Happiest Minds: Navigating Growth with AI-First Strategy in Q2 FY26

Happiest Minds Technologies Limited has reported a robust performance for the second quarter and first half of fiscal year 2026, showcasing resilience and strategic execution in a dynamic market. The company's H1 FY26 revenues reached $129.5 million, marking an impressive 11.8% growth in constant currency. In rupee terms, revenues stood at INR 1,123 crore, a 14% year-over-year increase. This strong top-line growth was complemented by a healthy EBITDA margin of 20.8%, comfortably within the guided range of 20-22%. The company's operating profit for the quarter was INR 97 crore, representing a 17% margin, reflecting effective cost management and operational efficiencies.

The company's success is largely attributed to its 10 strategic transformations, which are now visibly yielding excellent results. These transformations, announced in late FY25, include significant organizational changes such as Joseph Anantharaju's elevation to Co-Chairman and CEO, the establishment of a dedicated Generative AI business unit, and a sharpened focus on expanding Net New Accounts. These initiatives have fostered faster decision-making, enhanced vertical accountability, and improved operating leverage, structurally strengthening Happiest Minds for the long term.

Strategic Initiatives Driving Performance

A key highlight of the quarter was the exceptional performance of the Generative AI Business Services (GBS) unit. Since its launch in October 2024, the GBS unit has scaled rapidly, emerging as a pivotal growth engine. It delivered an impressive 77.8% year-on-year growth in constant currency for Q2 and 79% for H1, with a sequential growth of 15.3% this quarter. The unit has successfully scaled 22 transformative AI use cases into replicable projects, unlocking a sales potential of nearly $50 million over the next few years. This demonstrates the strong customer adoption of Happiest Minds' AI and Gen AI-led solutions, which address critical challenges like data silos and architecture optimization.

Another significant contributor to growth is the Net New Sales initiative. This independent sales unit, combining domain-led hunting with AI-powered account intelligence, has strengthened the company's go-to-market discipline and accelerated client acquisition. The initiative is currently operating at an annualized run rate of approximately $20 million. In the first half of FY26, the company signed over 30 new clients, representing a collective revenue potential of$50-60 million over the next couple of years. Notably, over half of these new clients have already expanded into multiple initiatives, underscoring strong client confidence and effective cross-selling.

Financial Summary

Note: All figures are converted to INR Crore for consistency. Operating Margin is a percentage of revenue.

Operational Excellence and Future Outlook

Operational metrics also reflect the company's focus on efficiency. Company-wide utilization improved to 80.7%, the highest in the last three years, compared to 78.9% in Q1. This, coupled with a moderation in attrition rates from 18.2% in Q1 to 17.4%, has significantly contributed to operating leverage and delivery excellence. The company's Days Sales Outstanding (DSO) also improved from 91 days in the previous quarter to 88 days, indicating better working capital management. Capital return ratios, including ROCE and ROE, remained strong at 23% and 14% respectively.

From a vertical perspective, Retail CPG, Healthcare, and Hi-Tech industry groups demonstrated strong growth during the quarter and the half, with expectations for this trend to continue. The BFSI segment, despite a slight quarter-on-quarter dip due to specific deal timings, is expected to return to positive trends in the second half, driven by proprietary platforms like Arttha banking and Insurance in a Box. Geographically, the US remains the largest contributor, with India and Europe showing steady improvement, and the Middle East and Africa emerging as high-potential AI markets.

Segment Performance (Q2 FY26)

Looking ahead, Happiest Minds is committed to deepening AI integration within existing accounts, scaling net new logos into multimillion-dollar relationships, and sustaining profitability through disciplined execution and high utilization. The company has raised its growth commitment from three to four consecutive years of double-digit revenue growth, now extending to FY28. This reflects strong confidence in its pipeline and the predictability of its AI-driven transformation portfolio. With healthy cash flows and a strong balance sheet, Happiest Minds is well-positioned to continue its growth trajectory, maintaining financial discipline and margin resilience while investing in key areas like AI, cloud, and cybersecurity.

Conclusion: Strategic Clarity and Sustained Growth

Happiest Minds Technologies Limited's Q2 FY26 performance underscores its strategic clarity and effective execution. The company's AI-first approach, coupled with robust operational management and targeted growth initiatives, has enabled it to deliver consistent profitable growth. The increased growth commitment and strong pipeline visibility reinforce investor confidence, positioning Happiest Minds as a key player in the evolving digital engineering and IT services landscape.