Tech Mahindra reported a 2.4% sequential revenue growth in Q2 FY27, supported by strong deal wins. Motilal Oswal raised its target price to Rs 1,950, highlighting margin improvements and growth in communication and retail sectors, even as manufacturing segments faced declines.
Tech Mahindra’s performance in the second quarter of the 2027 fiscal year showed a mix of operational progress and segment-specific challenges. The company reported revenue of USD 1.7 billion, marking a 2.4% growth compared to the previous quarter. This performance was notably ahead of analyst expectations, which had penciled in a lower growth rate.
A key driver for this performance was a rise in operating profit margins, which expanded by 40 basis points to 14.8%. For investors, this margin improvement is a critical metric, as it indicates better operational efficiency within the company’s services. The adjusted profit after tax stood at INR 16 billion, representing a 32.8% increase year-on-year, highlighting strong earnings momentum despite some deviations from analyst profit estimates.
The company’s performance was not uniform across all sectors. The Retail and Communication verticals served as primary engines of growth, expanding by 9.6% and 6.0% respectively. Technology services also contributed with a 2.8% gain. However, the manufacturing segment and other smaller business areas faced pressure, recording declines of 3.9% and 15.0%. This divergence indicates that while specific sectors are driving demand, the company remains exposed to headwinds in manufacturing, which investors often track as a barometer for global industrial spending.
Deal activity remained robust, with total contract value for new deals reaching USD 1,023 million, up 25.4% from the same period last year. This influx of new business is essential for sustaining revenue momentum. Brokerage firm Motilal Oswal has maintained a positive outlook on the stock, setting a target price of Rs 1,950 based on projections for the remainder of the fiscal year. Analysts expect revenue, operating profit, and adjusted profit to continue their growth trajectory, though much will depend on the company's ability to maintain these margins while navigating the ongoing weakness in its manufacturing and secondary business segments.
Investors looking ahead will likely monitor two main areas. First, the sustainability of the margin expansion, as the company works to balance profitability with potential salary or operational costs. Second, the performance of the manufacturing vertical will be a key signal to watch; any recovery or further decline in this segment could directly influence the company’s overall growth narrative in the coming quarters.