Tech Mahindra's Q2 Profit Declines 4.5% Amid 'Fragile' Business Conditions

IT firm Tech Mahindra on Tuesday reported a 4.5% decline in net profit to ₹1,195 crore for the quarter ended September 30, 2025. In the same quarter last year, the company had posted a profit after tax of ₹1,250 crore. Notably, Tech Mahindra booked a ₹450 crore one-time gain a year earlier by selling a land parcel in Telangana.

On a sequential basis, Tech Mahindra's net profit rose 4.7%.

The firm’s revenue from operations increased 5.1% to ₹13,995 crore in Q2 FY26, up from ₹13,312 crore in Q2 FY25.

In dollar terms, the company reported revenue of $1,586 million for the September quarter, down 0.2% year-on-year. In constant currency terms, revenue declined 0.3% annually.

CEO Mohit Joshi described the business environment as "maybe improving in parts, but it is still fragile."

"There is unlikely to be any sort of sharp recovery in the near term, but we do see stabilisation and hopefully growth in the second half of the year," he said, speaking to reporters in a post-earnings press conference.

During the quarter, Tech Mahindra's IT services segment grew 1.0% sequentially, while the BPS segment rose 3.2%. EBIT stood at $192 million, with a margin of 12.1%, up 108 basis points quarter-on-quarter.

“This quarter marks the eighth consecutive period of margin expansion, driven by operational efficiency and disciplined execution. Our deal TCV is up 57% year-on-year on a trailing twelve-month basis, supported by strong deal conversions," said Rohit Anand, Chief Financial Officer of Tech Mahindra.

The company has been focusing on operational efficiency, disciplined execution, and cost optimisation as part of its three-year strategic plan, Project Fortius, launched in April 2024. The programme (FY25–FY27) aims to raise operating (EBIT) margins from roughly 6% in FY24 to 15% by FY27.

For the quarter, the board approved a dividend of ₹15 per share. Ahead of its earnings, on October 14, Tech Mahindra shares on NSE closed 1.2% higher at ₹1,469 apiece.

Headcount Decline

Tech Mahindra’s total headcount stood at 152,714 employees at the end of Q2 FY26, with 78,528 in IT, 66,095 in BPS, and 8,091 in Sales and Support. IT headcount of 78,528 was down 1,459 sequentially and 2,090 year-on-year.

"This is, I would say, a marginal reduction in the workforce this quarter. It's not a meaningful reduction," Joshi told reporters, adding that the company continues hiring "where we see opportunities, and in portions of our business where we are seeing growth, we are continuing to add headcount."

The BPS headcount rose to 66,095, up from 60,278 in the previous quarter, while the Sales and Support workforce stood at 8,091, slightly lower than 8,252 in Q1 FY26 and 8,715 in Q2 FY25.

The IT headcount mix comprised 21.7% onsite and 78.3% offshore staff, indicating a stable distribution compared to the previous quarter. IT utilisation declined slightly to 84.4% from 85.0% in Q1 FY26, while attrition rose marginally to 12.8% from 12.6% in the previous quarter and 10.6% a year earlier.

On the impact of the $100,000 H-1B visa fee, CEO Joshi noted that only about 1% of the workforce is on H-1B visas, with the majority of the US workforce consisting of citizens or green card holders, limiting dependence on H-1Bs. He emphasised the company’s focus on strengthening its employer brand in the US, retaining top talent, and leveraging a global delivery network across the Americas, Europe, and other regions. Any changes to the H-1B program would have a limited impact due to the small proportion of affected employees.

Growth Decline in the US

In Q2 FY26, Tech Mahindra reported new deal wins worth $816 million, slightly higher than $809 million in the previous quarter and $603 million in Q2 FY25.

Revenue growth in the quarter was driven by broad-based performance across key verticals and geographies. Among verticals, Retail, Logistics, and Transport saw the highest sequential growth at 9.0%, followed by Manufacturing at 5.3%, and BFSI at 3.8%. Healthcare and Life Sciences grew 2.3%, while Communications declined 2.0%, and Technology, Media, and Entertainment slipped 0.4%. The Others category saw a sharp decline of 8.8% sequentially. Year-on-year, BFSI and Manufacturing led growth with increases of 6.2% and 5.2% respectively, while Technology, Media, and Entertainment fell 8.8%.

Geographically, the Americas grew 2.6% sequentially but declined 2.7% year-on-year. Europe dipped 1.2% quarter-on-quarter but grew 5.5% annually, while the Rest of the World (ROW) contributed 24.8% of revenue, up 1.6% sequentially and down 0.5% year-on-year.

The IT firm’s management highlighted the industry’s resilience and sustainable business model, capable of navigating both high-growth and slow-growth periods. They noted that global economic recovery is expected to drive increased IT spending, though certain discretionary areas, like design, remain slow. Meanwhile, sectors such as aerospace, consumer products, retail, logistics, and life sciences show targeted growth. The company is seeing opportunities in data and AI transformation projects across industries.