Tech Mahindra Beats IT Blues With Q1 Profit Surge, But Brokerages Still Sound Cautious

Shares of Tech Mahindra slipped 2% on July 17, despite the IT services major reporting a better-than-expected earnings performance for the April–June quarter of FY26. While the company posted a strong rise in profit, investor sentiment remained subdued due to a dip in revenue and continued weakness in its key Americas market.

Brokerages also offered mixed views, balancing the company’s solid deal wins and margin resilience against concerns over top-line pressure and macroeconomic headwinds that may impact growth and profitability going forward.

For the first quarter of FY26, Tech Mahindra reported a 33.95% year-on-year increase in net profit, with bottom line coming at ₹1,140.6 crore, compared to ₹852 crore in the same period last year. This came despite muted revenue growth and a decline in its largest market, the Americas. Revenue for the quarter stood at ₹13,351 crore, up 2.7% on year, but sequentially, revenue declined slightly, in line with expectations of a dip in constant currency terms.

What kept sentiment upbeat was the robust order pipeline. Net new deal bookings came in at $809 million, ahead of analyst expectations of $700–750 million, and up from $798 million in the March quarter. Deal wins over the past twelve months have risen 44% year-on-year, hinting towards a positive demand trend.

The company’s management attributed the margin gains to continued execution of Project Fortius, an internal programme aimed at improving operational efficiency. “We have delivered seven consecutive quarters of margin expansion, a clear reflection of the discipline and focus across our organisation,” said CFO Rohit Anand. The project aims to lift operating margins to 15% by FY27, a key target in Tech Mahindra’s medium-term strategy.

Despite these gains, revenue from the Americas, Tech Mahindra’s largest geography contributing nearly half of its topline, declined 5.9% year-on-year, hinting towards challenges in core markets. Accordingly, it tapered enthusiasm among some analysts, particularly as the broader IT sector continues to battle macroeconomic uncertainty and patchy client spending.

Brokerages responded with a mixed tone. International firm CLSA maintained an ‘outperform’ rating with a ₹2,020 price target, citing strong deal wins and margin stability, though it flagged slower revenue as a concern. CLSA expects the company’s topline to strengthen from Q2 onwards, with full-year FY26 revenue likely to surpass FY25 levels.

HSBC, which has a ‘buy’ call and a ₹1,900 target, said the results were in line with the firm’s FY27 strategy, though it noted that delays in margin expansion remain a risk. Meanwhile, Nomura also maintained a ‘buy’ rating with a ₹1,810 target, highlighting the strong deal pipeline as a potential driver of growth through FY26.

However, Jefferies retained its ‘underperform’ stance with a ₹1,400 target, and Morgan Stanley held an ‘underweight’ rating with a ₹1,555 target, both pointing to soft revenue performance and concerns around rich valuations. The brokerages noted that the profit beat was aided by higher other income, and that sustaining growth and margin improvement would be key challenges ahead.

Analysts across the board acknowledged Tech Mahindra’s efforts in stabilising its business after a challenging FY25, but were cautious about drawing clear conclusions too early. While order wins have clearly recovered, questions remain over the pace of deal conversion, the outlook for manufacturing, and the ability to maintain momentum amid global macro pressures.

Following underwhelming earnings from larger peers TCS and HCLTech, the market had been looking to Tech Mahindra for direction this quarter. While the company has delivered a better-than-expected start to the new fiscal year, especially on the profitability front, it will likely need to sustain these gains and translate its order book into top-line growth before brokerages fully turn the corner on their cautious stance.