Mphasis Ltd (NSE: MPHASIS) Q4 2025 Earnings Call dated Apr. 25, 2025
Corporate Participants:
Nitin Rakesh — Chief Executive Officer and Managing Director
Aravind Viswanathan — Chief Financial Officer
Analysts:
Sudheer Guntupalli — Analyst
Vibhor Singhal — Analyst
Nitin Padmanabhan — Analyst
Abhishek Gupta — Analyst
Sandeep Shah — Analyst
Girish Pai — Analyst
Manik Taneja — Analyst
Dipesh Mehta — Analyst
Ashwin Mehta — Analyst
Presentation:
Operator
Please wait while you are joining the conference. The conference is now being recorded good morning, ladies and gentlemen, and thanks for joining the Mphasis Q4 FY 2025 Earnings Conference Call. I’m Nirav, your moderator for the day. We have with us today Mr Nitan Rakesh, Chief Executive Officer of Emphasis; Mr, Chief Financial Officer; and Mr Vinay Kalingara, Head of Investor Relations.
As a reminder, there is a webcast link in the call and white mail that the emphasis management team will be referring to today. The same presentation is also available on the Emphasis website at www.emphasis.com in the Investors section under Financial and Filing as well as both and key 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 to ask your questions after the presentation concludes. Assistance during this conference call, please signal an operator by pressing star 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 risks and uncertainties. A detailed statement in this regard is available on the Q4 results release that was sent out to all of you earlier.
I now hand the floor over to Mr Nitin to begin the proceedings of this call. Thank you, and over to you, Nitin.
Nitin Rakesh — Chief Executive Officer and Managing Director
Thank you. Thank you, Hiro. Good morning, everyone. I’m glad to have you all on the call again. We are truly in interesting times. And as always, we continue to focus on the micro in an uncertain macro. As we close-out FY ’25, let me recap a few areas that we’ve been calling out over the course of the year. We called out that our growth would be led by BFS and TMT verticals, that we would be laser-focused on growing the pipeline in TCV and with the AI-led deals playing a bigger role, we would continue to originate and close large deals led by our transformation features to capture modernization and consolidation opportunities.
We’ve continued to invest in our AI platforms and solutions and all the while staying within our target margin brand. I’m pleased to report that we have executed on this strategy and have delivered on all these parameters in FY ’25. We will double-click on these in the subsequent sections of this discussion.
In the Q3 ’25 call-in January, we indicated a few paradigm shifts on how AI was driving and redefining most opportunities as well as the nature of how services are being delivered, namely supersizing deals with taking their transformation driving wins, unlocking opportunities through reimagining legacy modernization, expanding the target addressable market and driving pipeline growth, our platform’s near and neo products, creating tremendous efficiency, cost-savings and minimizing projects — project risk outcomes.
While our stakeholders continue to assess the potential impact of the recent macro uncertainties, there are certain tech imperatives that they are concentrating on. Self-funding investments in their transformation, modernizing, consolidating and simplifying their tech stack, investing in AI to enhance client experience while maintaining a low-cost to serve, integrating AI directly into business operations to improve client experience and continuing their investments in AI regardless of the macro-environment. This is evident in our performance in Q4 as we step into a new year with AI-led transformation deals driving record growth in pipeline, especially large deals, strong PC wins across core modernization, AIOps, transformation, experience transformation data strategy, as well as IT sheet and transformation offerings gaining traction across the portfolio.
Our commitment to innovation as well as the long-term focus and investments in AI are paying-off and driving success for the company and for our customers. We are uniquely positioned to lead-in this era because of our differentiated pool stack approach to AI innovation and we are now seeing these operate at-scale. We have a very structured, well-defined four-paced approach as per our AI strategy.
One, building a strong data foundation; two, build enterprise-grade identity and access management for data security and privacy, rebuild AI technology foundation and finally develop an AI strategic roadmap based on the following design principles: LLM agnostic architecture, secure data orchestration and use of pre-built connectors.
Earlier this week, we were listed as a leader in the Challenge, further validating our ability to design AI agents that perform complex data analysis using multisttep reasoning on real-world data. I’m also incredibly proud of the work that we’ve done and the impact that we are making. You may have read the news that we were granted a US patent recently for our innovative solution called system and method to optimized processing of information on quantum systems.
The newly-issued patent outlines the pipeline to improve scalability and performance of quantum machine-learning on near-term quantum computing systems, including quantum simulators. This tech and the associated presence stand as a testament to our commitment to innovation and advancement of next-generation technologies.
AI is becoming cable stake for us, whether it’s in the context of new deals that are AI-led or AI infused, existing clients or to increase their own employee productivity. This is both vertical-centric, like for instance, insurance broker or for compliance management solutions.
In terms of tech platforms that run horizontally, the platform is an intelligent journey-enabled platform that enhances the process of relearn and through this platform, we can help enterprises extract context-specific information from code and documents regardless of their format or layout and integrate it with downstream actions for IT value stream modernization systems to generate actionable insights.
Our AIL deal pipeline is significantly up from 25% in Q4 FY ’24 to 55% in Q3 FY ’25 and 65% now in Q4. AI levers continue to help creates, maintain competitiveness, especially on the run the business plan and underscore our differentiation through the use of our approach. Our overall pipeline grew 86% year-over-year and 26% sequentially at the end of 4th-quarter. BFS pipeline is up 70% year-over-year and non-BFS pipeline is up 99% year-over-year.
