Mphasis Ltd (NSE: MPHASIS) Q3 2026 Earnings Call dated Jan. 22, 2026
Corporate Participants:
Nitin Rakesh — Chief Executive Officer and Managing Director
Aravind Viswanathan — Chief Financial Officer
Analysts:
Nitin Padmanabhan — Analyst
Sulabh Govila — Analyst
Sudheer Guntupalli — Analyst
Vibhor Singhal — Analyst
Sandeep Shah — Analyst
Manik Taneja — Analyst
Girish Pai — Analyst
Rahul Jain — Analyst
Presentation:
operator
And thanks for joining the Emphasis Q3 FY 2026 earnings conference call. I am Dobbin, your moderator for the day. We have with us today Mr. Nitin Rakesh, CEO of Mphasis, Mr. Arvind Vishwanathan, CFO and Mr. Vinay Kalingara, head of Investor Relations. As a reminder, there is a webcast link in the call invite mail that the Emphasis Management team will be referring to today. The same presentation is also available on The Emphasis website www.emphasis.com in the Investor section under Financial and Filing as well as on both the BSE and NSE 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 this conference call, please signal an operator by pressing STAR and then zero on your touchtone 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 certain risks and uncertainties. A detailed statement in this regard is available on the Q3 website release.
Sorry, that’s the Q3 results release that was sent out to all of you earlier. I now hand the floor over to Mr. Nitin Rakesh 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. Thanks everyone for joining the call this evening. Hope you all had a great start to the new year. The past year has been an interesting one, especially in light of the multiple changes in the environment as well as some exciting developments in the technological landscape. With AI leading the way with the new tech stack under deployment, the nature of technological shifts underscore that every business is looking for opportunities not only to get higher efficiency using AI, but more importantly to reimagine the entire business model to stay relevant to their end customers. Clients are recalibrating the classic managed services constructs as outcomes for plans to become more important than effort based services.
Tech orchestration takes over early solution design and digital AI agents augmenting human workers becoming the norm. While seemingly disruptive, this also brings about one of the most exciting growth opportunities of our generation, especially for companies such as ours. Size and scale is no longer a disproportionate asset for our competitors. Technical competence and the ability to provide solutions that align with client outcomes using the blend of software, for example, AI agents and services which are people based, become the key differentiator we are seeing this duality playing out. While there is deflation of traditional people based service models, there’s an extremely healthy appetite for AI led tech solutions and AI efficiencies.
While there is strong desire to undertake significant estate reduction and rationalize service partners, there is an extreme focus on bringing in partners to build the AI stack, establish governance and guardrails while doing so. While some clients already running pilots and agentic AI, others have progressed to scale deployments. The need of the Hour is a platform approach that orchestrates multiple AI capabilities across the entire enterprise IT value chain from organization and deployment to operations, observability and governance underpinned by a living breathing layer of connected enterprise understanding that unifies data systems and processes to proactively optimize, modernize and transform business and IT operations.
What we are seeing is AI adoption, capability and value creation happening simultaneously. To address this opportunity, we built and launched a flagship market leading AI platform Emphasis Neo IP that is capable of all this at scale. Before we go to how new IP is getting traction, let’s take a moment to reintroduce Emphasis Neo ip our AI intelligence platform integrating multiple emphasis AI solutions. NEO IP enables organizations to continuously evolve rather than engage in a one time transformation program by making enterprise knowledge machine understandable, automate complex decisions, predictions and prevents issues before they occur and drive sustained innovation.
Empower CIOs and business leaders shift left embedding intelligence early in the software and operations life cycles to create self healing resource efficient systems that learn and improve over time and finally integrate evergreen business intelligence with AI assisted implementation fostering continuous learning and evolution with every subsequent initiative. The platform creates a connected data centric environment where AI and human teams collaborate to plan, build and manage transformation. New IP includes solutions across the relearn to build to run value chain of IT services to name a few. Emphasis Neo Zeta helps organizations overcome challenges of modernization through full transparency of the relearning process and creation of a complex comprehensive knowledge graph that constantly evolves throughout the lifetime of client’s journey.
Emphasis Neo Sabha for agile AI agents that for quality product driven definition and user story elaboration. Emphasis neorana for discovery and creation of targeted architectures neocrs for orchestration of AI driven code generation and quality Automation and Emphasis AIOps for Integrated Operations including proactive incident prediction, root cause analysis and self healing automation based on deep system observability. The entire new IP suite is supported by business operations, engineering and governance agents and are also supported by Onto Sphere which creates the critical enterprise intelligence encoded with contextual knowledge based on domain ontologies emphasis New IP has accelerated record deal wins along with record pipeline appeals for u s.
New IP is designed to help enterprises start anywhere and scale everywhere. Whether a client begins by modernizing legacy estates, transforming IT operations, scaling cloud and infrastructure, accelerating application development, or rewiring core business operations, every entry point intentionally converges onto a unified agentic fabric. This is what allows NEO IP to accelerate and expand enterprise value rather than creating isolated point solutions. Three core principles differentiate NEO IP start anywhere converge on one fabric. Clients can begin with their most urgent need IT operations, application development, cloud transformation or any other such burning platforms and seamlessly expand into a connected enterprise wide agentic estate without replatforming.
