Tata Elxsi reported Q2 FY27 operating revenue of Rs 1055.7 crore, reflecting a 2.3% sequential growth in constant currency. EBITDA margins improved by 70 basis points to 21.9%, driven by operational leverage despite annual wage hikes. While the European automotive market remains soft, strong performance in the US and India, alongside new GenAI and aerospace deal wins, has management optimistic for a stronger second half of the year.
Tata Elxsi Q2 FY27: Revenue Reaches Rs 1055.7 Crore, Margins Improve
Operating revenue stood at Rs 1055.7 crore with EBITDA margins expanding to 21.9%.
Reader Takeaway: Strong operational leverage and US/India growth offset wage pressures, though European auto demand remains a key concern.
What just happened
Tata Elxsi released its Q2 FY27 financial results, reporting an operating revenue of Rs 1055.7 crore, a 2.3% growth in constant currency terms. The company’s EBITDA reached Rs 231.4 crore, marking a 7.1% jump sequentially and a 19.7% increase year-on-year. Despite the impact of annual wage increases during the quarter, the company successfully improved its EBITDA margin by 70 basis points to 21.9% through operational leverage and the reversal of one-time costs.
Why this matters
The results highlight the company's ability to maintain profitability even when facing sector-specific headwinds. The growth in the Healthcare and Life Sciences vertical, which management confirmed has bottomed out, is a positive indicator for future revenue stability. Additionally, the focus on diversifying the client base in this segment with new wins like Bayer and Terumo reduces concentration risk.
The backstory
Tata Elxsi has been navigating a complex global environment, particularly in Europe, where automotive OEMs are delaying decision-making. While the Transportation segment grew by 2% due to new cloud-based telematics deals, the broader European market remains a soft spot. Management maintains a wait-and-watch approach for the region, focusing instead on scaling up its GenAI portfolio and aerospace initiatives, including the development of the Shunya eVTOL aircraft with Sarla Aviation.
Risks to watch
Investors should closely monitor the slow decision-making process among European automotive clients, which currently acts as a drag on growth. Furthermore, the company’s ability to sustain margin expansion depends on the execution of its pyramid management plan and whether it can push utilization rates above the current 78% level.
What to track next
The company has projected a better H2 compared to H1. Market participants should watch for conversion of the current deal pipeline in Europe and the impact of the pyramid management strategy, which aims to improve cost efficiency over the next two quarters.