Wins to go to 7.8percent we just require 1.8 to 2.2% compounded Q on Q. So that number looks conservative looking at the deal wins or you believe the deal wins will have a greater impact next year rather than this year because it may take some time to transition. And Arvind just wanted to understand in the margin, despite the gross margin decline being massive in the logistics, margin has been stable.
So is there any one off which we should be aware? And there are some investments which we highlighted on the 3rd of July as per the notes to the accounts. Can you brief the nature of these investments?
Nitin Rakesh
Let me take the first one which is your question around CQGR growth. Again, I think we’re just trying to make sure that the fact that we had to thread a needle this quarter and have pretty tight execution, we just want to make sure that we continue to find ways to keep that execution up, especially in an environment where things change on a daily basis. So as this visibility improves over the next quarter or two quarters, you will get a pretty good idea of how this ramp up is happening. But it’s also fair to assume that not every deal will convert very quickly just because some of those will require setup time, transition time, ramp up time.
So we’re just baking all of that in an environment where most of our peers are seeing pressure either on top line or on bottom line or on both as well as you know, the decision times. We just want to make sure that we don’t go out on a limb, you know, and try to be brave. We just want to make sure that we continue to execute and as execution led visibility improves you will see that on the margin and other questions on Arvind.
Aravind Viswanathan
So Sandeep, we’ve seen a drop in gross margin at the logistics level but we’ve also seen, you know, improvements in every other vertical in many ways. So one of the things that has happened is while there has been some kind of investment in the vertical, we’ve been able to on the back of growth kind of use our internal talents to fulfill a lot of the project based growth.
Aravind Viswanathan
Right.
Aravind Viswanathan
So effectively you’ve been able to offset that impact to better utilization interest of the BU’s. And given that some of those has come in as a whole, you’ve seen higher revenue at marginally higher cost which means margins are effectively flat. There is no one time in nature. There is no reversal of sort which is other than the usual anomalies that happen but not meaningful at a collective level.
Sandeep Shah
Okay, and does the investment on 3 July? Those are small but just wanted to understand the nature.
Vinay Kalingara
So you know, so that is a investment of a capital nature. It’s not. It is not a PNDL kind of investment. What we’ve done.
Nitin Rakesh
Let me take that one. So I think we made a strategic investment in a venture called IOKA which is essentially GTC advisory firm being set up by the ex founder of the NEO Group. He still is a shareholder in the NEO Group but they’ve decided to set up a separate venture to advise enterprises in the global GTC space. We made a minority investment. We put in $4 million for our 24% stakeholder with the view that 26% stake. Sorry, my bad. With the view that we will essentially have an opportunity to shift left in helping shape deals as clients start thinking about GCCs and the various shapes and forms that it takes.
That is not a business that we think will fit well if it was within emphasis. So we decided to take a strategic investment approach and use that opportunity to create new plan engagements not just in GCC advisory but then in the follow up execution of those needs as well. So that I think we made a detailed press release on that earlier today. You should be able to find more details in the press release.
Aravind Viswanathan
And there was a second investment in locate software. So is it m a small M&A.
Aravind Viswanathan
So that is one of the other consolidation deals, Sandeep, that we’ve done as a customer.
Aravind Viswanathan
It’s a very small deal.
Sandeep Shah
Right?
Aravind Viswanathan
It’s not an acquisition.
Aravind Viswanathan
It’s not an acquisition. It’s basically, you know, a vendor consolidation initiative where we have taken over the people and the contract has been given by the customer to us. So of course the accounting treatment and the disclosure follows an M and D accounting. But this is typically we don’t take over an entity. We have not even rebadging. We are hiring people and the contract comes with the customer and there is a contingent consideration for the person who used to run that business. And therefore it takes the nature of M and A quantity. We know goodwill, it all flows to the P and then the deal economics factors this cost which gets amortized and meets the margin threshold.
So it’s something that we’ve done in the past and it’s one more of that.
Sandeep Shah
Thanks, thanks. Congratulations again and all the best.
Sandeep Shah
Thank you.
operator
Thank you. A request to all the participants. Kindly listen to one question per participant and join the chosen for a follow up. The next question is from the end of Kavaljit Saluja from Codex Securities. Please go ahead.
Kavaljit Saluja
Hey, congrats on Fantastic. My question is for Arvind. Arvind, you know, is the 12 billion rupee increase in the current quarter in other assets entirely deferred contract costs? So like I told Kamal, there is a split between what I would call will go into an unbilled revenue, right? Because it is, it is, it is unbilled revenue of the fixed price projects which goes into contract cost right now. And the rest of it would be a combination of some of the investments we made on building IP as well as contract.
Kavaljit Saluja
And again, what will be your receivables.
Kavaljit Saluja
If you include the contract costs as.
Kavaljit Saluja
Well for the quarter?
Aravind Viswanathan
The only point I will make with respect to that cover is there is also a liability against it because these are accounted but not paid.
Aravind Viswanathan
So let’s take on a net basis.
Aravind Viswanathan
It doesn’t change to be honest, because you will see the same kind of increase on the liability side with respect to contract acquisition.
Aravind Viswanathan
And the third thing is Arvind, there.
Aravind Viswanathan
Is a massive increase in contract other assets in the non current part which means that there are certain fixed price contracts in which, you know, maybe it will remain unbaid or remaining contract assets.
Aravind Viswanathan
For more than 12 months.
Kavaljit Saluja
So what’s the nature of engagement which is causing such a big shift on a 1/4 basis? So typically the fixed price unbilled, that I talked about that comes in the current assets. Typically a contract acquisition cost comes in non current assets. So these are deal savings which get spread over the term of the deal and therefore that gets into non current. The fixed price kind of example is more the contract costs are not big contract acquisition cost. So the nomenclature is a little similar. Both come in a But what was in non current is more what is the amount that will get recovered over the deal value as a contract equation cost.
The other one will be more on.
Kavaljit Saluja
The current side, right?
Aravind Viswanathan
And the other financial as it is just the other part of the what I would say revenue in which there are unknown banned, et cetera, lying in presumably. Is that correct?
Aravind Viswanathan
Yes.
Kavaljit Saluja
Okay, fantastic. Thank you so much and congrats once.
Kavaljit Saluja
Again on great deal. Thanks.
operator
Thank you very much, ladies and gentlemen. We will take that as a last question. I now hand the questions over to Mr. Nishin Rakesh for closing comments.
Nitin Rakesh
Thank you again for another interactive call and your interest in Amazon. We really appreciate the early login and we do believe that we had a good start to the year and that sets the stage for the year ahead. Our achievements are a direct result of the dedication and talent of our incredible employees and leadership team and the continued trust of our clients and shareholders. I’m deeply grateful for their unwavering commitment to excellence. Thank you again and we look forward to talking to you next quarter.
operator
Thank you very much. On behalf of Emphasis limited we conclude this conference. If you have any further questions, please reach out to the Emphasis investor relations@investor.relationsphysis.com thank you for joining us and you may now disconnect your lines. Thank you.