Our large deals pipeline is up 40% sequentially and 154% year-over-year, aligned to the efforts we’ve been making in that segment. Notably, planned priorities to repurpose and modernize our existing tech estate are reflected in the biggest growth vectors in our pipeline, the IT value stream propositions. These include our value stream acceleration, agile ITOPs and modernization solutions. We continue to see a high share of proactive deal wins as we stay focused on deal-making.
As our AICs start reflecting in our deal wins, we’re happy to report that 59% of the TCV in Q4 is AI-led. New TC wins for the quarter were $390 million, the highest in the past seven quarters. We won two large deals in Q4, taking the total tally to 13 deals in the full-year and we have accumulatedly won 75 large deals since FY ’18 from the time we started reporting it. We have broad-based ECV wins across verticals, our client pyramid and archetypes.
While the to revenue conversion pace remains steady, we continue to make investments in the right areas where we expect demand. To give you a sense of kind of deals we want, a large North America-based bank has chosen our emphasis for its data center modernization. Emphasis is helping them simplify their operations by consolidation, rationalization and modernization of platforms to reduce operational risk, increase resiliency and accelerate growth and profitability.
And second, MPS is partnering with the North American logistics and transportation major in its transformation journey into a data-driven enterprise. We’ll be involved in multiple initiatives aimed at enhancing the data strategy, governance, analytics and operational effectiveness. Emphasis also want to deal with a large healthcare services enterprise that will utilize the capabilities of the Emphasis platform and the integrated health experience framework to transform the user experience and back-end processing of enrollment in their products.
We will deliver an evidence-based solution for evaluating customer acquisition, streamlining, back-end processing and lowering the demand for contact center interaction. Thank you. In another example, the North American banking client has chosen emphasis as a strategic partner for the modernization of its wealth services platform. The services will enhance growth, modernization and regulatory remediation priorities.
Coming to performance by segment, we continue to push for revenue growth, which is anchored in our strong client mining model and tech-led offerings. Our Q4 ’25 revenue came in at $430 million, a growth of 2.9% sequentially and 5.4% year-over-year in constant-currency terms. This is a high sequential growth in the past three years despite the impact of a decrease in revenue from our non-strategic APM business, which is reflected in the other secondary market segment in our MD&A.
Our direct business accounts for 97% of our overall revenue in the quarter. We expect the pace of revenue and deal conversion to remain strong, propelled by our savings led transformation team. Our direct revenue for the quarter increased by 3.8% sequentially and 6.8% year-over-year in Q4 in constant-currency terms.
Growth momentum in-direct continues to be strong and in our anchor geography, the US, we grew 3.7% sequentially, 7.1% year-over-year in the direct business. EMEA region grew at 0.9% sequentially and the rest of the world grew at 8.7% sequentially and 24.4% year-over-year in constant-currency terms of the direct business.
Our core service line, enterprise apps constitutes about 72% of revenue and the revenue contribution continues to upwards. We grew 3.3% sequentially in constant-currency terms in the direct apps business. BPS service line declined by 3.8% sequentially and the ITL service line grew approximately 21%, both sequentially and year-over-year, driven by transformation programs around IT value stream modernization that we won in recent quarters.
Our mortgage business remained stable. Moving to our vertical performance. Both the BFS and TMT verticals continued the growth momentum. At an overall company-level, BFS was up 5.6% sequentially and 11.8% year-over-year in Q4 FY ’25 in constant-currency terms. Specifically in the direct business, BFS was up 7.2% sequentially. VFS growth has largely been driven by wallet share gains in existing accounts and continued strong execution in new account wins, including large deals.
The direct AMT vertical grew 9.6% sequentially and 22.1% year-over-year, driven by continued deal wins and conversion from recent large deal wins to revenue. Insurance is also a growth engine now with an increase of 0.3% sequentially and approximately 9% increase in the direct business year-over-year. The vertical is poised for strong growth in FY ’26 as well on the back of strong TCV and pipeline as well as recently won deals.
Logistics and transportation and other verticals declined sequentially by 7.7% and 3.4% respectively. These verticals have an outsized impact by the macro-environment. Nonetheless, we see significant opportunities in the pipeline for both logistics and transportation and healthcare. Our client pyramid continues to improve across-the-board. Y-o-Y, we added one client in the 75 million-plus category, one client in the 20 plus category and three clients in the and plus categories, respectively.
A couple of new accounts we signed recently have already grown to over 60 million on a quarterly annualized basis. You will note that we’ve seen robust growth across all customer brands. Top-10 accounts grew 5.8% sequentially, 11% to 30 grew 5.7% sequentially.
On an LTM basis, top-10 and account grew 4.1% Y-o-Y and the next 20 accounts grew 5.1% Y-o-Y. Looking at financial quarterly metrics, we delivered to a philosophy of maintaining margin in the stated band while making investments for growth. EBIT margin remained stable at 15.3% despite the macro uncertainties. We reported that operating profit for the quarter grew 3.9% sequentially and 11.7% Y-o-Y.
EPS for the quarter was INR23.5, hence the highest-ever EPS in a single quarter and a 4% — 4.1% sequential and a 12.9% year-over-year-over-Year growth. Operating cash-flow generation continues to be strong at $52 million for the quarter, 100% of the net income. DSO of 75 days increased three days over the last quarter. In summary, what we witnessed with the highest quarterly growth in 12 quarters is a growth led by BFS and TMG, our highest-ever quarterly and full-year EPS.
Pipeline growth at record levels with 26% sequential and 86% year-over-year growth, 390 million EPC in Q4, the highest wins in the past seven quarters and our execution has continued to deliver stable margins. With this effect, the Board of Directors has also recommended a dividend of INR57 per share for the full-year FY ’25.
