Artificial intelligence is becoming a bigger part of LTM's business, but the growing contribution is yet to dispel concerns about the company's deal pipeline. AI revenue accounted for 13.4% of quarterly revenue in Q2 FY27, even as total contract value (TCV) fell to a two-year low, reflecting a shift towards shorter-duration AI-led deals.
That disconnect is keeping brokerages cautious. Citi retained its ‘Sell' rating on LTM and cut its target price to Rs 3,590 from Rs 3,620, while Jefferies maintained ‘Underperform' despite raising its target to Rs 3,480 from Rs 3,360. Both flagged weak deal wins and a challenging growth outlook, even as management expects stronger growth in the second half of FY27.
LTM's revenue performance was broadly in line with expectations in the September quarter, but profitability and deal momentum remain key concerns. The company's ability to convert AI-led work into sustained revenue growth, while managing pricing pressure and margins, will be crucial in the coming quarters.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
Why Citi And Jefferies Remain Cautious On LTM
Citi said LTM's Q2 performance was largely in line with expectations, with margins slightly ahead of estimates. However, TCV declined year-on-year, while revenue from a top client fell, keeping client concentration on the watchlist.
READ | IndiGo Faces Fuel Cost Squeeze As Jefferies, Nomura Stick To 'Buy'; Airfare Rules Loom
The brokerage retained its Sell rating and lowered its target price to Rs 3,590 from Rs 3,620. It highlighted a shift towards shorter-tenure AI-centric deals, which can enable faster revenue realisation but may offer less visibility into longer-term order inflows.
Financial Services remained a key growth driver, with the Production segment benefiting from a recovery in large deals. However, Technology & Services was affected by seasonal renewals and weakness in the Saudi business. Subcontracting costs also remained elevated.
Citi noted that management remained constructive on growth momentum and expected a stronger second half compared with the first quarter. AI revenues continued to scale, but the brokerage remains cautious about the sustainability of growth.
Jefferies, meanwhile, maintained its Underperform rating but raised its target price to Rs 3,480 from Rs 3,360. The brokerage said revenue growth was broadly in line with expectations, while profitability missed estimates due to lower other income.
It flagged weakness in the Saudi business and seasonal client-specific headwinds. Order inflows declined sharply as the mix shifted towards shorter-duration AI-led deals, with TCV falling below recent run-rate levels. Jefferies also cut its FY27–FY29 estimates and expects margins to remain range-bound as pricing pressure in traditional services offsets efficiency gains.
LTM Q2 FY27 Results: Revenue Grows 1.7%, Profit Falls 4.6%
LTM reported revenue of Rs 11,808 crore in Q2 FY27, up 1.7% quarter-on-quarter from Rs 11,608 crore. Earnings before interest and tax (EBIT) rose 2.2% to Rs 1,839 crore from Rs 1,799 crore.
EBIT margin edged up to 15.6% from 15.5% in the previous quarter. Net profit, however, declined 4.6% sequentially to Rs 1,398 crore from Rs 1,466 crore.
Constant-currency revenue growth stood at 1.1% quarter-on-quarter, compared with 0.3% in Q4, in line with expectations.
The company said the Middle East business affected quarterly growth by around 60–70 basis points, while the Saudi business remained a drag. Technology & Services declined 4% quarter-on-quarter in constant currency, partly due to seasonal renewals and the impact of the Middle East business.
AI Revenue Reaches 13.4% Of LTM's Quarterly Sales
LTM's AI revenue accounted for 13.4% of quarterly revenue in Q2 FY27, up from 12.2% in Q1. This was the highest share among the AI revenue figures provided for LTM, TCS and HCLTech.
For comparison, TCS reported AI revenue of $3.1 billion in Q2 FY27, equivalent to 10.3% of annualised revenue, while HCLTech reported advanced AI revenue of $219 million, or 5.9% of quarterly revenue.
LTM's management said the company was seeing a shift towards shorter-duration AI-led deals that enable faster revenue realisation and shorter transitions. It also intends to begin providing annual contract value (ACV) data to improve visibility into its business.
The rising AI contribution offers a growth opportunity, but the shorter duration of deals and lower pricing for AI-led work remain concerns for analysts assessing revenue visibility and profitability. The key question is whether this growth can translate into stronger, more predictable deal inflows.
Financial Services Drives Growth As Technology & Services Slumps
Financial Services and Production were the main growth drivers during the quarter. On a constant-currency basis, Production grew 3.7% sequentially, while BFSI increased 3.1%. Consumer grew 0.3%.
Technology & Services declined 4% quarter-on-quarter in constant currency, affected by seasonal renewals and weakness in the Middle East, including the Saudi business.
Management expects a recovery in the Hi-tech segment in Q3. It also expects stronger growth in the second half of FY27 and has guided for flat margins for the full financial year.
LTM added around 1,700 freshers in Q2, compared with approximately 1,300 in Q1. Approvals for the Randstad acquisition remain on track for Q3.
What Investors Should Watch Next
The key monitorables for LTM are a recovery in deal wins, the contribution of AI-led contracts to revenue, pricing trends and the performance of Technology & Services. The expected Hi-tech recovery in Q3 and stronger second-half growth will also be important.
Management's optimism about H2 offers a potential counterpoint to the weak deal pipeline. However, Citi and Jefferies remain cautious because shorter-duration contracts, client concentration and pricing pressure could constrain earnings visibility. The rising share of AI revenue is encouraging, but investors will be looking for evidence that it can translate into sustained growth and profitability.
READ | Stock Market Live Updates: Sensex Volatile, Nifty Holds 23,100; PNB Zooms 6%, Axis Bank Down 4%
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
