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Near-term growth remains soft; deal ramp-ups pushed out Slower deal ramp-ups and GSE client weakness weigh on 3Q growth

* Hexaware Technologies (HEXT) reported revenue of USD412m in 3QCY26, rising 1.7% QoQ in CC terms vs. our estimate of 3.0% QoQ CC. Technology/Banking/ Financial Services grew 7.1%/6.6%/3.0%, whereas Travel declined 3.6% QoQ. Adj. EBIT margin stood at 13.8%, broadly in line with our estimate of 13.8%. Adj. PAT rose 20%/7.2% QoQ/YoY to INR3.9b (our est. of INR4.0b).

* For 9MCY26, revenue/Adj. EBIT increased 14.5%/6.1%, while PAT declined 2.7% YoY (in INR terms). In 4QCY26, we expect revenue/Adj. EBIT/PAT to grow 12.5%/18.5%/11.7% YoY (in INR terms). We reiterate our BUY rating with a TP of INR630 (based on 22x CY27E EPS), implying ~18% potential upside

Our view: Execution on delayed deals will shape the CY27 growth outlook

* HEXT reported revenue growth of 1.7% QoQ CC in 3QCY26, below our estimate of 3.0%, as softness at a large GSE client and slower-thanexpected deal ramp-ups weighed on performance. Following the CEO transition, management has chosen not to provide guidance for now. Achieving the lower end of its earlier CY26 revenue growth guidance of 6– 7% YoY in USD terms would require a steep recovery in 4Q, which, in our view, appears challenging given the usual seasonality, lower working days, and the continued GSE client headwind. HEXT is likely to deliver CY26 revenue growth of ~5.1% YoY in USD terms, below its earlier guidance.

* 4Q growth outlook has weakened; deal ramp-ups remain a key monitorable: Earlier, management expected delayed deal ramp-ups to support growth in 4Q despite seasonal furloughs. However, the latest commentary suggests that some deals may ramp up only in 1QCY27, while the GSE client headwind is expected to continue.

* Management indicated that the deals remain active, with delays largely related to timing rather than lost deals. We believe the pace of deal conversion and ramp-ups will be key to the growth outlook over the next few quarters.

* Margins to remain broadly range-bound in the near term: Adjusted EBIT margin stood at 13.8% in 3QCY26, in line with our estimate. Management narrowed its CY26 margin guidance to 13.0–13.5%. Seasonal weakness and merit hikes effective October are likely to weigh on 4Q margins, partly offset by operational improvements and benefits from the Netherlands restructuring. The restructuring is expected to provide around 40bp of annual margin benefit. We believe the company’s ability to offset near-term cost pressures through operational improvements will remain a key monitorable. We estimate CY26/CY27 EBIT margin of 13.4%/13.7%.

* Performance remains mixed across verticals; Banking and H&I expected to support growth: Banking grew 6.6% QoQ and 13.5% YoY, with broad-based growth across geographies, while Healthcare & Insurance remained healthy on a YoY basis despite a marginal sequential decline due to lower asset revenue. In contrast, Travel & Transportation declined 3.5% QoQ and 8.5% YoY, and the company expects continued weakness through CY26. Financial Services grew 3.0% QoQ, although a client-led cost-optimization exercise is expected to remain a headwind in 4Q. We expect growth to remain uneven across verticals, with Banking and H&I partly offsetting weakness in Travel and Financial Services.

Valuation and view

* While HEXT has discontinued providing revenue guidance following the CEO transition, the softer-than-expected 3Q performance and continued clientspecific headwinds point to CY26 growth of ~5.1%, below its earlier guidance of 6–7%. We have cut our estimates by ~3% to factor in slower deal ramp-ups and continued weakness in the GSE client. However, management indicated that delayed deals remain active, with some ramp-ups likely to extend into 1QCY27. We expect deal ramp-ups and continued strength in Banking and H&I to support growth over the coming quarters.

* HEXT’s adjusted EBIT margin remained in line with our estimates at 13.8% in 3QCY26, while the CY26 margin outlook is now 13.0–13.5%. We estimate EBIT margins of 13.4%/13.7% for CY26/CY27. We reiterate our BUY rating with a TP of INR650 based on 22x CY27E EPS (earlier 23x), implying ~18% upside

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