Coming to our outlook, we’ll continue to focus on executing on the micro despite the uncertain macro. As we focus on investing in growth initiatives, we continue to strengthen and expand our AIL pipeline to TCV and TCV to revenue as evidenced in Q4 as well. For the full-year FY ’26, we do expect to be above industry growth on a revenue front, gaining from strong PCV wins and a steady conversion of TCV to revenue across the portfolio. Our target EBIT operating margin would be within the band of 14.75% to 15.75%.
With this, I’d like to open it up for questions, please.
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 R&D one on their attached on telephone. If you wish to remove yourself from the question queue, you may press R&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 ask a question. The first question is from the line of from Kotak AMC. Please go-ahead.
Sudheer Guntupalli
Hi, sir. Congrats on a great performance. Just a couple of questions. Firstly, towards the end-of-the quarter, right, in March and April months, have you seen any major drop-off in the client conversation rate or deal bookings, pipeline conversion or clients trying to push-out a ramp-up, so on and so forth reacting to that direct volatility
Nitin Rakesh
So Sudeer, I think the answer is a little bit nuanced because if I look at the impact of tariffs or other uncertainties that came into for the last 30 days, there are certain industries that are in the direct line of fire, so that they have the direct impact. For example, all global trade, logistics, supply-chain, manufacturing, automotive, you know, energy, railroads are fairly direct impact because there is a pretty significant impact of what happens across global trade flows.
The flip-flop on tariffs hasn’t helped them either because they suddenly gotten frozen in some of their decision-making not just on our businesses, but in their own business, right? How do you make capex decisions, how do you make supply-chain decisions, not knowing what’s going to happen either on April 2nd or 90 days pause after that. So that’s the first segment of customers where the impact of indecision is a little bit higher.
Then there is a segment of customers like banks, insurance companies, healthcare companies where the impact is not direct impact because there were not in the direct line of fire of tariffs. The impact is a second order impact because there the questions are more around economic outlook, interest-rate outlook, on the consumer, provisioning for customer credit losses and so on, what happens to deal-making to all street firms.
On one-hand, they’re making higher trading revenues. On the other hand, deals have dried up, IPLs have dried up again. So I think in those segments, the impact hasn’t quite shown up yet. In the first category, the impact obviously is visible and we’ve seen a significant, I would say, nervousness not to a point where deals are getting canceled, but definitely decisions get pushed out because the 90 days pause really doesn’t mean much until we know what happens after 90 days.
So I would kind of break it down into a nuanced customer-by-customer, segment-by-segment impact and uncertainty definitely creates indecision, but it varies by which industry and which segments you play in. Given that 60% of our business is BFSI and another 7%, 8% comes from healthcare and others. And if you include some of the other businesses that are not in the right line of fire, we are actually not in a bad place on-balance relatively speaking.
Sudheer Guntupalli
Got it, got it. And the decline in logistics this time, is it more broad-based or maybe led by one or two accounts?,
Nitin Rakesh
I think it’s a little bit more broader than just one account. So it’s linked in-part to what I just answered. And I think each client obviously will have to go through their own journey of where they are in that global macro-environment as well as in their own journey of where they are with what they are trying to accomplish with their own transformation agenda.
So impacts not a single customer-base. But the good news is, if you look at the pipeline that we shared on you know the overall split of deals by vertical, you will see a pretty healthy pipeline showing up in logistics and travel. And that’s the that’s the one that we will absolutely focus on when it comes to the non-BFS jump of 99%, significant portion of that comes from that segment as well. So I think we are very focused on making sure that we get through this phase and we bring that vertical back to growth through the year.
Sudheer Guntupalli
Yeah, that is helpful. And just one last question. There is no further update on any large account within this segment, right? I’m assuming.
Nitin Rakesh
Nothing more to call-out to be honest at this point.
Sudheer Guntupalli
Okay, Nitin. Congrats and all the best.
Operator
Thank you. Next question is from the line of Singhal from Nuvama. Please go-ahead.
Vibhor Singhal
Yeah, hi. Thanks for taking my question and congrats on a solid performance on both growth and these win. This is two questions from my side. I think our TMP vertical saw a very good growth in this vertical in this quarter. You alluded to a bit about it in the opening remarks. But what is exactly our basically driving the driving behind the revenue growth this year? And how do you see this getting impacted given the overall macro uncertainty that we are facing, especially with the tech companies also kind of another?
Nitin Rakesh
So I think — I think we talked about this in the last couple of quarters as well when you guys had some questions around some large deals that we signed using consolidation. And this is an outcome of the deals actually ramping-up for revenue and then we are actually further expanding the wallet share using those deals that we signed. So this is effectively consuming the TCB that we signed in the last two quarters and effectively growing that — growing a segment of the TMP customers into as I mentioned in my remarks as well, the 60 million annualized quarterly run-rate, one of those customers happens to be in PMT. So it’s — again, while the growth is not one customer-driven, but that definitely helps when you have a customer that grows exponentially in the last three or four quarters, right.
We have obviously more opportunities in that — in that segment. While there is some uncertainty that comes into the manufacturing part of the high-tech segment, what I think our client base is broader than just being dependent on a manufacturing high-tech business because the combination of our protect devices, med devices, ISVs and telecom in there. So we feel very good about where we are. We think we will see further growth through the recent times as we get through Q1, Q2. And then of course, as I mentioned, pipeline is really broad-based growth and that we should continue to convert those over the course of FY ’26 as well.
Vibhor Singhal
Got it. Which part of EMT do you think are we doing? I mean, apart from that is exceptional growth in the client, which part of the TMT do you think we are more well-placed and both from our own capability perspective and also from a macro standpoint of view, which is where you will see more opportunities in the coming quarters?
