Mastek's Q2 FY26: AI-Driven Growth Amidst Macro Headwinds

Mastek Limited, a global provider of enterprise AI, digital, and cloud services, has reported a quarter of consistent performance for Q2 FY26, ending September 30, 2025. Despite ongoing geopolitical and macro uncertainties, the company demonstrated resilience, with operating revenue reaching ₹940.4 crore. This represents a robust 8.4% year-on-year growth and a 2.8% sequential increase, translating to a constant currency growth of 0.2%.

The company's operational excellence and disciplined cost control were evident in its profitability metrics. Operating EBITDA stood at ₹145.5 crore, marking a 6.0% quarter-on-quarter improvement and a 1.7% year-on-year growth. The operating EBITDA margin improved by 46 basis points quarter-on-quarter, reaching 15.5%. Net profit for the quarter was ₹97.4 crore, up 5.9% sequentially. On a normalized basis, excluding an exceptional gain from the base quarter, net profit grew by 14% year-on-year, with a net profit margin of 10.2%.

Strategic Focus and Segment Performance

Mastek's strategy revolves around three key pillars: continued focus on geo diversity, AI as a key driver, and establishing leadership in the mid-market segment. The company's AI-led services are gaining significant traction, with over 25 new AI deals secured in Q2 FY26 and nearly 100 active engagements focused on delivering tangible ROI through Generative and Agentic AI.

The UK continues to be Mastek's strongest geography, driven by strong demand in healthcare and secured government services. The company reported a GBP 50 million-plus AI-led engineering services deal for modernization and efficiency in the secured government sector. The private sector in the UK also saw good demand, with new logos added and a $15 million-plus AI-led modernization deal in financial services.

In North America, Mastek has made strategic leadership changes, including a new CEO for the region, to drive turnaround and growth. The focus remains on healthcare and life sciences, leveraging strong partnerships with Oracle, Salesforce, and Data service lines. While the North America market faces macro uncertainties, Mastek is preparing for AI-led growth. The APAC and Middle East business also showed significant growth in healthcare, securing a $7 million-plus deal and focusing on profitable growth and DSO improvement.

Financial and Operational Highlights

The 12-month order backlog stood at ₹2,484.3 crore ($279.8 million) as of September 30, 2025, reflecting a 13.2% year-on-year growth in rupee terms and 6.8% in USD terms. This growth is supported by healthy deal conversions and renewals across all geographies. Mastek's cash and cash equivalents remained strong at ₹656.1 crore, up from ₹549.0 crore in the previous quarter, demonstrating robust working capital discipline with DSO improving to 80 days from 82 days.

Consolidated Financial Summary (Q2 FY26 vs. Q1 FY26 vs. Q2 FY25)

Revenue Split by Service Line (Q2 FY26)

Outlook and Management Commentary

Umang Nahata, CEO of Mastek, expressed optimism for a positive H2 FY26, despite continued macro uncertainties. The company expects profitability to remain steady and grow quarter-on-quarter, driven by internal operational efficiencies and AI-led initiatives. Mastek is also making significant investments in AI for business transformation, which is expected to drive substantial growth in the coming years.

Management acknowledged challenges such as slower decision-making in the US and a shift towards shorter-term contracts, but emphasized their proactive approach in demonstrating AI capabilities to secure larger, long-term deals. The company's focus on delivering tangible ROI to customers and maintaining a strong balance sheet positions it well to navigate the evolving tech landscape and capitalize on the AI wave.

Mastek's Q2 FY26 performance underscores its strategic clarity and disciplined execution. With a strong emphasis on AI-led transformation, geographical diversification, and mid-market leadership, the company is poised for sustainable and profitable long-term growth, reinforcing investor trust in its future trajectory.