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HEXT posted a soft operating performance in 3Q. Revenue grew 1.6% qoq to $411.9mn (1.7% CC), below our estimate. Growth fell short of management expectations due to weakness in a GSE client, softness in T&T, and slower-thananticipated progress in selected large deals. Reported EBITM fell 140bps qoq to 12.2%, while adj for exceptional costs, it was largely in line with our expectations at 13.8%. Among verticals, the management expects Banking, H&I, M&C, and TPP to remain growth drivers, with FS witnessing mixed trends due to continued weakness at one GSE client, while T&T is expected to remain soft amid challenging demand conditions. The company has not provided a 4Q outlook, citing the CEO transition, and intends to tighten its forecasting process to improve forecast accuracy. 4Q margins are likely to face seasonal and merit hike headwinds (~100bps impact; wef 1-Oct), partly offset by better realization and operational improvements, including benefits from the closure of the Netherlands entity (~40bps annual benefit). The management narrowed its CY26 adj EBITM guidance to 13–13.5% (vs 13–14% earlier). Factoring in the aforementioned factors and 3Q performance, we lower our CY26-28E adj EPS by ~0.5-5%. Retain ADD and TP of Rs600 at 20x Sep-28E EPS

Results summary

Revenue grew 1.6% qoq to $411.9mn (1.7% CC) in 3Q, below our expectation of $416.3mn. Sequential growth was led by volume growth and seasonal tailwinds, partly offset by license revenues. Reported EBITM was lower at 12.2%, reflecting exceptional costs of ~160bps, comprising amortization of acquired intangibles (-140bps) and leadership transition costs (-20bps). Adj EBITM improved ~20bps qoq to 13.8%, in line with our estimate, driven by calendar and FX benefits, partly offset by investments and an onshore shift. Reported PAT was also impacted by multiple one-offs, including the SMC earnout reversal (+530bps), partially offset by restructuring cost wrt Netherlands ops (- 150bps) and CyberSolve earnout charge (-110bps). Total headcount grew ~4% qoq to 35,887. IT headcount grew by 386, while that for BPS grew by 995 qoq. What we liked: Momentum in TPP and Banking. What we did not like: Revenue miss, weakness in T&T.

Tech and Banking lead growth; T&T and APAC lag

Revenue growth was led by Tech, Products, and Platforms (7.2% qoq in USD terms), Banking (6.6%), FS (3.0%), M&C (1.8%), Professional Services (0.3%), partially offset by T&T (-3.5%) and H&I (-0.4%). Across geographies, growth was largely led by Europe (3.1% qoq in USD terms) and the Americas (1.5%), offset by a decline in APAC (-1.6%).

New CEO sets 3 priorities for the first 90 days

Over his first 90 days, CEO Vivek Jetley will focus on

1) strategic client engagement

2) improving people and execution through consistent delivery and faster decision-making

3) evaluating investments in industry expertise, differentiated solutions and AI-led offerings. Following this review, he plans to present a strategic roadmap outlining HEXT’s focus areas, investment priorities, and measurable outcomes. The new CEO aims to establish clear expectations and deliver consistent performance, with greater discipline and accuracy in forecasting.

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