Nitin Rakesh
I think enterprise tech, engineering services and R&D services, cyber security, the whole IT value stream modernization I talked about using SDLC transformation. So it’s a combination of four or five things.
Vibhor Singhal
Got it, got it. That’s okay. That’s very helpful. Secondly, on the deal in front, another very solid quarter of deals, I think it’s the second-highest deal that we’ve done. But has this — I mean, have the conversations around the deal closures changed in the last 10, 10 15 days, do you see the momentum of dealing continuing in Q1 or do you think the tariff uncertainty is basically leading to delay in disclosures and clients kind of holding back the? From what we see?
Nitin Rakesh
I think — I think, again, as I said, right, in some of our big verticals, the impact is more second order, hasn’t quite trickled down into saying, okay, we don’t make a decision because of what’s going on with tariffs because they’re not in the direct line acquired. But there are segments where we have seen some hesitation in committing to a program, not knowing what happens to US, Canada or what happens to global trade. So I think the answer is a little bit mixed. But on-balance, as I mentioned, given the spread of our business coming out of second order industries being a much bigger portion of the second order impact segment, then I think we feel-good about the fact that we should be able to see this momentum carry-through in Q1 and Q2 as well.
Vibhor Singhal
Okay. Got it, got it. Just one last question, if I could squeeze in on the mortgage business. I think we are at that road again where there are talks about interest rates substantially maybe trickling in. Do you see any uptick in the mortgage business leading to that? I know a refinancing business is probably going to take time. But in terms of at least the origination part, do you see some uptick happening maybe over the next couple of quarters?
Nitin Rakesh
You know, very hard to call. I think what I can tell you, what we are seeing definitely is a deep desire by customers to say, is there an opportunity to induce AI into my operation and reduce my cost of loan servicing our loan origination. So that’s one play that’s definitely giving us some expanded wallet share. I don’t think volumes have gone up and I don’t know when they will show-up because it’s very hard for me to tell you whether the 30-year — the 10-year will be at 4.3 or 3.8 in the next 30 days.
And who knows if inflationary impact comes through, then you might actually even see interest rates go up, right? So it’s very hard to that. So I think it’s really more a consolidation and an AI infusion play right now that is driving the marginal growth or the stability in that segment. And we are pleased that segment actually grew quite well through FY ’25 despite having a very difficult FY ’24.
Vibhor Singhal
Got it. Got it. Great. Thank you so much for taking my questions and wish you all the best
Nitin Rakesh
Thank you.
Operator
Thank you. Next question is from the line of Nitin from Investec. Please go-ahead.
Nitin Padmanabhan
Yeah, hi, good morning. Thanks for the opportunity. Nitin, couple of questions. So one is, from a — I think even in the last quarter, you did mention that there is an improvement in pipeline for logistics, transportation, et-cetera. And are you seeing that the conversion for those will be a little delayed considering the uncertainties and conversion should take time or do you think these are specific areas which actually help them in the current context and thereby you could see closures. So that’s one.
The second is, I think directionally considering that we are not in the direct line of file, is it fair to sort of assume that from a revenue trajectory perspective, at least in the near-term, it’s unlikely that we see any specific headwinds for a large part of our portfolio. And thereby from a momentum perspective, it could sort of continue considering the deal wins and-or is it that there is a risk to ramp-ups being delayed a bit? And finally, just your thoughts on margin. So you still do have a lower band margin at 14.75% despite an exit at 15.3 so just sort of curious about what are you worried about from a margin perspective broadly?
Nitin Rakesh
So let me take the first one. I think we did announce the deal win in the current quarter in the logistics and travel segment, transportation segment that definitely will help as we get through Q1 and Q2 as we convert that deal. So it’s not like decisions aren’t getting done. There definitely is a stress segment because the level of impact on them is actually pretty high, right. Will that lead to further decisions being delayed?
Will — I think it’s a combination. It’s very much an account-specific conversation versus a sector-specific conversation when it comes to a deal because there may be a deal that actually lines up to the value prop where the uncertainty actually gives a trigger to the customer to make a decision or there may be a deal where they have to do an outlay of spend that may get deferred because they want to see certainty of capital outlays.
So I think it depends on what type of deal it is, what the value prop is. We use this concept of a client value framework. It all depends on what’s the value framework with which we are doing with that deal. So again, going back to the comment I made around focusing on the micro, I think we are taking a very nuanced deal level, client level, level approach versus a macro segment, industry vertical or geography level approach. So it’s a bit of both.
And I actually do feel-good about the fact that there are a few deals in there that might actually give us a lift in Q1 itself, but we’ll report on that as we come back to you in July. Finally on the question around margins, I’ll give you a very-high level answer and I’ll have Arvind elaborate on that. I think the reason to keep that flex with us and just like we kept 40 75, we also kept 15 75 out there. For a simple reason that as we get into some of these large deals, let’s say we end-up signing a mega-deal that requires us to actually make some investment in upfront ramp-ups or technology or orchestrating and working with the client for the first 30 to 60 days where we may need to make that investment. Or if, we’ve actually made a pretty decent investment in-building these AI platforms. That’s just the reason we want to keep that flex with us.
But Robin, maybe you can give a little bit more color.
Aravind Viswanathan
Yeah. So Nitin, we’ve kind of narrowed the range from before, right? It was 14.6 to 16%. We used the range to 14.75%. I mean, not much to elaborate beyond what Nitin has said. It just — when you give a range, there is a reason that there are things that can happen in an uncertain environment, right? It’s obviously not — not really demonstrated a margin drop or lack of focus on execution on margins, but there are circumstances where we will make investments.