Second enterprise knowledge as a foundation onto sphere engine encodes institutional knowledge, enabling agents to operate with deep context, not just prompts. This drives precision, consistency and trust at scale and third plug and play within the ecosystem. NEO IP is architected for interoperability with hyperscalers like aws, Azure and gcp, with AI infrastructure partners including Nvidia, and with existing enterprise applications and partner ecosystems. We’re already seeing this play out in the market quite nicely. Whether it’s a large financial services institution, a global insurer, multinational investment firm, clients begin from very different entry points, yet all expand towards the same unified fabric and as they do, the platform naturally becomes more sticky, increases wallet share and enhances margin leverage.
With NEO ip, enterprise don’t have to choose the right starting point, they simply start and every path leads to scalable connected solution, all the while compounding value. New IP is supersizing deals and we are seeing good customer penetration across existing customers and prospects to give you a sense of traction. Our customer said leveraging the new IP platform represents clients that contribute more than 50% of our company revenue. It’s been 12 months since we first spoke about how the AI thesis is playing out, especially in helping expand the total addressable market for emphasis primarily through these four drivers.
We want to give you some concrete indicators of our traction on our agentic platform based approach. Our LTM PCB has doubled in the last four quarters. Our modernization pipeline which was the first AI archetype out of the gate, is still one of our key archetypes. Up 4x our large deal pipeline has been supersized and climbed 2x. In summary, pipeline differentiation and hence TCB all speak to the efficacy of our platform, especially driving this to some of our top clients in the ecosystem. Since the launch of MPHS, AI pipeline has grown 2.5x we currently have the largest ever deal pipeline and have strong PCB wins in this quarter as well, led by large deals.
Despite strong TCV conversions over the last three quarters, we continue to add deals to the pipeline which is now 69% AI led. It is no surprise that AI is supercharging the pipeline which has grown 66% year over year. BFS pipeline is up 98% yy and non BFS pipeline up 44% y large deal pipeline is up 91% year over year. AI led modernization continues to be a big theme as you can see on the chart. The strong growth in the pipeline provides further visibility to sustaining our momentum in deal wins. We continue to see high share of proactive deal wins as we stay largely focused on deal making infusing a new IP platform into opportunities net new TC weapons for the quarter were at $428 million.
We won four large deals in Q3 and of the four large deals two were over 50 million dollar deals. On the back of our ALR propositions, our LTM PCB has doubled and now stands at $2.1 billion. A TCV to revenue conversion pace has remained steady as well. Moving to performance by segment, we continue to push for revenue growth which is anchored in our strong client mining model and tech led offerings. Q3 FY26 revenue came in at US$451 million with an annualized run rate of 1.8 billion plus. Despite seasonality effect, revenues grew 1.5% sequentially and 7.4% year over year.
In constant currency terms, our direct business contributed approximately 98% of overall revenue for the quarter. We expect the pace of revenue and real conversion to remain strong propelled by the savings rate Transformation team. Growth momentum in direct remains strong as well. Direct revenue for the quarter increased 1.9% sequentially and 9.6% year over year in Q3. In constant currency terms, our anchor geography, the US grew 1.4% sequentially and 10.8% yy indirect driven by ramp ups in large deal recent large deals Growth momentum continues in the EMEA region with a sequential growth of 3.9% in constant currency in Q3 FY26 rest of the world grew 5% sequentially and 17.4% year over year in constant currency terms of the direct business.
This growth is partly driven by increasing presence in the GCC ecosystem with some of the deals with global accounts being structured in the India geography. We are pleased to note that all geographies contributed to strong sequential growth this quarter. Our core service line enterprise apps now contributes to 75% of overall revenues and has increased by 3.7% sequentially this quarter. Direct apps growth is driven by AL modernization deals. ITO service line for direct also delivered y growth of 9% in CC terms led by ramp up of deals that have integrated build plus run components. Moving to our vertical performance, BFS and insurance verticals continue the growth momentum.
At an overall company level, bfs has grown 14.8% year over year. Overall Y growth for BFS was impacted by the ramp down of our ATM business in India. Direct BFS grew 2.5% sequentially and 18% year over year largely driven by wallet share gains in existing accounts and continued strong education in new accounts. Insurance vertical continues the growth momentum with yy growth of 36%. The vertical grew 8.1% sequentially and 36.6% yy in constant currency terms combined. Our BFSR vertical performance was a strong 3.7% sequential growth and contributed to 66% of revenue. TMT vertical sequential performance was impacted by seasonality but still registered a strong year over year growth of 20 plus percent in underwrite business.
At a portfolio level, our performance is in line with our expectations. Our client pyramid continues to improve especially across the middle of the pyramid. On a YOY basis we’ve added one client in 100 million plus cat bucket, one client in 75 million plus bucket, three clients in 50 million plus bucket and three clients in 20 million plus categories respectively respectively. Our client pyramid improvement is driven by volunteer gains in existing accounts led by a strong account mining approach and large deal wins and successful ramp ups in neocons as well. On an ATM basis our top 10 accounts grew 11.8% YUI and the next 20 accounts grew 13.5% YOY.
Top 10 accounts grew 3% sequentially in the next 20. Accounts grew 5.7% sequentially in Q3 FY26 last quarter our top client sequential growth was better than the company average. In the current quarter as well the top client sequential growth is better than the company average. We are not seeing any air deflation impact due to our positioning as a transformation partner leveraging our new IP platform which is helping us participate even more in the customer spends than we did in the past. Moving to our quarterly financial metrics, we delivered to our philosophy of maintaining margins in a stated bank while making investments for growth.
