Tech Mahindra concluded the 2026 fiscal year with $6.38 billion in revenue and record contract wins of $3.79 billion. While the company focuses on margin improvement through AI and new contract models, investors are watching execution risks and current valuation levels.
What Happened
Tech Mahindra concluded the 2026 fiscal year with significant business momentum, reporting revenues of $6.38 billion. A key highlight of the year was the company’s ability to secure a total contract value (TCV) of $3.79 billion, which represents a 42% increase compared to the previous year. This performance, reported recently, reflects a high volume of new business wins. Alongside revenue growth, the company managed to expand its Ebit margins for the tenth consecutive quarter, reaching 13.8%. This consecutive margin growth signals an improvement in operational efficiency for the IT services firm.
The Growth And Margin Story
The company’s ability to win large deals has been a primary driver of its performance. This includes a notable global partnership with Orange Business, which is expected to support revenue scaling through the 2027 fiscal year. While the broader IT services industry is currently projecting growth in the range of 2% to 4%, Tech Mahindra has indicated it aims to outperform this sector average. The demand is currently supported by stability in the manufacturing, banking (BFSI), and retail sectors, along with a recovery in its telecom segment, which had previously faced challenges.
Shifting Business Strategy
For the coming fiscal year, Tech Mahindra is evolving its operational strategy. The company is moving away from a primary focus on cost management to a model centered on higher-value products and efficiency. This includes a greater mix of fixed-price contracts and the use of Artificial Intelligence (AI) for service delivery. Additionally, the company is implementing 'human-plus-agent' pricing models, which aim to deliver services more effectively. These changes are designed to support sustained profitability as the company scales its operations.
Valuation And Business Risks
In a recent research note, HDFC Securities reiterated an 'Add' rating on the stock, setting a target price of Rs 1,500. However, the report also highlighted that the stock is currently trading at a premium valuation, estimated at 19 times its projected FY27 earnings per share, which is higher than some industry peers. This suggests that the stock’s current price already accounts for a significant portion of its growth expectations.
Investors should also consider business risks that could affect future performance. These include potential delays in ramping up large deals, which could push revenue recognition further out. Additionally, a slowdown in spending within the hi-tech and healthcare sectors, along with wider macroeconomic uncertainties—such as geopolitical tensions and changes in trade tariffs—could pressure the company’s growth targets.
What To Watch Next
The primary monitorables for investors include the actual pace at which the newly secured contracts are executed and converted into revenue. Given the company's shift toward fixed-price and AI-driven service models, maintaining the current 13.8% margin trajectory will be a key metric to track in upcoming quarterly results. Investors will also look for management commentary regarding demand sustainability in the telecom and hi-tech sectors, as these are critical for achieving the company's growth targets relative to the broader industry.