And if those come to it, then we would still be within the range. So that’s the purpose of the range. So on a basis, we don’t expect to significantly deviate from where we are, but there are circumstances where either an investment or a deal may necessitate that, then we would still operate within this range. So that’s how you should look at the range.
Nitin Padmanabhan
Okay. Perfect. That’s helpful. And I think the only thing you missed is from a deal ramp perspective, are you quite comfortable or are you seeing customer behavior in terms of delayed ramps or anything despite the strong wins.
Nitin Rakesh
Again, I think the spectrum is pretty wide. There was, for example, we announced a deal in the last January call, that deal actually ramped-up pretty nicely because there was a sense of urgency and a time window for the customer to execute that transformation thesis.
There’s another deal in the same industry where it’s taken us many quarters to actually get to the run-rate that we wanted to get to. So it’s again a little bit of a specific client-centric issue. But I think it’s fair to assume, Nitin, that when there is this level of volatility in the environment and when the stock prices are swinging between 3% and 5% at an index level, it’s just very hard for many of our customers to stay focused on what may seem important to us, but may not be on their top three things to do and given the environment, the volatility they’re dealing with. So not that becomes an excuse for us on our field force, but that’s the reality that we have to deal with as well.
So I think it is a tough environment when it comes to getting clients to come in and put pen on paper. But I think the approach of being very focused on what value you’re taking to the customer, what problem are you solving, how are you align to the outcome of the business and how you’re even sometimes able to repurpose what they may be doing today into a much more efficient and a transformative approach. I think is really what in a way stood out to us as a winning formula.
Nitin Padmanabhan
Sure, that’s helpful, Nitin. Thank you so much and all the very best.
Nitin Rakesh
Thank you.
Operator
Thank you. Next question is from the line of Gupta from Axis Asset Management. Please go-ahead.
Abhishek Gupta
Hi, sir. Good morning and apologies for the good set-up. Sir, just wanted to check on the leverage on margin. As I see for the full-year basis, the seems to have increased as
Operator
Abhishek, sorry to interrupt your audio is not clear. Can you speak for the answer, please.
Abhishek Gupta
Am I audible?
Operator
Yes.
Abhishek Gupta
Hello. Yeah. So sir, the only thing which I see, hello, headcounts, yeah. So the headcount for the last four years seems to have been decreasing and the — that seems to be on which like switching to the subcon expenses as well as our utilization seems to be at 86%. So are we like-kind of uncertain about the demand environment where we are like hiring on the — as per the deal basis? And will it be continue to see in the FY ’26 also? Like will it be not a margin lever coming going-forward.
Nitin Rakesh
I don’t think that’s the way to think about the headcount metrics. I think sometimes what happens is, especially in larger deals or transformation deals, you start with a certain headcount or you take-over a certain book of body and then you transform it. If you look at Q4, the offshore revenue actually offshore headcount actually went up. And I think that’s natural when you take on a large deal and you start transforming it, you will also try to offshore higher component of it.
The reason you may see a subcon expense go up is because you don’t hire the employee because you may only need them for six months or nine months as you transition the workout. So I think the way we are running supply-chain is on a very dynamic basis given the level of uncertainty that exists in the business. We are not — we haven’t and we don’t intend to build a large bench, obviously onboard based on what we need on a rolling 90-day basis.
And I think I explained that in a couple of calls ago, we are running a fairly dynamic process of what we call a rolling 90-day forecast based on deal wins, availability of people internally as well as the ability to onboard people quickly. So that’s a — again, headcount or utilization is a good outcome of the way we run the supply-chain and the operations. We don’t target a certain utilization level or a certain hiring level. I think it’s all linked to what sits in the pipeline and the linkage between pipeline and headcount supply-chain.
Abhishek Gupta
So got it. And sir, at the lower-end of the margin, does it build any deterioration or some revenue decline for the next year too? Or is it just because some investments or the incremental human headcount increase — increment will be impacting that?
Aravind Viswanathan
So let me take that right. So I think we’ve seen over the past couple of years, we have had a year where revenue has declined and we have had a year where revenue has gone up and our margin profiles haven’t changed too much, right? So I think from an industry standpoint and from an emphasis standpoint, we’ve done a good job of managing our costs where we see a revenue headwind. So I don’t think a simplistic revenue drop would require us to operate at lower levels of margin.
But you know, even if I mean, Nitin talked about it from a customer standpoint saying, no, whatever the macro, there are certain spends that customers will do and emphasis on enterprise will also make certain investments no matter what the macro-environment is, right. So to that extent, if we would not compromise on critical investments which have longer value, you know so just because there is a near-term shortfall on revenue. So — but I think you have to look at it from that perspective, I don’t think a simplistic assumption that revenue growth will necessarily margin drop, which would not be a factor of
Nitin Rakesh
Revenue decline. So I think the counterpoint to that also is that sometimes you may actually see an impact on the short-term margin because of revenue growth because that means you’re investing in a deal I explained that a few minutes ago as well. So I don’t think that there is a direct correlation that we are keeping the lower-end because we expect revenue to decline. I think the implicit message here is that we are keeping flexibility with us to continue to invest for growth.
Abhishek Gupta
Got it, sir. That’s all from my side. Thank you so much.
Nitin Rakesh
Thank you.
Operator
Thank you. I request all the participants kindly restrict to two questions per participant, one question and one follow-up. The next question is from the line of Sandeep Shah from Equirus Securities. Please go-ahead.