EBIT margin remains stable at 15.2%. Operating profit for the quarter grew 2.2% sequentially, an 11.6% YoY to INR 6089 million rupees in Q3 FY26 our Pinal includes an exceptional item of INR 355 million as a result of changes in the labor laws excluding the impact of exceptional item EPS through 9% YoY to rupees 24.6. Operating cash flow generation for post 43 million US dollars for the quarter in FY20 in Q3FY26DSO for the quarter was 91 days, an increase of 2 days QQ. This increase is primarily due to unbilled receivables pertaining to milestone contracts and as highlighted over the past quarters, it is very much controlled and planned to align with deal constructs.
Since we have seen large corresponding TCB win in PCB win growth rates, we expect DSRO trend progressively down over the course of 2026 calendar year. In summary, we had good growth momentum in Q3 driven by conversion of our strong dealings to revenue. We achieved growth of 1.5% sequentially and 7.4% YoY in CC terms while direct business grew 1.9% and 9.6% Y. Growth was led by BFS and insurance verticals supported by a steady ramp up of large deal wins from the recent quarters. VFS grew 2.5% sequentially, Insurance Group 8% sequentially and the combined BFSR vertical grew 3.7% sequentially in CC terms.
We also had strong sequential growth across all our geographies. Pipeline is at record levels with 66% growth IOI of which 69% is AI led pipeline reflecting the strong interest in our new IP platform offerings despite large conversions. Large deals pipeline is up significantly at 91% YY further providing us Runway for future deal activity and growth. We had strong net new TCV wins of US$428 million including four large deals, two of which are 50 million plus LTM. PCB at $2.1 billion also gives us strong track record to build up. We maintained our margin discipline within the stated band while investing for growth.
We will continue our sustained steady conversion of pipeline to TCB and TCP to revenue. We expect to be greater than 2x of industry growth on the back of our last nine months performance and the strong direct correlation between TCB and revenue that’s been building back up. We will continue our ramp up of large deals in the upcoming quarters and as such we are maintaining a rabbit margin within the band of 14.75 to 15.75. With that, let’s open it up for questions. Moderate.
Questions and Answers:
operator
Ladies and gentlemen, you may press star and 1. If you wish to ask questions you may press star and 2, if you wish to withdraw yourself from the question queue, our first question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Nitin Padmanabhan
Good evening, wishing you a very happy new year and congrats on a strong sense. I had three questions. The first is in the deals that we execute with a combination of humans plus agents, do you believe margins can be higher? And when you think about this longer term, do you think competition eats that away or that sort of sustained? So that that’s the first maybe hypothetical concept questions. The second is, you know, considering the strong deal wins and the ramp up of those deal wins that need to happen and the recovery from furloughs, do you think that Q4 could be the strongest sequential quarter for the year? And finally, just a question on why is the debt sort of consistently increasing? So that’s the final. Yeah, thank you.
Nitin Rakesh
Sure, Nathan, thank you for that. I’ll take the first two questions and Arvind will answer the third one. If I understood correctly, your first question was that if you have seen deals being infused with AI, do we have room for margin expansion? Is that correct?
Nitin Padmanabhan
Yeah, in the context of humans plus agents and yes, in that context, yes.
Nitin Rakesh
Got it, got it, got it. So I think the short answer is it definitely provides us some operating leverage as we start infusing agentic approach into the deal because what we’re really doing is eliminating a bunch of human effort and crashing down not just the effort but also the timeline complexity and the accuracy rates are helping with that. So the approach will definitely mean that we have operating leverage. But more importantly, what we’re doing today is using that approach to unlock deals that probably were so far either too complex for customers to undertake or too prohibitive from a budget standpoint.
As we create enough proof points and lighthouse programs, our confidence and our ability to drive forward a rapid deployment will actually help. I think in some archetypes, especially around modernization, we have a very clear idea of what the value capture path is and can we move from the way we used to price these to a different model where technique, you know, theoretically we have the ability to price them better. And, and we are seeing that play out already in a few deal archetypes. But I think it’s a little bit early to, to see that across all archetypes.
But that’s the direction of travel for sure. Now the next question from that will be, you know, do we, how much of that do we give back to the customer? How much of that do we keep? I think that’s a, that’s a, that’s a never ending debate. But reality being if you have enough value being created there’s definitely going to be some that you will be able to keep back into your own P and L and then you can choose to either take it in the P and L or continue to invest. So far we’ve been whatever leverage we are getting we are investing it back in, in the buildup of the platform.
But I think at some point we’ll have enough critical mass and, and scale and proof points to be able to drive this in the direction I just talked about. The second question was around based on the deal wins, you know, will Q4 be the strongest sequential growth quarter? I think directionally it seems like the answer is yes because you know we, if you remember the guidance we did last quarter was greater than 2x and if we trend towards that simple math will indicate for this to be the strongest, you know, growth quarter for financial year 26. Arvind, maybe you can answer the third one on that.
Aravind Viswanathan
So Nitin, if you look at right while borrowing has gone up, you know the cross cash balance has also gone up. The reason we do borrowing is more in terms of mismatch in cash flow between the, between the geographies and we had a couple of payouts from an acquisition purchase consideration which was deferred came through in this quarter and we used temporary financing, short term borrowing to do that rather than send money from India given the arbitrage of interest rates. Visavi what you earn in India Visavi the borrowing cost. So that’s, that’s the only reason for the borrowing and it will keep moving up and down. We’ve seen kind of similar levels 4/4 or 6/4 back. We keep coming down and up. So that’s what I would say. It’s not a, it’s not a trend per se.
