Tech Mahindra Q1 preview: Earnings set to dip QoQ as key segments drag

Tech Mahindra will report its earnings for the quarter ended June on July 16, and analysts expect a dip in profit and revenue sequentially

Tech Mahindra Q1 results preview: The technology giant, Tech Mahindra is expected to post a sequential decline in both revenue and net profit for the quarter ended June amid seasonal headwinds and weakness in key segments.

 

Analysts tracked by Business Standard project a 0.80 per cent quarter-on-quarter (Q-o-Q) decline in net profit to ₹1,184.50 crore for the first quarter of the financial year 2026 (Q1-FY26). Revenues are expected to fall 0.12 per cent to ₹13,367.58 crore amid muted recovery in the telecom and manufacturing segments. 

 

These headwinds will more than offset the tailwinds from new deal ramp-ups, analysts said, as they expect a margin improvement driven by rupee depreciation and cost optimisation initiatives. On a year-on-year (Y-o-Y) basis, the top and bottom lines are likely to rise by 2.78 per cent and 39.11 per cent, respectively. 

 

The IT bellwether will report its earnings for the quarter ended June on July 16, Wednesday. Analysts expect deal closures to be between $600-800 million. 

 

The tech firm reported a profit of ₹1,167 crore for the fourth quarter of the previous fiscal, up 76.5 per cent from the same quarter in the previous year. Sequentially, the bottom line grew 0.7 per cent. 

 

Demand outlook, the nature of deals in the pipeline, US tariff impact and pace of enterprise GenAI adoption will be key to focus on in the management commentary, analysts said.  

Here's how analysts of various brokerages expect Tech Mahindra to fare in Q1: 

ICICI Securities: Analysts at the brokerage firm project a 0.8 per cent sequential decline in constant currency (CC) revenue for Tech Mahindra in the first quarter, citing seasonal headwinds in the Comviva unit, weakness in the automotive sub-segment within manufacturing, and continued softness in the technology vertical.

 

However, the brokerage sees healthy growth momentum in key segments such as banking, financial services and insurance (BFSI), healthcare, and consumer. Deal closures during the quarter are estimated to be in the range of $600-800 million, driven largely by cost optimisation and vendor consolidation initiatives, amid subdued discretionary spending.

 

Ebit margin is expected to remain flat sequentially, as revenue pressure is likely to be balanced by cost savings from the firm's ongoing Project Fortius.

 

Kotak Securities: The brokerage expects Tech Mahindra to report a sequential decline in CC revenue for the first quarter, impacted by continued weakness in the hi-tech vertical and seasonal softness in the Comviva business. These challenges are likely to outweigh the benefits from recent deal ramp-ups.

 

Net new deal wins are projected at $750 million, stable on a Q-o-Q basis and up 40 per cent Y-o-Y. Notably, the deals are being secured at higher margins, bolstering the outlook on profitability.

 

While Kotak expects a solid performance in terms of profitability for the full year FY2026, it anticipates muted revenue growth owing to rationalisation of low-margin businesses and ongoing challenges in the hi-tech segment.  

 

Motilal Oswal: Tech Mahindra's revenue will likely be weighed down by a sluggish recovery in its key telecom and manufacturing segments, which together contribute nearly half of the company’s revenue. While the communications vertical has stabilised, the recovery is expected to be gradual, it said. 

 

On the positive side, deal momentum has improved, with Tech Mahindra outperforming peers. The management is confident of maintaining a sustainable total contract value (TCV) baseline in the range of $600-800 million. Margins are projected to expand by 20 basis points, aided by lower subcontracting expenses and improved sales, general and administrative cost efficiencies. However, the margin upside may remain limited due to weak revenue growth.