As the Indian IT services sector faces demand uncertainty, especially blamed on tariffs imposed by US President Donald Trump, Tech Mahindra’s Chief Operating Officer, Atul Soneja, says the country remains crucial for long-term stability and scale. The IT major, one of the industry’s top five leaders, derived 49% of its $1,564 million revenue from the Americas in Q1 FY26, but growth in the region declined by 5.9%. Meanwhile, earnings from Europe for the quarter ended June 30 grew by 11.7%, contributing 26% to the overall topline.
“In Q1, Europe delivered strong growth, reflecting accelerated digital transformation across telecom, BFSI, and manufacturing. This validates our strategy of focusing on priority markets and deepening local partnerships. While client decision-making in the US is currently more measured, the market remains critical to our business. We will continue to invest in strengthening relationships and expanding capabilities there,” Soneja said in an exclusive interview with Outlook Business.
He added that while Europe offers near-term momentum, the US provides long-term stability and scale. The Tech Mahindra executive also discussed the company’s financial turnaround programme, Project Fortius, officially launched in April 2024, which aims to achieve a 15% operating margin by FY27.
Soneja further highlighted how the company’s AI and generative AI solutions are creating a stronger pipeline of outcome-driven deals. Here the edited excerpt of the interview.
Mr. Soneja, I’d like to start with Project Fortius and its key goal of improving the operating margin to 15% by FY27. In Q1, you moved closer to that target, with EBIT margin up 60 bps QoQ at 11.1%. But given the uncertain macro environment the sector is operating in, does this make the goal more challenging?
Project Fortius continues to demonstrate its effectiveness in driving structural efficiency and building a future-ready delivery engine. Our seventh consecutive quarter of margin expansion in Q1 reflects the program’s discipline and impact. The initiative is anchored on principles of LEAN, embedding AI across applicable projects, and driving productivity improvements at scale.
This structured approach ensures we eliminate inefficiencies, optimize costs, and enhance delivery quality. Despite the dynamic macro environment, our results highlight the resilience of this model. With consistent execution, focus on profitable growth, and the adoption of AI-first practices, we are confident of steadily progressing toward the 15% margin ambition by FY27 while strengthening our competitiveness.
In the last conference call, management said one of the levers to improve margins is by increasing offshoring in fixed-price contracts and enhancing execution. Could you give more colour on how Tech Mahindra plans to achieve this, and whether AI is part of the strategy?
Margin expansion is supported by a combination of higher offshoring, improved execution in fixed-price contracts, and productivity enhancements. Rather than focusing on metrics, our strategy is about optimizing the delivery pyramid and embedding automation where it creates maximum impact.
AI plays a pivotal role in this journey, our 200+ enterprise-grade AI agents are transforming delivery by automating routine tasks, improving quality, and enhancing speed. Alongside disciplined project governance and execution excellence, these levers help us structurally improve margins while keeping client outcomes at the core. This balanced approach ensures we scale responsibly, sustain competitiveness, and deliver outcome-oriented projects with efficiency and precision.
The IT services sector has recently seen a ramp-up in M&A deals, whether to boost specific segments or expand in certain geographies. Is it also part of your strategy?
Our three-year roadmap is firmly anchored on driving organic growth and delivering our FY27 commitments on margins and profitability. This is our foremost priority, and the progress achieved in recent quarters reinforces the strength of that strategy. While selective M&A remains a complementary lever, we are disciplined in our approach.
Any inorganic opportunity will be evaluated only if it accelerates strategic capabilities, strengthens client relationships, and aligns with our long-term roadmap. The emphasis, however, remains on execution excellence, operational efficiency, and growth through differentiated offerings. This balanced approach gives us the confidence to meet our FY27 ambitions while positioning Tech Mahindra for sustainable growth beyond.
Tech Mahindra has incorporated a new subsidiary in Saudi Arabia to manage operations in Bahrain and Egypt. Do you think West Asia could contribute more to Tech Mahindra’s revenue going forward? We have seen the RoW geographic revenue contribution consistently rising quarterly.
Our new subsidiary in Saudi Arabia underscores our commitment to West Asia, where we are also managing operations in Bahrain and Egypt. This region is undergoing rapid digital transformation fuelled by national visions and private sector investments, creating significant opportunities in telecom, BFSI, and government services.
Q1 results reflected the growing importance of RoW (Rest of World) in our portfolio, and we expect West Asia to strengthen this trajectory further. We are building long-term relevance in the region by combining our global expertise with local partnerships. We see the region becoming an increasingly important growth engine in the years ahead.