Nitin Padmanabhan
Oh perfect. That’s very helpful. Thank you so much. And on the very best. Thank you.
operator
Thank you. Our next question is from the line of Sulab Govila from Morgan Stanley. Please go ahead.
Sulabh Govila
Yeah, hi, thanks for taking my question. Am I audible?
Nitin Rakesh
Yes sir, you are audible. You may proceed.
Sulabh Govila
Yeah, yeah. So I have three questions so maybe, maybe I’ll list them out together. So the first is that in this particular quarter just wanted to understand that from your own expectations perspective, how did this quarter pan out versus what would you have thought at the start of the quarter? I just wanted to understand if there were, you know, any surprises that you witnessed during the quarter. And the second is that with respect to the top 10 client bucket. Is there any particular sub segment or any client situation where one should expect any sort of volatility in the coming quarters? So just wanted to check that. And the third bit is the increase in headcount on the BPO front that you saw. Should one expect any near term tailwind because of that?
Nitin Rakesh
Sure. Philip. I think the question around did Q3 pan out as expected? I think if that’s related to the fact that was seasonality in line with expectations, the answer is yes. Other than that, I think every quarter there are some surprises. As you know, this is, this is, you know, managing a business will always have meaning to manage things, but from a seasonality perspective it panned out exactly, you know, pretty much the way we thought it was going to pan out. So as such there’s nothing to call out in. In Q3 again, we are pleased with the fact that following up on two very strong PCB quarters, we had another above average TCB quarter compared to our historical averages.
So I think we’re pretty happy with that on the client sub segments at this point. As I mentioned in the last quarter call as well, we are not seeing any, any, any significant or even, you know, apparent reasons to call out a sub segment that may be in stress or a segment or a client that may be in stress. There are no known headwinds at this point in time, which is why you’re seeing all the categories of top 10 and next 20 both on a QQ and a YY basis, actually delivering good growth across all geographies as well.
So I think we feel good about the position we’ve built with our top 2530 customers. And that is reflecting again in the client pyramid which has moved quite well in the last two quarters and that’s showing up in, in both YY numbers and sequential numbers in terms of the buckets that clients are progressing through. The third one around headcount increase again, I think the, we indicated that we are starting to see some life of activity, especially with the interested environment. So that’s one part of the segment in the, in the BPO headcount where we have seen some increase and inflow.
We also now, you know, talked about a deal that came out of an existing customer where we are actually setting up a mortgage origination unit linked very much to an agentic AI approach. Let’s kind of think of that as a first lighthouse client for an agent based origination platform that we are launching and as we ramp that up across other customers, we’ll probably see additional benefits. But I think the Environment has been stable, a little bit more work to be done to see through tailwinds, but there’s definitely upside risk if those tailwinds appear. But we’re just making sure that we have the pipelines available to be able to actually capture that demand because we are seeing that indications coming through.
Sulabh Govila
Understood. So thanks for taking my question.
operator
Thank you. Our next question is from the line of Sudhir Guntapalli from Kotak Mahindra Asset Management company. Please go ahead.
Sudheer Guntupalli
Hi Nitin, thanks for the opportunity. My first question is any kinds of change or improvement you are seeing in the discretionary spending side with the short cycle projects and all?
Nitin Rakesh
Sure Sudhir, I think again over the last couple of quarters, maybe, maybe a year I’ve actually said that discretionary spend as we knew it is unlikely to come back in the same shape and form. Where we are seeing spends today is for the, you know, first and foremost. Again it’s too early. But within three weeks into the, into the new year it is very apparent that spends are going to be stable to slightly up this year. I don’t think any clients in a mode that they will, they will see a reduction in total spends. What is also clear is there is going to be a reproduction of spends because they have to free up money in investing in the AI fabric whether it is stack, whether it is migration to the stack, deploying new agents, software spends.
So I think there is new spend available, there is money being spent on new build up of the new stack. If you’re aligned to that, to capturing that spend, you will see net new spends available to you as a provider. On the other hand, if you’re on the other side of the trend where you are actually going to lose more than you will gain because efficiency will lead into a lot of the, the you know, work that you do for that customer, then it’s going to be a difficult situation. In that case you will have to find a way to get behind where the spends are moving.
So I think the discretionary spend question is a little bit more advanced at this stage given just the phase of early phase of deployment of the AI stack and fabric and extreme focus on driving efficiency using AI while they build up the stack and start spending money on the other side of the house. So again, based on our numbers and our deal flow, you can clearly see that we are actually gaining more whether it is consolidation, driving Large deals through ADMs, infrastructure transformation, operations transformation, modernizations and so on. So I think it’s a very interesting time and we are very pleased with the fact that we’ve been able to use this as an opportunity to play the challenger role and open up areas where we were not competitive earlier because of price or scale or size.
Sudheer Guntupalli
And secondly on bfsi, impressive to see very strong performance despite this being the most impacted quarter. So your deal ramp ups that you are expecting over H2, is there any pull forward impact into the December quarter or it was panning out as expected earlier. So there will be some push up in BayernC in terms of BFSI deal ramp ups in Q4 as well.
Nitin Rakesh
So Sudhir, it’s very difficult to kind of look at every quarter and have a straight line. For example, last quarter I think some of you had a question around the fact that BFS didn’t grow sequentially but remember it was growing so strongly for the past few quarters. So I think the direction of travel is very clear. We are very confident with based on the pipelines that we will definitely this be the, this will definitely be the one of the leading growth verticals for us both across banking and insurance. But given just the pipeline and the flow I think we feel good about where we are. As such there was no pull forward or anything to call out. I think we are just executing the order book and busy, busy in converting the existing pipeline into deal. So we’ll just continue to focus on that. So as such, based on the question I answered earlier around Q4, I think you can see from there that we are expecting a pretty stable outlook in terms of the direction.
