Mastek Reports Q2 Revenue of Rs 1,018.7 Crore

Profit stands at Rs 105.7 crore with a 14.4% EBITDA margin.

Reader Takeaway: Revenue growth remains steady, but margin compression and a softening order book require close investor monitoring.

What just happened

Mastek reported a resilient top-line performance for the quarter, with revenue reaching Rs 1,018.7 crore, a 3.4% sequential increase. In constant currency terms, USD revenue rose by 2.4% sequentially to $107.3 million. However, profitability saw a slight contraction, with EBITDA margins settling at 14.4%, reflecting a 100-basis point decline compared to the previous quarter.

Why this matters

The margin dip was primarily attributed to the impact of annual salary increments and ESOP costs, which exerted a 190-basis point headwind. While management noted that AI-led productivity gains partially mitigated these costs, the shift in project mix—specifically in the UK market—weighed on overall profitability. Investors should note the company’s stated intent to recover at least 160 basis points in the medium term.

Business and Operational Updates

Mastek is aggressively pivoting toward an 'AI-native' service model, with AI-related engagements now accounting for over 40% of its deal flow. Regionally, the UK business grew 4.1%, driven by strong momentum in Financial Services. Conversely, the company signaled caution regarding order book softness, as its 12-month backlog dipped 7.7% sequentially due to deferred project starts in North America and policy re-evaluations in the UK.

Risks to watch

Key risks include the current softness in the order book and potential margin volatility tied to higher subcon costs for security-cleared personnel in the UK. Additionally, the Middle East remains a source of uncertainty given the ongoing geopolitical environment.

What to track next

Management is currently bidding for large UK-based deals exceeding 100 million pounds each. The ability to convert these large-scale opportunities into revenue will be critical, alongside the company’s progress in achieving its targeted margin recovery through increased operational efficiency.