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Improved execution with accelerated AI led focus to drive growth

MPHASIS is witnessing increased traction in AI Ops, Data & AI Modernization spends with more of GenAI & Agentic AI larger outcome-based deals. The company’s large deal pipeline is up 40% QoQ with The highest-ever TCV booking of USD 760Mn seen in Q1FY26. A robust AI-led pipeline & steady rate of deal conversions reflects management’s strong execution capabilities, which, we believe, could result in MPHASIS delivering a strong performance ahead. Hence, we have revised our estimates & expect Revenue/EBIT/PAT to expand at a CAGR of 9.8%/ 10.9%/ 11.6% over FY25–FY28E. Given this outlook, we maintain our rating to ADD. As we roll forward to FY28 estimates & consider average of FY27E & FY28E EPS of INR 117.4, implying a PE multiple of 25x (earlier 26x based on FY27 EPS). Thus, we have revised our Target Price upwards to INR 2,935.

MPHASIS reports steady Q1FY26 led by strong execution across spectrum

• Reported Revenue for Q1FY26 stood at USD 437Mn up 1.8% QoQ (vs CIE est. at USD 440Mn), while in CC terms revenues grew by 1.1% QoQ. In INR terms, revenue stood at INR 37,325Mn, up 0.6% QoQ.

• EBIT for Q1FY26 came at INR 5,709Mn, up 0.7% QoQ (vs CIE est. at INR 5,784Mn), while EBITM remained flat QoQ to 15.3% (vs CIE est. at 15.4%).

• PAT for the quarter came in at INR 4,417Mn, down 1.1% QoQ led by higher Finance cost and higher ETR due to minimum tax expenses in certain subsidiaries (vs CIE est. at INR 4,545Mn).

Robust pipeline augurs well for 2x of industry growth guidance in FY26E: MPHASIS reported strong TCV growth of 95% QoQ and 138% YoY, reaching USD 760Mn in Q1FY26, with 68% of the pipeline being AI-led (vs. 30% in Q1FY25). The quarter included 4 large deals—three over USD 100Mn & one over USD 50Mn—driven by wins in BFS, Insurance, & TMT. Key client themes included cost efficiency & vendor consolidation. Revenue grew 1.8% QoQ to USD 437Mn, supported by 1.6% QoQ growth in Direct business. BFSI was the topperforming vertical, with Insurance up over 20% QoQ and BFS up 6%. TMT growth was muted, and Logistics & Transportation declined 46.5% QoQ due to customerspecific investment pauses, though recovery is expected with new deals in the pipeline. Among services, APPS rose 3.6% QoQ, while BPO & ITO declined 2.7% & 5.3%, respectively. Regionally, Americas grew 3.2%, ROW 6.8%, while EMEA declined 15.5% due to a major client ramp-down.

EBITM guidance increased to 14.75%- 15.75%: Mphasis reported flat EBITM at 15.3% in Q1FY26, driven by a 400bps QoQ rise in offshore utilization to 82%, supported by a strategic shift to fixed-price projects (43.1% vs 36% in Q4FY25). This shift enabled higher productivity with reduced headcount (net reduction 379 employees QoQ), resulting in non-linear revenue growth. This is reflected on overall margins which stood stable, despite some pressure in logistics vertical due to investments in a top client. The company is focusing more on acquiring differentiated skill sets as needed rather than hiring freshers

Highest revenue growth in last 8 quarters

Revenue to grow at 9.8% CAGR over FY25-28E

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