Sudheer Guntupalli
This last bookkeeping question from my end. Possible to call out the impacts of furloughs this quarter.
Nitin Rakesh
I think it’s best we don’t call out the exact impact because I think then the risk will risk the assumption that if the furlough was X then it’ll be, you know, added back to the line as is because that’s. But that’s not how the reality works. I think we’ll have to just manage it. We’ll have to just make sure that we are able to maximize whatever opportunity we have in Q4.
Sudheer Guntupalli
Thank you and all the very best.
operator
Thank you. Our next question is from the line of Vibor Singhal from Nuvama Equities. Please go ahead.
Vibhor Singhal
Yeah, hi, thanks for taking my question and congrats on a very solid performance in our season. So Nitin, I got two questions for you and then we want to follow up for Arvind. So I think over the past, let’s say 3, 4/4 of our GFSI vertical has stood very tall despite let’s Say some hiccups in other verticals. I know your presentation mentions that we’ve been winning a lot of basically wallet share gains and also new wealth and accounts. But in the vertical as such, over the past, let’s say two to three quarters, have you seen any change in the industry dynamics in terms of, let’s say the demand picking up, any green shoots in terms of, let’s say more of the stationary spend coming back? Any specific call out on regulatory spends maybe going up in either banking or insurance vertical which could help us sustain this growth momentum in the coming quarters, apart from of course the deals that we have, but which could maybe further this momentum in terms of dividends as well as revenue growth. And after that, if you can ask that, I’ll follow up after that.
Nitin Rakesh
Yeah, nothing. That’s a fair question. So it’s fair to say that we were probably the first ones to call out growth in bfs. Actually almost six or seven quarters ago we called for a bottoming in that business once we saw the macro environment getting stable. And then of course in the last four or five quarters we’ve seen some strong growth coming out of BFS and now insurance in the last couple of quarters. Two things have happened there once. One is in general the banks and financial institutions have been in a pretty strong earnings environment in the US especially even in Europe as well because the NIMs were so high that they were actually sitting on record spreads.
So that at least kept the, you know, at a macro level, kept a lot of the, you know, short term cost cutting pressures away. Of course they were very diligent with the spend. So it’s not like there was the spending, you know, faucet was on. And second, the regulatory environment and the deal making environment has been pretty strong in the last 12 months and is expected to be strong this year as well. Whether it is MNA activity, IPO activity and that has a direct impact on, on bank earnings and in just a regulatory environment. Third, banks in general are early adopters of all new tech trends and we are starting to see some significant programs, some significant numbers being outlayed.
Some of them are coming from internally repurposed trends and some of them are obviously additional investments that the banks are going to make in creating a bank wide AI fabric or adopting capabilities across the value chain. So I think think it’s a little bit of a, of a nice complement of things that have happened in the banking space and has been a good space to play in over the last, you know, 12, 18 months. And positioning wise, you know, having the, the engineering positioning, having the ability to drive some of these solutions around transformation has definitely helped us gain, I would say a disproportionate share as this spending has recovered and we still see room for that as we go forward.
Insurance is a little bit different in advance depending on what segment of insurance. But life and annuities for example is very interestingly poised because there is going to be a tremendous amount of effort on integrating the distribution with the wealth distribution. So, so that overlap starting to play out quite nicely. PNC I think has had a little bit more of a trouble because of the high claim ratios. So efficiency is number one in focus there. And then of course European insurance business has done well as well purely based on the, on the power of a proposition. So we feel good about that segment in general as well.
Vibhor Singhal
Got it, got it. That was really helpful. My second question Nitin was our dealings have been very strong over the last four quarters, almost double of the preceding four quarters. Now the presentation also shows a correlation, good correlation between the revenue growth and the deal win growth. But if I look at the absolute amount I think we’ve been reporting, even in this quarter our deal win growth was more than 20% last 2, 3/4 it was like almost double on a Y on Y basis. Shouldn’t this kind of a strong believe in should have led to a much higher growth in terms of Y and Y are there some of the deals that we won over the past couple of quarters, are they yet to basically ramp up and start executing and we could possibly see an acceleration of growth when those deals start coming in. I know there’s a correlation, but I think the gap between the YMY growth rate on dealings and the revenue load seems to be quite too high. I know it’s not a straight away mathematics, but if you could just explain anything on that one that would be very helpful.
Nitin Rakesh
Yeah, I think part of the reason we started publishing the correlation is because we think the correlation is going to continue to improve given that we are not seeing any client specific issues that we did see in the early part of 2025. So that’s probably the biggest delta between DCV because this is net new TCV growth. Not all of it will translate into company growth because company growth is, is the net revenue that you, that you see growth based on all your ramp ups and of course ramp down. So I think there is, there is some of that playing in again by simple math.
If we, you guys can do the same math, you eliminate the impact of one vertical on the Overall growth are actually revenue growth is mid teens, well past mid teens already. So I think we just had to be patient. We have just continued to focus on driving deal wins so we can grow around that particular issue. That issue is now behind us. We called for bottoming last quarter. It has bottomed. So we will, we definitely expect the deal wins to continue to accelerate the growth. And that’s kind of. I call for that in my script as well.
Vibhor Singhal
Right.So the deal is that we had one. They are progressing as per your expectations or do you think they could ramp up further in the coming quarters?
