Tata Technologies Q2 FY26: Engineering a Strong Comeback Amidst Strategic Shifts

Tata Technologies, a global leader in product engineering and digital services, has reported a robust performance for the second quarter of fiscal year 2026, signaling a strong return to sequential growth. The company's consolidated operating revenue reached ₹1,323.3 crore, marking a 6.4% quarter-on-quarter (QoQ) increase and a 2.1% year-on-year (YoY) growth. This positive momentum was underpinned by significant strategic initiatives and a resilient operational discipline, despite a complex macroeconomic environment.

The Services Segment, which constitutes 77% of the total revenue, grew 5.1% QoQ to ₹1,012.8 crore. This growth was particularly driven by strong performances in the Aerospace and Industrial Heavy Machinery verticals, which saw a 14% revenue increase in USD terms. Even the Automotive vertical, after a few softer quarters, regained positive momentum with a 0.5% sequential increase in USD terms, indicating stabilization and improving demand. The Technology Solutions portfolio, contributing the remaining 23% of revenue, delivered an impressive 10.6% sequential growth to ₹310.5 crore, fueled by strong traction in both Education and Products segments, as previously delayed projects went live.

Strategic Acquisitions and Partnerships Driving Future Growth

This quarter was marked by several pivotal strategic moves. Tata Technologies announced a definitive agreement to acquire 100% equity shares of ES-Tec Group in Germany for up to €75 million. This acquisition is a significant step to bolster their European presence and automotive engineering capabilities, providing direct access to Volkswagen as a key customer. ES-Tec brings over 300 skilled engineers with expertise in ADAS, Connected Driving, and Embedded Software, crucial for the industry's shift towards software-defined intelligent mobility.

Furthermore, the company forged a strategic partnership with Synopsys, a global leader in electronic design automation, to enable virtual validation in the Software-Defined Vehicle (SDV) space. This collaboration aims to accelerate OEMs' ability to integrate and validate software more efficiently. Tata Technologies also launched WATTSync, a proprietary digital battery passport platform, offering traceability, transparency, and compliance for batteries throughout their lifecycle, leveraging AI analytics and blockchain technology.

Operational Excellence and Talent Development

Operationally, the company continued to invest in talent and partnerships. They inaugurated a new office in Munich, strengthening their presence in Europe's dynamic automotive ecosystem. In India, they partnered with Intel to accelerate AI skill development across the academic ecosystem through their iGET IT platform, powering Intel's AI for Future Workforce program. The BMW joint venture continues to exceed expectations, having scaled to over 1,000 employees ahead of schedule and undertaking high-complexity work.

Despite these positives, management acknowledged some near-term challenges. They anticipate moderation in Q3 performance due to seasonal factors and temporary headwinds, including the ongoing restoration of IT systems at a key customer, JLR. This situation has impacted JLR's short-term priorities. Additionally, the company expects some margin pressure in Q3 due to upcoming salary revisions. The Days Sales Outstanding (DSO) also increased to 109 days, reflecting broader business conditions and customer-specific payment delays.

Outlook and Investor Confidence

Looking ahead, Tata Technologies remains cautiously optimistic about the second half of FY26. While Q3 might see some temporary headwinds, management is confident about a sharp recovery in Q4, supported by recent deal wins, improving demand signals, and normalization of customer operations. The company's focus remains on deepening customer relationships, driving operational excellence, and building a future-ready organization through continued investment in talent, technology, and transformation. The long-term aspiration for double-digit growth in FY27 underscores their strategic clarity and commitment to sustainable value creation for shareholders.