The Communications segment turned net positive in Q1, up 2.8% QoQ. Some analysts expect it to be a key driver of revenue momentum going forward. Can you share more colour on the demand you are seeing in this vertical, and whether it is enough to offset pressures in the manufacturing segment especially in Americas?
The Communications vertical delivered 2.8% sequential growth in Q1, reflecting early signs of stabilization. While it is premature to call it a full recovery, we are encouraged by the resilience shown across our top clients. We are well-positioned to serve evolving customer needs in this sector with deep domain expertise, differentiated capabilities, and a broad spectrum of offerings spanning Comviva, Consulting, Engineering, BPS, and IT services.
Our BPS business continues to strengthen customer engagement by leveraging AI, automation, and analytics to optimize customer experience and streamline operations, further complementing our core Communications portfolio. Additionally, our investments in 5G rollouts and digital platforms create opportunities that leverage our engineering expertise. We remain cautiously optimistic that this sector will gradually improve and eventually become a key growth driver for the company.
Tech Mahindra reported strong deal wins of $809 million in Q1, up 44% on an LTM basis. Could you share more about the nature of these deals, the verticals or geographies driving this momentum, and how this positions you for the coming quarters?
Our Q1 deal wins on a last twelve-month basis reflect clients' strong confidence in our capabilities. The wins are broad-based, spanning Communications, BFSI, Hi-Tech, and Retail, and cover multiple geographies, including Europe and the Americas. Importantly, many are large, multi-service engagements, showcasing our ability to scale relationships and deliver end-to-end transformation.
These outcomes result from disciplined execution, deeper client mining, and the strength of our "AI Delivered Right" strategy. This momentum continues into the coming quarters, positioning us well to drive sustained growth and unlock greater client value.
Many of your peers have seen stronger growth in Europe than in the US. Is this due to tariff-related uncertainty there?
In Q1, Europe delivered a strong growth, reflecting accelerated digital transformation across telecom, BFSI, and manufacturing. This validates our strategy of focusing on priority markets and deepening local partnerships. While currently more measured in client decision-making, the US remains critical to our business. We will continue to invest in strengthening relationships and expanding capabilities there.
The contrast between regions underlines the importance of diversification. While Europe offers near-term momentum, the US provides long-term stability and scale. Our balanced geographic approach ensures resilience, and we are confident of capitalizing on opportunities across both markets as conditions evolve.
Tech Mahindra has deployed over 200 enterprise-grade AI agents across industries. Can you help me understand how these agents have changed your engagement with potential clients? Are they shifting more towards outcome-based deals?
We have been deploying our AI agent solution for quite some time. For us, it's always about AI delivered right, and these solutions have provided a variety of benefits, including creating better productivity, transformational client experiences, and delivering innovative solutions—all with trust, security, and responsibility at the heart of the way these agents operate. Most of the current installs operate in a manner where the outcomes are part of how we have created the end-to-end value propositions for the clients. These have also become reference points for our ongoing proposals and deals we are looking to sign.
Of late, we are also seeing some of these conversations shift from input-based to outcome-based models, where value is measured in tangible business impact. Clients are seeing improvements in customer experience, operational resilience, and decision-making speed. This builds confidence and fosters deeper, longer-term engagements. By automating repetitive tasks, AI agents free our teams to focus on greater value-add activities, co-innovation, and business transformation. This evolution is further creating a stronger pipeline of outcome-driven deals, positioning us as a trusted partner in accelerating enterprise-wide adoption of AI.
Finally, what sort of productivity gains are these AI agents providing in Tech Mahindra’s traditional offerings? Is manual intervention reducing substantially, if you could explain with some examples?
Our AI agents are delivering measurable productivity gains across core offerings. In IT operations, AI-driven monitoring has reduced manual intervention by enabling proactive detection and auto-resolution of incidents. In application development, generative AI accelerates steps such as user stories definition, creation of High-Level designs, coding, and testing, assisting the Business analysts and developer throughout the development chain and shortening delivery cycles.
In customer experience, conversational agents handle queries at scale, driving greater satisfaction levels. These interventions are simultaneously strengthening throughput, quality, and cost efficiency. Manual tasks are being replaced with intelligent workflows, enabling our people to focus on even higher-order innovation. The result is much stronger client value creation and consistent margin improvements across engagements.