Nitin Rakesh
I think there’s more room to go. Not all, I mean they are converting but these are transformation deals. You know, if you sign a 100 million deal and it’s a five year deal, you know, you may not see you know the exact 5 million in the first quarter of the deal itself. It might take you two or three quarters to get to that run. Right. So but that’s just the nature of the business. I’m not telling anything you don’t already know.
Vibhor Singhal
Just one last question. Bookkeeping question for Arvind. Arvind, in response to Nitin’s question. In the beginning when about the debt and the cash. Now while the debt has increased significantly, let’s say in the last four quarters, the cash is almost the same number. So if there was, let’s say as you mentioned that the debt had increased just to pay for the acquisition, that it was a timing mismatch, the cash should have increased. The cat catch, the cash stands at 3,600 crores which was pretty much 3,500 crores last year. So I mean in the last four quarters we haven’t added much cash but we’ve increased the debt a lot. So if you could just explain that. What am I missing here?
Aravind Viswanathan
So we had given a dividend of close to $130 million. So you need to factor that from your cash analysis. Yeah but, but obviously when you compare last year to this year, right. You will see that the dividend has got paid now in, in not now in the sense paid in July. And so, so you will see that as a cycle going up and down, maybe paid more dividend also than the year increased our limit. And there is also acquisition payouts that has happened. So one needs to look at it from an operating cash flow. But if you have, if you do M and A and there are certain payouts on contingent considerations of past MNDs that are getting paid now, those need to be factored because those will obviously reduce Your cash. So the two elements you need to. Look at outside of the norm. One is the incremental dividend. Two is all kinds of M and A related payouts that have happened over the past one year and if you normalize for it, then that will explain.
Nitin Rakesh
And some of these are contract acquisitions, not just the typical. Yeah.
Vibhor Singhal
I’ll probably take the DTI expression offline, but thank you so much for answering my questions and I wish you all the best.
operator
Thank you. Our next question is from the line of Sandeep Shah from Equitas Securities. Please go ahead.
Sandeep Shah
Yeah, thanks. Thanks for the opportunity and congrats on a good execution. Nitin. The first question is what would be the penetration of the client in terms of modernizing the application with the journey I or LLM or the agent AI? Just wanted to understand, do you believe clients are becoming more confident to touch the legacy which they were not earlier in terms of modernization now in the. AI world.
Nitin Rakesh
Order of magnitude difference in the level of confidence and the appetite for three reasons, to be honest. One, the programs are, you know, if you were to do a similar modernization program, 20, 18, 19, and we’ve done many of those, the typical execution period used to be between five and seven years to retire any, any decent size monolith application, right? 25, 30 million lines of code, 40 million lines of code, or an application that was really old, even if it wasn’t that large, a monolithic. It was just because the biggest, the biggest complexity there used to be relearning or reverse engineering their application from a logic standpoint.
The second big impediment obviously was that if you’re going to deliver this application back in five years, seven years, the risk is too high. It’s like a black box, you know, implement modernization program. You probably won’t see any new benefits for the first three years or so. And of course it’s expensive. So complexity, time and cost for all three big impediments with the approaches that are now being proposed, clients have undertaken significant amount of, you know, early adoption work, tested it, validated it, we’re still doing it. You know, set it up inside of the production environment, done minimum viable programs to see if that works.
Take a million lines of code and, you know, parse it and see whether we’re getting the right accuracy. Does it work in my integrated ecosystem? Can it work with my stack? Yes, it works with Java. Does it work with Kobo? Does it work with tpf? There are multiple different nuances to it, but in general, I think the appetite for doing These deals is probably up an order of magnitude. We are seeing it up 4x in our own pipeline in the last one year and that’s definitely opening up a lot of conversations for some really large programs.
Now of course we have to also be diligent because these are complex programs. You know you don’t get paid when you sell, you get paid when you deliver. So it’s a combination of making sure that we understand the complexity and we undertake it in in areas where we have a high degree of confidence whether it’s a domain or it is a sub domain. Right. For so in banking, yes we are comfortable in multiple domains but there are still other areas where it will require a lot more investment for us to be able to have the same level of execution capability.
So that’s the way to think about it. Market is absolutely opening up. Partner channels are buzzing as well whether it is hyperscalers or other partners. And I think it’s a good time to take this proposition to customers because there is appetite to listen to new ideas and potentially construct deal.
Sandeep Shah
Okay, so if demand picks up especially in BFSI even application is 75% of our revenue we could be one of the biggest beneficiary. And just in the coming quarters it is fair to assume that we can have a broad based growth because there is no portfolio specific issues even outside furlough. The furlough would be recouped in TMT as well. And question Arvind to you I think it’s good to see that your DSO also includes contract assets. I think none of the many other vendors does not include in the DSO the contract asset. And just on the hedging Arvin wanted to understand because if I look at your EBIT margin X of hedging we are already approaching closure to 16%. Can you guide us what to model in terms of the hedging? I do agree rupees depreciating but any view in terms of average hedge rate its benefit in the near term and the longer term.
Nitin Rakesh
Yeah so let me just address your comment around the broad based growth. I think if you look at current quarter it was pretty broad based and across vertical segments and geographies I think we have some more work through in a couple other verticals as we fix that. We are very much focused on driving a broad based company wide growth and again TCV pipeline to TCV GCB to revenue. So all seven pipeline is the lead indicator of that and I think we are, we are quite, quite pleased with the progress we’ve made in the last Three or four quarters on that front. Arvind, can you talk a little bit about that?