Sandeep Shah
Yeah, thanks. Thanks. Congrats on a good execution in a difficult macro. So just wanted to understand, Nitin, is there any large client-specific issue in any of the vertical when you are entering FY 2026 outside of macro issues.
Nitin Rakesh
So Sandeep, firstly, thank you for the comments. I think the — as I mentioned, right, depending on which segment of customer you look at and even within the segment, it’s not like every top client in banking is operating in the same trajectory for us. Similarly, not every client in every other vertical is always going to operate in the same trajectory.
There may be client-specific issues, there may be client loan journeys. So I think the right thing to do is to focus on the portfolio, the growth guidance on the portfolio, the outlook on the — on the business based on the early indicators like pipeline and pipeline of. So I think to me, the right conversation to have is what’s the plan for us to continue to convert at a clip that we’ve seen pick-up in the recent couple of quarters.
Can we increase the pace of conversion of our pipeline to DCV? And given the massive expansion we’ve seen in our large deal pipeline year-over-year and again, it’s very early days. We only set-up that group five months ago. I think that’s really what the focus of the business is. We will have to manage client-specific issues in every vertical and that’s no different from what we’ve been doing for years as well..
Sandeep Shah
Okay. And just we are also entering 1Q FY ’26 with a very healthy order intake, which was similar when we entered 4Q FY ’25. So if I’m not wrong, you are trying to say the growth momentum of 4Q FY ’25 can be sustained in 1Q and 2Q. Is it the right way of looking at it?
Aravind Viswanathan
No, you are trying to draw us into giving a Q1 guidance Sandeep, that’s really not what we are looking to do, right? I think Nitin kind of explained how the market and the macro is playing out and we are watching staying close to customers and trying to execute on the deal closures, right? I believe we will grow in Q1 as we stand and that’s what I would like to talk about from a Q1 standpoint.
Sandeep Shah
Okay. And just on the Gen AI and the agent AI, as clients are scaling up the investments and we are also part of them in terms of helping them to adopt the same. Is there any increased instances where we have to pass-on the productivity gains or are we in the phase where the demand is accorative rather than generational?
Nitin Rakesh
I think it’s a bit of both, to be honest, Sandeep, because there are certain segments of what the client does today where they think that they can gain significant efficiency by introducing not just Gen AI, but any other AI playbook as well. Gen AI will be part of it. LLMs can be used to train agents. I mean, we talked about the quantum machine-learning model that we just announced and the rating we got.
So there is one segment of the client business, especially on the run the business side, whether it is ops, IT operations, customer service, business operations, claims, underwriting, all of those areas which require heavy human intervention can actually benefit from creating an AI or agent assist to work alongside the humans in taking away the manual tasks and increasing the efficiency. So there is definitely an element of AI induced efficiency that the client will expect to get from that operation.
Good news is they may be doing their operation themselves today, so that becomes a target addressable market for you to go in and implement the solution and sometimes take-over the operation as well. Then there is a segment where they are actually building out the Gen AI or the AI infrastructure. We actually Call-IT the AI superhighway and we’ve talked about it in the past. That’s a net-new opportunity because new spend is getting diverted there.
The trick to playing in that spend is actually to have the right set of propositions and the value framework there is more around helping the client the Chessis for AI adoption, data governance, data pipelines, data privacy. So there’s a big data element, right? Then there’s a big AI infrastructure element, there is a big element and of course, the ability to orchestrate all of this in a manner that you can actually do ethical AI and governance of AI and traceability of AI because many industries are regulated in that manner is a net-new opportunity.
Having said all of this, if you then look at the tech spends of most customers, we are not in an environment where the tech spend is going to go up by 8% or 9% or 10%. We are in an environment that the tech spend may only go by 2% or 3% if at all, includes cost of inflation,? Whether it’s people inflation or equipment inflation or the inflationary prices they get from software and hardware providers.
So in that environment, I think spends will get repurposed. So yes, clients will expect to see benefits of AI in their services and providers will have to find a way to make money by making sure that there is enough and more left on the table for the client to get and for the service provider to be able to actually make money in that transaction. This is nothing different than what I called out earlier, which is savings led transformation. So the — the ability to bend the cost and quality and time curve using AI actually justify that savings transformation. That’s the way I would summarize the playbook of AI. And it’s not — it’s not but it’s unfathomable to see the industry slowly pivoting away from providing people-based services to actually providing us solution to a customer that drives a certain outcome and then getting the volume for it.
Sandeep Shah
Yeah. Thanks for the detailed answer. And the last question, if I can squeeze. On DLTCV and looking at your comments on the pipeline, is it fair to assume the earlier quarterly run-rate of $350 million-plus or minus in terms of PCV can be maintained in FY ’26 unless the macro issues are really causing the country.
Nitin Rakesh
I think that is a reasonable assumption at this stage. Again, we don’t know what happens over the next 90 days or 80 days, but at this stage, given the strength of the pipeline, large deals, that’s a reasonable assumption.
Sandeep Shah
Thanks and all the best.
Operator
Thank you. Next question is from the line of Girish Mai from BOB Capital Markets. Please go-ahead.
Girish Pai
Yeah. Thanks for the opportunity. Nitin, do you think FY ’26 would be a better growth year compared to FY ’25?
Nitin Rakesh
For emphasis, given where we sit today, we definitely feel that we have the opportunity and the potential to better the growth over last year. The only I’ll make is if the environment gets worse, whether it’s macro or geopolitics or something else, then of course, we’ll have to come and tell you again. But at this point in time, as we stand today, we do feel like we are in a place to beat our own performance from last year.
