Mphasis Q2 Earnings Show Steady Growth, Strong Deal Wins Boost Outlook

Mphasis Ltd. announced its second-quarter earnings, indicating a period of steady financial performance and strong future prospects. Revenue saw a modest increase of 1.7% in US Dollar terms and 2% in constant currency sequentially. The company successfully maintained its Earnings Before Interest and Tax (EBIT) margin at 15.3%, unchanged from the previous quarter. Profit after tax (PAT) rose to ₹469 crore, up from ₹441.7 crore in the prior quarter and ₹423.3 crore in the same period last year. The company's rupee revenue stood at ₹3,901.9 crore for the September quarter. A key highlight was the significant increase in deal wins. The company secured $528 million in new deals during the quarter. This brings the Total Contract Value (TCV) for the first half of fiscal year 2026 to $1.28 billion, which is a notable achievement as it surpasses the entire TCV of $1.26 billion for fiscal year 2025. The order pipeline is at record levels, growing 9% sequentially and 97% year-on-year, with 69% of this pipeline being AI-led. Mphasis reported its highest-ever revenue and Earnings Per Share (EPS) growth, driven by strong performance in the insurance and Technology, Media, and Telecommunications (TMT) sectors. The Americas region saw sequential growth of 2.1%, and the Banking and Financial Services (BFS) vertical continued its momentum with 13.8% growth. The logistics and transportation vertical is poised for sequential growth from the next quarter. Management expressed confidence, expecting industry growth to be more than double, supported by their performance and the conversion of strong TCV wins. They have set a target for operating EBIT margin to remain within the 14.75% - 15.75% band.

Impact: These results are positive for Mphasis investors. The robust TCV wins and strong order pipeline, especially the AI-led component, indicate potential for future revenue growth. The maintained margin and profit increase further solidify the company's financial health. This could lead to increased investor confidence and potentially a positive impact on the stock price. Rating: 7/10

Difficult Terms: * **EBIT (Earnings Before Interest and Tax)**: This is a measure of a company's operating profit, showing how much money it made from its core business operations before accounting for interest expenses and income taxes. * **EBIT Margin**: This is the EBIT expressed as a percentage of revenue. It indicates the profitability of a company's operations. * **Constant Currency**: This is a way of reporting financial results that removes the effects of fluctuations in foreign exchange rates, providing a clearer picture of underlying business performance. * **TCV (Total Contract Value)**: This is the total value of a contract over its entire duration, typically used in service-based businesses like IT services. * **PAT (Profit After Tax)**: This is the company's net profit after all expenses, including taxes, have been deducted. * **EPS (Earnings Per Share)**: This is the portion of a company's profit allocated to each outstanding share of common stock. * **Verticals**: In business, these refer to specific industries or market segments that a company operates in, such as insurance, banking, or telecommunications. * **AI-led**: Refers to projects, deals, or pipelines that are driven or significantly involve Artificial Intelligence.