Aravind Viswanathan
So Sandeep, we have a reasonably consistent hedging policy which we hedge about 80% for the next four quarters and you know, and a lower percentage for the four quarters after that. So I don’t think you will see a lot of change in terms of the benefit flowing into the P and L for rupee depreciation at least for the next couple of quarters and then you will start seeing that play out positively after that. Obviously from the time we have announced results from a mark to market standpoint with the December 31 to now, rupee has further moved. Right. So becoming a little dynamic. But I think we are sticking to our hedging policy. I would say that you will see over a medium term this flow in, but you will not see too much of it flow in in the next couple of quarters for sure.
Sandeep Shah
Yeah, thanks. Thanks. Just little. The question on the application modernization, if the market opens up, these could be one of the biggest beneficiary because of skewness towards application as opposed to portfolio.
Nitin Rakesh
I think the market is really very, very big. So I don’t know whether we’ll be one of the biggest beneficiaries but we’ll definitely be one of the leading contenders to take a lot of that work. And, and we are also very focused together. The ecosystem. Okay. I think the last thing I want to make is we are also very, very focused on stitching together an ecosystem that will be required to win in that space because that isn’t something that you can just do by yourself. You will need an ecosystem of tech providers, cloud providers, infra transformation partners and so on and so forth. So context and complexity will require us to build that ecosystem. So stay tuned. We’ll make some further announcements as we go forward on how we are building that ecosystem to tap into the modernization opportunity itself. But thank you for the question. Great question.
Sandeep Shah
Thank you. All the best. Thank you.
operator
Our next question comes from the line of Manik Taneja from Access Capital. Please go ahead. Hi.
Manik Taneja
Thank you for the opportunity. I hope I’m audible.
Nitin Rakesh
You are audible. So you may be. Yes, a little bit jumbled. But.
Manik Taneja
With regards to the medium term growth outlook, through the course of FY26 you continue to see steady performance in financial services. You did have the headwind of the logistics of one of the larger major CPOs customer through the year. If you think about now for the foreseeable future, how should we be thinking about growth construct across industry segments? Does the BFI momentum hold steady or intensify further and then how, how do the other industry segments play out? If that, if you could talk about the fact, especially given in the past, provided color around H2 being better than H1 or IF, or FY 2016 better than FY25 with that construct, would be great to get your views on that.
Nitin Rakesh
Yeah, I think we will give you more color on FY27 as it compares to 26. I think we were clear that 26 is likely to be better than 25 despite the headwinds that we were seeing. And that’s. That should give you a confidence in the fact that you can see how the rest of the business has performed and that’s a good template to kind of at least assume will continue to happen in FY27 as well. So again, too early to tell you what FY27 color will look like, but I think you can see over the last 2, 3/4 of performance that we’ve truly turned, you know, our aspiration into, into some real numbers and we continue to focus on conversion of all that sits in the pipeline that we can convert.
And hopefully if we can do that in the first half of, you know, 2027, FY27, then obviously that sets us up really well for, for the full year as well, just like we did in the first half of FY26. So. So I think fair to assume that the template that we have working for the last three quarters is the one that we’ll continue to lean on for the next five, six quarters as well.
Manik Taneja
Great, thank you. And all the rest.
operator
Thank you. Our next question comes from the line of Girish Bhai from Bob Capital Markets Ltd. Please go ahead.
Girish Pai
Yeah, thanks for the opportunity. Nitin and Arvind just wanted to understand the investments in your AI platforms. What exactly are you doing? Is it OPEX or is it capex? Is it capitalized? And I’ve seen that between March 2025 and 31st of December 2025, there’s been some incremental growth in the intangibles part and there is a significant growth in other assets. So can you just explain these two, three things?
Nitin Rakesh
Yeah, I think it’s fair to assume that the AI strategy is centering on intelligently orchestrating through our own platform, multiple third party systems, integrating LLMs, proprietary solutions and third party assets. So while there is a built component to what we are doing bulk, you know, a large part of the build component, well actually running through our opex, but in some cases when we do have to, you know, integrate some third party assets or we need to buy some third party platforms to integrate in some of that will definitely get capitalized and I think we talked about that in the October earnings call as well. And maybe Arvind, you can expand on the second part of the question.
Aravind Viswanathan
So, so that, that is the reason why you know we had this as an intangible under development as of September 30th and then when we launched the platforms on end of October, we placed it and that’s getting, you know, to P and L over a period of time. You would have also seen a little bit of a bump in the capex line item on the cash flow which also pertains to this. We have some to go but a large portion of that, you know capex has also kind of got paid out right. On the other assets, the multiple elements to it.
Right. And we have had a lot of discussion on it between Q1 and Q2 largely around the large deals that we have made upfront investments and also in the nature of contract assets where as we shift to more fixed price projects, unbuilding fixed price projects come under contract assets till customer delivery and we said that that would kind of wind down and you’ve seen that in our DSO slide. Right. As we get more and more customers milestone approval. So, so that’s a big answer. Not much movement on that line item in Q3, Visa V Q2. So this frankly a lot of bump up that happened in Q1 and a bit in Q2 on the back of some of the large deals that we won.
Girish Pai
Okay. Just on our provisions. I think you, you said that you. Some of the cash went into paying for some of the acquisitions you’ve done in the past. Just want to understand over the last 12 to 24 months have there been any write back or provision that you would have made earlier?
