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Transitioning from Services to Platform

We attended MPHL investor day, the company is shifting its operating model from traditional services to a combination of subscription/ARR +implementation + managed service model. The new operating model revenue mix is in low-single-digit that it aims to scale to 20-30% in the medium term. With those efforts, the company launched Mphasis Tria, its new enterprise AI platform to capture institutional memories and derive ontologies on top, progressively shifting from bespoke service efforts to recurring service model. The platform-led service approach would help drive business accountability, owning decisions and enterprise AI governance, in a way de-risking the business outcomes and scale AI transition. On business momentum, the company highlighted strong deal traction with pipeline growing 4x over 18 months, the large deal (USD100m+) concentration mix has improved notably to 29% in FY26 vs 18% in FY25. With this change in mix, the average deal size has also improved to USD75m in FY26 from USD54m in FY25. MPHL is doubling down on consolidation deals and gaining wallet share on blue-chip accounts. Although the constructs of these deals are growth and margin supportive, but it is backed by upfront capital allocations, and measured risk that is tied to scaling presumptions. We might have a down-side risk to our cash conversion (FY27E/FY28E), if a similar deal construct were to escalate going forward. We maintain our revenue and margin estimates for FY27E & FY28E. Reiterate our BUY rating with an unchanged TP of INR 3,000.

Mphasis Tria:

Mphasis launched Tria, an Enterprise Agency Platform that integrates enterprise knowledge, causal decision-making, and agentic execution into a single governed system to help clients convert AI capability into measurable business outcomes, priced as platform fee + implementation + managed services. The platform is delivered through two product lines - Mphasis Modernize (tech, operations and process transformation) and Mphasis Optimize (commercial and operational performance improvement).

Sustained investments:

Management highlighted that sustained investments in AI platforms (~1.5% of revenues), strategic engagement teams (~0.3% of revenues), and continued capability building and client engagement have driven meaningful improvement in deal metrics, with pipeline growing 4x over 18 months and average deal sizes increasing from $54 Mn to $75 Mn. Management noted that had these investments not been made, margins would have been ~200 bps higher; however, given the returns on these investments, the company will continue to invest, keeping operating margins within the guided band of 14.75–15.75%.

Shift in Business model:

MPHL is transitioning its business model from traditional timeand-material services to a platform-led, outcome-based model with a growing subscription and ARR revenue stream, currently at low single-digit revenue mix but targeted to scale to 20-30% in the medium term. As ARR mix improves, management expects better gross margins; however, with sustained investments to drive this transition, operating margins are expected to remain within the guided band

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