Tech Mahindra Shares Slide Despite Stable Q4; What's Holding Them Back?

Shares of Tech Mahindra declined up to 2% in early trade on Thursday, extending the previous session’s losses, despite the company reporting in-line to marginally better fourth-quarter results.

At around 11 am, the stock was trading at ₹1,437, down 1.75%, after falling 2.6% in the previous session, indicating that investor sentiment remained cautious even as key operational metrics showed improvement.

The muted market reaction comes at a time when the broader IT sector is already under pressure due to weak commentary from peers and concerns around discretionary spending, especially in telecom and global markets.

Margins Improve, Deal Wins Strengthen Turnaround Narrative

Tech Mahindra on Wednesday, reported a consolidated net profit of ₹1,353.8 crore for the quarter ended March 31, a sequential rise of 20.7%. Despite the growth, the numbers fell short of Street expectations.

Revenue for the January–March quarter came in at ₹15,076.1 crore, up 4.7% from the previous quarter. IT revenue, specifically, stood at ₹12,660.8 crore, growing 4.8% quarter-on-quarter.

ICICI Securities said Tech Mahindra is entering the third year of its turnaround journey with improving growth in large accounts and addition of 63 key clients. The brokerage highlighted that the company has strengthened its position in the communications vertical through two mega deal wins and is gradually diversifying into BFSI, healthcare and manufacturing.

The brokerage expects Tech Mahindra to grow around 4–5% YoY in constant currency in FY27, broadly in line with industry growth, and reiterated that margin expansion remains on track with a target of 15% EBIT margin in FY27. However, it maintained a hold rating with a target price of ₹1,390, stating that much of the turnaround progress is already reflected in valuations.

Brokerages See Growth Visibility Improving

In contrast, Motilal Oswal Financial Services retained a positive outlook, reiterating a buy rating with a target price of ₹1,750, implying potential upside from current levels.

The brokerage pointed out that telecom growth has remained resilient despite client-specific concerns, supported by diversification across over 100 global operators and strong deal wins, including a large Europe deal. It also noted that margin expansion is likely to continue, driven by delivery efficiencies, pricing improvements and a higher share of fixed-price contracts.

Motilal Oswal expects Tech Mahindra to deliver around 4.5% YoY growth in FY27, outperforming the broader industry, even as risks from budget cuts and demand slowdown persist.

Similarly, Centrum maintained a buy rating with a revised target price of ₹1,664. The brokerage said the company's improving execution, strong deal pipeline and transition towards an AI-led and consulting-driven model are enhancing earnings visibility.

Centrum expects Tech Mahindra to deliver CAGR of 8.1% in revenue, 15% in EBITDA and over 20% in profit over FY26–FY28, supported by better client engagement and margin expansion.

Demand Concerns, Valuation Debate Keep Stock Under Pressure

Despite improving fundamentals, concerns around demand visibility continue to weigh on sentiment. The company's growth outlook remains modest, with industry growth expected at 2–5%, and client-specific budget cuts in key verticals remain a risk.

While strong deal wins provide revenue visibility, conversion timelines and stability of client spending remain key monitorables. In addition, elevated valuations after the recent rally have led some brokerages to adopt a cautious stance.

The divergence in views reflects the current phase of the company, where operational improvement is visible but sustained growth acceleration is yet to fully play out.

Tech Mahindra's Q4 performance highlights the ongoing turnaround story, supported by strong deal wins, improving margins and better execution. However, the split in brokerage views highlights a key market debate around whether the recovery is already priced in or if further upside remains.

In the near term, the stock is likely to remain sensitive to demand trends, deal conversions and broader IT sector sentiment, even as its medium-term outlook continues to improve.