Aravind Viswanathan
No, No, not in the last six quarters. Yeah, sure.
Girish Pai
Okay, last question. Nitin. The Trump administration is saying that they’re going to buy back about 200 billion of or asking, I think the GSEs to buy out 200 billion of mortgage backed securities. Are you seeing any difference that it would make to the mortgage business of ours?
Nitin Rakesh
I think that’s in a way an alternate mechanism to bring down interest rates and provide more liquidity into the, into the funding markets. If that happens, the volume will pick up. If the volume picks up, we will benefit and other than that I don’t see how it will directly have any correlation to, to our business. But if the net impact is increasing volumes increase in home, you know, home buying activity and lower interest rates, then definitely we’ll benefit.
Girish Pai
Okay, thank you.
operator
Thank you, ladies and gentlemen. We will now take our last question from the line of Rahul Jain from Daulat Capital. Please go ahead. Rahul Jain, your line is unmuted. You may proceed with your question.
Rahul Jain
Hello. Yes, please go ahead. Yeah, sorry for that. So my question is, you know, regarding this reprioritization of spend that you mentioned earlier, if you could highlight two, three factors which you think we have, which put us like on the right side of the spectrum on this. Of course your deal win is a big testimony to that. But I’m asking about the same on a more sustainable basis that would ensure that we are on the right side on a more sustainable, this is beyond the current one year and so on. And secondly, with this positioning and deal win, is it safer to assume that our growth rate from an actual perspective could be meaningfully better than what we have logged in Q3?
Nitin Rakesh
Yeah, I think I’ll give you the first answer. Second one a little bit more nuanced. We’ll talk more about it in the April call when we have a clearer visibility on FY27. But again, I answered that quite a bit in, in the sense that the model that is working, the framework of growth, you know, the puts and takes, and despite the puts and takes, you know, our direct business is trending to double digit in Q3, you know, potentially, you know, giving you a sense of what the, the template of growth is likely to be for the future. O n the question around reprioritization, if you think about any enterprise now, three years and change after the launch of. One. Of the most successful consumer AI products called ChatGPT, significant work has happened at every enterprise in understanding what this means to an enterprise, what kind of proof of concepts and experimentations that have been done, you know, identification of areas where this can be implemented.
And now they’re in a mode where again, different phases for different types of customers in different industries, but they’re generally in a mode where this has been becoming, beginning to become real inside of an enterprise. This has top down focus and the easiest, you know, way to adopt this at scale is to effectively use it to drive efficiency because you don’t necessarily need human labor to the extent you did to do the same tasks. You can upskill people and move them to higher value added or revenue generating tasks. Now if you put that in context of our industry, you know, squeeze the run speed to change is the model that has not failed since the Digital era because you want to be able to automate existing tasks, you want to be able to shift left and eliminate manual operations. We saw that with, with standalone testing 10 years ago and we are now starting to see that with areas where you still had eyes on glass, humans monitoring queues waiting for an incident and the whole ITSM IT operations, you know, production assurance model was incident based in cyber as we have seen.
Sorry about that. In cyber as we have seen a lot of this has gone pre incident and has to be done highly, in a highly automated manner. So we are starting to see something very similar play out in the entire ITSM value chain, in the IT ops value chain. So if you had a very large runbook production assurance monitoring or production support operation, either on applications or on infrastructure, that I think is where you will see a lot of efficiency being demanded by customers. And that’s what I meant by being on the right side of the trend structurally for us because we are taking an AI first approach.
We are using AI ops to lead in. We are actually opening that that opportunity set for us because we didn’t claim that earlier because we weren’t really very efficient in the lowest per ticket or per unit cost pricing model because we didn’t have the scale in that business. And neither did we want to be in that business because it was a people centric. You know, you needed people in, in, in tier 2, tier 3, tier 4 locations to keep the costs low. So that’s just the way to think about what this reprioritization means. You know, ability to orchestrate tech and use tech to drive outcomes is what’s opening up these opportunities. So for us we definitely think it is not a one or two or a three quarter phenomena. It is something that we are structurally trying to capture using NEO IP as our platform.
Rahul Jain
Yeah, that’s pretty helpful. Just one extension to, to the comment you have made. So from a purely client spend perspective, do you think that the current trend could be that the spend might go up because you are moving into a current way of doing things to a different way of doing things as you articulated, but on a net basis from a two, three, four year perspective, the absolute spend itself could shrink because of the level of implementation of AI and then it will all be about market share gain and rather than, you know, the spend gaining from the spend expansion?
Nitin Rakesh
Yeah, I don’t see a scenario where clients will spend less on tech. I think if anything their spend on tech versus spend on people will be in favor of spend on tech tech.
Rahul Jain
Got it, Got it.
Nitin Rakesh
Then it’s up to us to decide how to play in that ecosystem. Yeah. All right. Thank you.
operator
Thank you. I now hand the conference over to Mr. Nitin Rakesh for closing comments. Over to you, sir.
Nitin Rakesh
Thank you, operator. I think in closing, all I’ll say is while strong plans matter, disciplined execution is defining success for us. This new year is not about just setting goals. It’s about delivering results, building momentum, and strengthening our position in a rapidly changing world. I’ve never been this excited or worked harder to drive results. And I wish you all happy 2026 and look forward to seeing you all in the next quarter. Call. Thank. You.
operator
Thank you. On behalf of Mphasis limited That concludes this conference. If you have any further questions, please reach out to MPHASIS investor relations@investor.relationsphasis.com thank you for joining us. You may now disconnect your lines.