Girish Pai
You also mentioned that you have a greater exposure to verticals which are probably susceptible to second order the impact of the macro. So would you say that the visibility on 2H FY ’26 is a little weaker as things stand today,
Nitin Rakesh
I’m not sure I can make that correlation between second order impact and second-half of FY ’26 at this point. I don’t know maybe if I’m missing something, you want to elaborate?
Girish Pai
No, the second order impact is going to come a little later and then the cost-cutting or the postponement is going to happen a little later down the road.
Nitin Rakesh
Yeah. You’re assuming that the second order impact means that the US goes into a big recession. I don’t know if we know that yet. Again, that’s why I said as things stand today, I think if that second order impact has to play-out, then we have to see the macro deteriorate a lot more, which I don’t know as we stand today. So very difficult to answer that question based on where things stand today, I think there’s a bit of time and environment watching that needs to happen for us to get to that determination.
Again, having said that, what we’re really trying very hard-to-do is make sure that we go deal-by-deal, plan by client, value framework, our value framework, get those deals done. So as much as possible, we decouple from the impact of either first or second order macro. Not easy to achieve, but that’s what we are trying to do because that’s the only way we can run a business with a power dealing approach. And you know, effectively, it keeps us honest, it’s hard work, but that’s exactly what we’re trying to do right now.
Girish Pai
Okay. My last question is regarding consistency of performance because last many quarters we’ve seen a quarter strong and you have a succeeding quarter, which is weak. Do we think we’ve reached a stage where we can deliver consistently strong performance quarter-after-quarter from here on because you said that we now have a large deal organization in-place and stuff like that. So do you think we are going to get into a consistency or a certain level of consistency from here on from a growth perspective?,
Nitin Rakesh
I think I hear you. As I said, right, we’ve obviously taken many — many knocks on the chin based on what we’ve dealt with in the last three years, portfolio-wise, macro wise, you know, direct versus non-direct, all of that put together. So our attempt is to is to get a little — get a lot more consistent. Again, what we are doing, what we can control, which is, as I mentioned, deal focus, drive account action client-by-client. So that’s definitely one of the reasons why we are focusing on driving FY ’26 to be better than ’25. And if you do the math, you’ll see that we’ll probably need a lot more consistent sequential growth through the year for us to get there.
Girish Pai
Okay. Thank you.
Operator
Thank you. Next question is from the line of Manik Taneja from Axis Capital. Please go-ahead.
Manik Taneja
Hi, thank you for the opportunity and congratulations on a steady performance. My question is with regards to our segmental margins. So even while our logistics revenues have been declining for the last couple of quarters, we’ve seen a bump-up in margins. If you could talk about what’s driving that? And second question was with regards to the strong growth that we’ve seen in top customers despite the decline in the single largest customers. If you can talk about how do you see growth outlook within some of your customers, that would be helpful.
Aravind Viswanathan
Sure. So Manik, maybe I will talk about both of these, right? So, yeah, I think one of the earlier questions was exactly this, right, when revenue were to go down, will your margins range kind of give you cushion on that and my point was that we have an ability to offset a offset revenue drops by taking out cost and that’s exactly what has happened here, right? So I don’t think we look at a there is a certain amount of variability on cost as well from a margin standpoint.
So — and this vertical historically has operated at different levels of margins. So we’ve kind of tightened the utilization and did a good job of allocating the bench and managing supply-chain holistically to protect the margins, right? So I think that is something that you know, we will continue to be focused on and we will continue to do you. So that is one element. On clients, again, we don’t — you know, it’s a complicated correlation that you’re doing to say the top account has been grown, et-cetera, because it’s an LTM to LTM comparison, the way we report it.
So you know, in this quarter, all I can say is with strong Q-o-Q in top-10 and we had a strong Q going to 11% to 30% also, right? So it’s been a little holistic growth driven across obviously some customers would not have gone in some customers. But I think it’s important to look at it at a basket, right? We can’t really micromanage metrics like that.
Manik Taneja
Sure. And if I can in one more question. If I look at your longer-term performance on margins and it has been at the for almost now seven, eight years. In the initial years when the transformation at was playing out, we did see an improvement in profitability as the growth began to improve. And in the more recent past, past through periods of high-demand or through pressures that we’ve gone through in the last couple of years, our margins have been very. So would it be fair to assume that for us margins will not benefit from any operating leverage even if growth inputs. Is that the way to think about it?
Aravind Viswanathan
But not really, right. There is a range where we have given and we think that you know we have an ability to improve. I think there are a lot of puts and takes, right? There are too much of variability from a demand environment standpoint. I would say — I would rather reframe this question like this, right? I think our priority right now is to convert on our pipeline that we’ve built, right, and convert the wins to revenue, right? And that’s the biggest focus right now. We continue to stay focused and disciplined on margin. But if you ask me, margin improvement is not an independent drive that we are running as part of, let us say, driving the growth trajectory to be a lot more consistent in terms of our revenue growth.
Nitin Rakesh
Sure. If I can just add there, right. Just to add one last bit to that comment. I think the ability to drive margin growth is very much in our hands. We decide not to make a certain degree of investments. Operating leverage will definitely come into play as we convert some of these large deals because that’s how we actually build long-term sticky platform-based revenues. So I think we are very aware of the opportunities that come with it. But in the current phase, the environment and the competitive intensity and the shift in landscape with AI, I think it’s the prudent thing to do is to focus on growth and not try to do growth and margin expansion at the same time.
Manik Taneja
Sure. Thank you for that explanation. Wish you all the best. Thank you.
Operator
Thank you. The next question is from the line of — sorry, next question is from the line of Dipesh from Emkay Global Financial Service. Please go-ahead.
