Tech Mahindra Q1 Preview: Analysts See Muted Revenue, Margin Improvement Likely

Tech Mahindra is expected to post muted revenue growth in its June quarter results, set to be announced on Wednesday, with brokerages projecting a modest sequential rise in profitability and margins.

Analysts anticipate minimal top-line momentum due to continued weakness in telecom and manufacturing verticals, even as cost-efficiency measures may aid margins.

Brokerages broadly agree that revenue growth is likely to remain under pressure amid subdued client spending, though the company could offer a better outlook on margin recovery and execution of strategic initiatives. Most analysts do not expect any material upgrades to the full-year guidance, citing the ongoing macro uncertainties and a weak deal conversion environment.

Revenue is expected to remain largely flat at Rs 13,422 crore from Rs 13,384 crore in the previous quarter, according to Bloomberg’s consensus estimates. The company’s EBIT is projected to rise 5% sequentially to Rs 1,480 crore. The EBIT margin is seen improving to 11.02% from 10.49%.

• Revenue seen little changed at Rs 13,422 crore versus Rs 13,384 crore

• EBIT seen 5% higher at Rs 1,480 crore versus Rs 1,405 crore

• EBIT margin seen at 11.02% versus 10.49%

• Profit seen 3% higher at Rs 1,198 crore versus Rs 1,167 crore

Here is what analysts are expecting from Tech Mahindra in its Q1 results:

• Expect subdued Q1 revenue growth

• Expect the company to continue to underperform peers on revenue growth

• See risks to the 15% FY27 margin guidance

• Continue to see a subdued outlook for telecom and manufacturing verticals, where Tech Mahindra has relatively higher exposure

• Will monitor momentum in large deals, which, as per the company, have been seeing an improving trend

• Expect EBIT margin to improve on a sequential basis driven by cost efficiencies

• Headcount to remain flat on a sequential basis

• Expect soft quarter supported by FX with limited chances of guide-ups

• While signings are likely to remain tight, pressure from AI deflation is likely to filter through client demand for price cuts that is likely to keep revenue conversion light

• Revenues expected to rise by 1% due to cross currency tailwinds driving a 1% earnings upgrade across estimates through financial year ending March 2028

• In this uncertain macro environment where growth will be a challenge for all companies, Tech Mahindra could benefit from its self-help margin story

• Expect CC revenue to decline 0.5% sequentially

• Communications vertical to be impacted by Comviva seasonality while Enterprise to be impacted by likely softness in Manufacturing, Hitech

• Expect margins to expand by 50 basis points led by efforts under Project Fortius

• Watch out for: Progress of the strategic initiatives by CEO Mohit Joshi, Telecom vertical outlook, margins levers, discretionary spend outlook

• Expect Telco business to be stable and growth to be led by non-telco business

• Revenue from largest telco client should have also stabilised from Q1

• Expect some softness in manufacturing offset by growth in banking and other verticals to hold steady

• Expect revenue in dollar terms to grow by 0.7% quarter-on-quarter aided by positive constant currency impact

• Key focus areas would be the update on margin expansion roadmap, client tech spending behaviour in communications, and scale-up progress at other divisions particularly BFSI and manufacturing

• Revenue growth may see a decline of 1.0% QoQ in constant currency terms due to a muted recovery in telecom and manufacturing

• While the communications vertical has stabilised, recovery may take time

• Margins are expected to rise by 20 basis points, supported by lower subcontractor costs and SG&A efficiency

• Deal wins have picked up pace, with Tech Mahindra outperforming peers

• Outlook on segments such as BFS vertical and CME, especially in US and deal TCV, will be the key monitorable