TECHM - Tech Mahindra Limited Share Price

In the Q1 FY26 earnings call, management provided a cautiously optimistic outlook for Tech Mahindra Limited. The company reported revenues of $1,564 million, reflecting a 0.4% growth year-on-year but a 1.0% decline on a constant currency basis. Growth was primarily driven by the Communications, Retail, and BFSI sectors, despite challenges in the Automotive sector and the Field Service business.

Looking to the future, Tech Mahindra expects improved momentum due to increasing deal wins, with the total contract value (TCV) for the quarter reaching $809 million, a 44% increase year-on-year on a last twelve months (LTM) basis. The management highlighted confidence in the ongoing demand for IT services, particularly in Telecom, BFSI, and Retail. Mohit Joshi, CEO, stated that large-deal wins are anticipated to start contributing to revenue from Q2 onward, assuming no significant macroeconomic disruptions.

Key forward-looking points include:

1. Revenue Growth Expectation: Management aims for FY26 to show better performance than FY25, projecting revenue increases starting from Q2, attributed to deal conversions.

2. Focus on Client Relationships: Continued investment in strengthening relationships with large clients, particularly in the Telecom sector, which showed stabilization and growth.

3. Vertical-Specific Strategies: Emphasis on expanding capabilities in digital platforms and adjacent services, particularly in Communications and BFSI.

4. Talent Acquisition and Organizational Changes: Appointment of key leaders and focus on internal talent development seems to augment operational efficiency.

5. Increased AI Integration: A robust AI strategy is expected to yield new revenue streams, with over 200 enterprise-grade AI agents developed.

Overall, Tech Mahindra management sees a solid path forward, characterized by structural improvements and strategic prioritization of growth areas.

Here are the key Q&A session highlights from the Tech Mahindra earnings call on July 16, 2025:

1. Question: "Have you seen any signs of weakness over the course of the quarter because of trade deals or uncertainty?"

   Answer: We've observed a mixed demand environment. The auto sector and manufacturing are notably slow due to increased tariffs and discretionary spending cuts. However, our telco vertical has stabilized, showing positive growth. The large-deal wins will start accruing to revenue from Q2, provided the business climate remains stable.

2. Question: "Do you think it makes it tougher to meet your margin and growth targets given current conditions?"

   Answer: That's a valid concern. When we set FY '27 targets, we anticipated a return to growth in FY '26, which hasn't fully materialized yet. However, we're committed to our margin targets and are cautious in our large-deal approaches, maintaining pricing discipline to avoid unprofitable revenue.

3. Question: "Can you provide granularity regarding the stabilization in telecom?"

   Answer: Yes, we see steady growth across telcos, particularly in Europe. Our India, Middle East, and Africa sectors have faced volatility but new leadership and a global structure should improve our position. The Americas have stabilized after experiencing cuts, and we expect growth moving forward.

4. Question: "What gives you confidence that momentum will strengthen?"

   Answer: There are multiple factors at play, including a focus on enhancing relationships with key clients. Our talent addition, vertical alignments, and operational improvements are showing positive results that support our future growth ambitions.

5. Question: "Regarding manufacturing, could tariffs impact spend in coming quarters?"

   Answer: Yes, the long-term impacts of tariffs may surface later. Our greater auto exposure is in the U.S., which provides some protection. There isn't significant clarity yet, but planning among clients suggests improvements may emerge.

6. Question: "Are you seeing impacts from generative AI on your business?"

   Answer: We're seeing substantial interest in AI use cases, particularly in autonomous networks for telcos and churn reduction in our BPO units. We have developed over 200 AI agents to assist clients, which we believe will enhance revenue opportunities moving forward.

7. Question: "What are your expectations for client metrics reflecting recent account wins?"

   Answer: We've added significant must-have accounts and see early growth from our largest clients. While changes take time to materialize, the early metrics indicate positive momentum in stabilizing and growing our portfolio.

8. Question: "What impact has recent hiring had on your talent pyramid?"

   Answer: Our talent pyramid's restructuring is ongoing; while we have a higher experience average than peers, reshaping will take time. Our recent vast hiring shows our commitment to improving capabilities, particularly in complex areas like AI.

Each response is concise but captures the essence of the discussion and provides relevant data or insights shared during the conference call.