Dipesh Mehta
Yeah. Thanks for the question with me. Nitin, just want to understand, let’s say earlier we said pipeline could be closer and closer to revenue or some of those earlier was impacted. Considering in last one, one and a half months, whether you find any changes to some of those conversions? Second thing is about win rate.
Now if I look, let’s say, our win pipeline, fairly strong growth over last many quarters we have reported in terms of the way pipeline is shaking up. So partly it also start getting reflected into close. And if I look, let’s say, last few quarters, the inflows are also very strong. Considering some of the earlier link to revenue conversion kind of narrative the way you answer. Do you expect this revenue growth momentum what we have started building is more sustainable, more durable during one or two-quarter here as well, that it will be more durable and sustainable? But in your overall, it doesn’t come out. So it doesn’t get overall thought process, how do you think these things could play-out?
Nitin Rakesh
Again, good question. I mean, I answered parts of that already, Pipesh. So let me just give you a quick summary answer again. You’re absolutely right. The deal conversion pace picked-up. So that obviously has translated to some revenue conversion pace that we’ve seen in Q4. I think at this point, we just want to make sure that we continue to get the trajectory of bringing growth back and be a little bit more sustained and consistent about it. Not every quarter will be the same.
There will be things that we can see and there’ll be things that we can’t see. But having said that, that’s exactly the direction of travel. But instead of coming out-of-the gates and telling you all our challenges are behind us and now we’re going to grow consistently every quarter at a healthy cliff, we’re just taking an approach where we want to just make sure that we have enough and more momentum built-in and early indicators are pipeline, which is very healthy, the indicators of recent TCV wins also healthy.
So let’s just give it a quarter or two for us to make sure that we have the ability to get their own consistency in our own execution because we are dealing with a lot of parts here. So I think that’s the way I would you ask you to think about it. I don’t think there is any debate in the objective or the direction of travel, which is consistent quarter-on-quarter growth and from an organic standpoint?
Dipesh Mehta
Understood. And last question is on the win rate side, let’s say, in last six to eight quarters, can you provide some sense, however, because pipeline is very strong, I just want to understand how win rate is changing or playing out for us.
Nitin Rakesh
Yeah, I don’t think we’ll give that metric out per se, but I think again if you see the metrics around new-gen deals, now. Now we started talking about AI infused or AI-led deals or even the proactive deals, I think the win rate has actually been pretty steady. We have work to do in certain segments, right? And in those segments, we do expect the strategic engagements team to come in and play a role and that’s how they started to do it. But that’s what they started to do. So if anything, I think we would expect the win rate to improve. The pipeline has already improved and hence, we gave the confidence that the TCV number at least for the foreseeable couple of quarters should be healthy.
Operator
Thank you. Next question is from Ashwin Mehta from Ambit Capital. Please go-ahead.
Ashwin Mehta
Yeah, thanks for the opportunity and congrats on a decent set of numbers. One question, Nitin, in terms of — say, if I look at your on-site contributions, it’s up almost 8% over the last six quarters. And in absolute terms, your offshore revenues have fallen. So one, I wanted to get a sense in terms of nature of these deals and when do we start to see, say, the savings being given out to the clients in terms of moving them offshore or is it different? And secondly, we manage margins pretty well despite the fact that there has been such a high bump-up in terms of onsite. So as you go-forward and try and give savings to clients, why shouldn’t the margins improve?
Nitin Rakesh
The way I will answer that question is, I think there are a couple of assumptions in your thesis that I would like you to revisit, because that’s the shift we are going through in the industry. I talked briefly about it, but we are moving from a people-based services model to a text-based solutions model. That doesn’t mean that cost-to-serve at our end is not important or location is not important. But that definitely gives us an opportunity to not be tied to a rate card that may have a lower-margin for onshore and higher-margin for offshore. So that’s the first assumption that is starting to get challenged, questioned, addressed, monetized.
If we are going to infuse the tech platform, we have to find a way to actually make sure that the tech platform is giving us something more than just a differentiation, right? And hence, the assumption that onshore — higher onshore revenue means lower-margin, I don’t think holds true, especially because of this migration from services to solutions.
Second, I’ll just give you a data point. If you looked at Q4 numbers, the offshore headcounts actually ticked up. So it means the model today is right shoring, right solution, right tech stack, right tech infusion and then you continue to optimize and find ways to not only expand what you can offer back to the customer, but also try to keep some back with you. So in the longer-term, and I’m not going to put a timeframe on what longer-term means, if the and the migration plays out well, then you’re right, you potentially have an opportunity to expand the margin. Now whether you keep it in your P&L or you put it back-in the business is a call we’ll take if we get to the happy place.
Ashwin Mehta
Thanks,. Thanks for the clarification thank you very much.
Operator
Ladies and gentlemen, we’ll take that as our last question. I now hand the call-back to Mr Nitin for closing comments
Nitin Rakesh
Thank you guys for giving us the time. I know it was early in the day and I’m energized by our progress on the opportunities ahead. We have a lot of work to do given that we are dealing with a certain set of variables that we necessarily cannot control, but we continue to be laser-focused on execution and growth and our tech leadership and AI portfolios are helping us attract new customers to our existing customers and win larger deals. With that, on that note, we look-forward to speaking to you guys again at the end of our Q1 earnings. Thank you again.
Operator
Thank you very much. On behalf of Emphasis Limited, that concludes this conference. If you have any further questions, please reach-out to the Emphasis Investor Relations team at investor.relations@emphasis.com. Thank you for joining us and you may now disconnect your lines. Thank you.