Tech Mahindra Q2 FY26: Progressing Through Transformation with AI Leadership and Broad-Based Growth

Executive Summary of Q2 FY26:

Tech Mahindra, under the leadership of CEO Mohit Joshi, reported impressive Q2 FY26 results, reflecting solid progress in its three-year transformation plan. The company posted revenue of ₹13,995 crore (about $1586 million US), marking a 4.8% quarter-on-quarter and 5.1% year-on-year growth. This revenue growth is Tech Mahindra’s best in the past 10 quarters, boosted by productivity gains, improved execution, and operating leverage from initiatives under Project 40s. Profit after tax stood at ₹1,194 crore, delivering a PAT margin of 8.5%. Strategic deal wins surged by 57% year-on-year with new contracts worth $816 million US, underscoring robust market traction. CEO Mohit Joshi highlighted that the company is halfway through its transformation journey targeted to conclude in FY27.

Key Financial Highlights:

• Revenue: ₹13,995 crore (up 4.8% QoQ, 5.1% YoY)
• EBIT: ₹1,699 crore (up 15% QoQ, 32.7% YoY)
• Profit After Tax: ₹1,194 crore (up 4.7% QoQ)
• EBIT Margin improved by 108 basis points to 12.1%
• Free Cash Flow: $237 million US
• Interim Dividend: ₹15 per share, adhering to a policy of returning over 80% of free cash to shareholders
• IT Headcount: 78,258 (down 459 QoQ)
• Annualized Attrition: 12.8%

Business Segment and Regional Growth:

Growth was broad-based in Q2 FY26. The manufacturing vertical grew 5.2% driven by smart factories, digital twins, and predictive maintenance demand. Financial Services and Insurance advanced 6.2% aided by key deals like JP Morgan Payments. Retail, transport, and logistics jumped 7.2%, fueled by continued e-commerce momentum. Healthcare also contributed positively. The communications segment was the sole weak spot, declining 2.2%, though their largest client in this segment outpaced overall company growth. Regionally, Europe grew 5.5%, Americas declined 2.7%, and the rest of the world saw a slight decrease, indicating a bottom-up recovery despite soft global macros.

AI and Innovation Focus:

Tech Mahindra launched TechM Orion, an agentic AI platform built on NVIDIA’s accelerated computing stack. This platform enables enterprises to automate workflows with over 300 plug-and-play AI agents available through the Orion Marketplace. The company is also involved in the India AI Mission, contributing to the development of a sovereign 1 trillion parameter large language model (LLM), positioning India prominently on the global AI map. Gartner recently rated Tech Mahindra as the global leader in generative AI consulting for future potential, indicating the company’s strong AI credentials.

Deal Wins and Strategic Focus:

The company secured significant net new deals worth $816 million in Q2 FY26, reflecting a 57% increase year-on-year. Clients span sectors such as telecom (AI networking testing automation), global logistics, European telecommunications (autonomous operations), semiconductor equipment, and APAC insurance (AI-powered modernization). These wins affirm the effectiveness of Tech Mahindra’s go-to-market strategy. The company’s transformation plan emphasizes strengthening key accounts, recovering margins through Project 40s, and building future readiness via AI leadership.

Risks and Outlook:

Discretionary IT spending remains constrained, especially in the US, with communications as a legacy business facing challenges. Margin recovery is progressing but not yet complete. Tech Mahindra aims for a 15% EBIT margin medium-term goal while maintaining a conservative approach to M&A. Hiring is selective, with fresher recruitment expected next year and limited H1B dependency (~1% of workforce). Overall, Tech Mahindra’s Q2 results present a cautiously optimistic picture, with deal momentum and AI investments providing positive momentum while the transformation story unfolds.

Investors and followers of India’s IT sector can watch the next two quarters closely to evaluate if the company’s turnaround and strategic bets take sustainable hold. Comments and thoughts on Tech Mahindra’s progress are welcomed.