Coforge's Q2 FY26: AI-Powered Growth and Robust Performance

Coforge Limited has delivered an exceptional second quarter for fiscal year 2026, showcasing robust growth and strong operational performance. The company reported consolidated revenues of INR 39,857 million ($462.1 million), marking a significant 8.1% sequential growth in INR terms and 4.5% in USD terms. On a constant currency basis, revenues surged by 5.9% quarter-on-quarter and an impressive 25.7% year-on-year. This sustained momentum underscores Coforge's ability to navigate dynamic market conditions and execute its strategic vision effectively.

The quarter's profitability metrics also painted a strong picture. The EBIT margin expanded to 14.0%, a notable increase of 251 basis points sequentially and 240 basis points year-on-year. This margin expansion was a key highlight, demonstrating improved operational efficiency. Reported Profit After Tax (PAT) for the quarter stood at INR 3,758 million, up 18.4% QoQ and a remarkable 86.0% YoY. This strong financial performance is a testament to the company's focus on high-quality growth and disciplined execution.

Strategic Initiatives Driving Future Growth

Coforge's growth narrative is deeply intertwined with its strategic initiatives, particularly its aggressive push into AI. The company is not merely experimenting with AI but is embedding it into the very fabric of its delivery models and service offerings. This AI-driven service portfolio aims to capture the surge in enterprise investment in AI infrastructure and data modernization, fueling durable revenue growth and enhanced shareholder value.

Key initiatives include 'Evolve Ops AI', which anchors the company's 'Mission Zero' initiative, targeting zero-touch operations and zero disruption for enterprise systems. This highly automated delivery model has already seen over 25 clients complete a full year without a single P1 incident, expanding margins and increasing contract value. Furthermore, Coforge's proprietary 'Quasar AI platform' offers multi-framework agentic support, secure RAG as a service, and smart LLM routing for optimal performance and cost efficiency.

The company's 'Code Insight AI' platform exemplifies its innovation in AI. This intelligence platform leverages advanced LLMs to reverse-engineer massive undocumented legacy codebases, automatically generating high-quality documentation and extracting critical business rules. This capability is crucial for de-risking vital modernization efforts for clients, as demonstrated with a leading travel industry client.

Business Momentum and Client Engagement

The business momentum remains robust, with a strong order intake of $514 million during the quarter, including five large deals. The order book executable over the next 12 months stood at a record$1.63 billion, representing a healthy 26.7% year-on-year growth. This strong order book provides significant revenue visibility for the coming quarters. Coforge also added 9 new logos during Q2 FY26, indicating expanding client relationships.

From a vertical perspective, the growth was broad-based. The travel vertical led the charge with a 6.4% sequential growth in dollar terms. Other verticals, including healthcare, retail, high-tech, and manufacturing, grew by 5.9%. The insurance vertical grew 1.8%, and the Banking & Financial Services (BFS) vertical grew by 4% sequentially. The company's top 5 and top 10 clients also showed strong sequential growth, contributing 21% and 30.8% respectively to the overall revenue.

Outlook and Management Confidence

Coforge's management expressed strong confidence in maintaining its growth trajectory. The company expects the full fiscal year 2026 to be a robust growth year, with the second half also projected to be strong. Management reiterated its commitment to achieving a minimum of 14% reported EBIT margin, leveraging operational efficiencies and strategic investments. The free cash flow to PAT ratio is expected to remain in the 70-80% range, reflecting disciplined cash management.

The successful integration of the Cigniti acquisition was highlighted as a key factor in the company's performance, bringing in new clients and leadership talent. The merger is anticipated to be completed by December 2025 or January 2026. Coforge continues to focus on robust organic growth, complemented by strategic acquisitions, to sustain its market leadership. The increasing revenue per employee, nudging $70,000 per annum for its tech services business, is a clear indicator of the impact of its AI-led platforms and high-quality growth.

Coforge's Q2 FY26 results underscore a company in strong health, driven by strategic clarity, robust execution, and a forward-looking approach to AI adoption. The consistent performance across key metrics positions Coforge well for continued success in the evolving IT services landscape.