Tech Mahindra's Q2 FY26: Sustained Momentum and AI-Driven Growth

Tech Mahindra Limited has delivered a robust performance in the second quarter of fiscal year 2026, showcasing sustained momentum across key financial and operational metrics. The company reported its strongest quarterly constant currency growth in the past ten quarters, a clear indicator of its strategic initiatives bearing fruit. Total revenue for Q2 FY26 stood at $1,586 million, reflecting a 1.6% sequential constant currency growth and a marginal 0.2% year-on-year decline on a reported basis. This broad-based growth was observed across critical verticals including manufacturing, BFSI, retail, travel, logistics, and healthcare, underscoring the resilience and diversified nature of its business model. The company's EBIT margin reached an impressive 12.1%, marking the eighth consecutive quarter of margin expansion, driven by rigorous operational efficiency and cost optimization efforts.

Segment-wise, the performance was a mixed bag but largely positive. The Manufacturing vertical posted a strong 5.2% year-on-year growth, buoyed by demand in smart manufacturing, predictive maintenance, and digital twins, particularly in the Aero and Industrial segments. BFSI also demonstrated healthy growth of 6.2% year-on-year, attributed to focused growth areas and strategic partnerships, such as the one with J.P. Morgan Payment Systems. The Retail, Logistics and Transport segment saw a significant 7.2% year-on-year growth, benefiting from tailwinds in e-commerce expansion and last-mile delivery optimization. However, the Communications vertical experienced a 2.2% year-on-year decline, though management noted stabilization in spend from its largest client. Geographically, Europe delivered a good performance with 5.5% year-on-year growth, while the Americas saw a 2.7% decline due to challenging macroeconomic conditions.

Tech Mahindra's strategic focus on AI and digital transformation continues to be a significant growth driver. The company launched 'TechM Orion', a next-generation agentic AI platform built on Nvidia accelerated computing, designed to enable faster and more autonomous AI solution deployment for global enterprises. This platform, along with the 'TechM Orion Marketplace', offers a robust ecosystem of intelligent AI agents. The company's commitment to AI is further evidenced by its partnership in the 'Indian AI Mission' to develop a sovereign large language model and the training of over 79,000 employees in AI. Strategic alliances with industry leaders like NVIDIA, AMD, J.P. Morgan Payments, FintechOS, Athena, and Abacus Insights are enhancing its capabilities in AI, cloud transformation, payment solutions, and healthcare interoperability.

Looking ahead, Tech Mahindra's management expressed optimism for the second half of FY26, anticipating improved performance driven by ongoing operational efficiencies and enhanced demand visibility. The company remains committed to its FY27 goals, with a clear strategy for continued margin expansion and sustained growth. The Board's recommendation of a Rs. 15 per share dividend reaffirms its disciplined capital allocation policy, returning 85% and above of free cash flow to shareholders. With a strong foundation, strategic AI investments, and a focus on operational rigor, Tech Mahindra is well-positioned to capitalize on future opportunities and deliver long-term value to its stakeholders.