Datamatics Global Services Shines in Q2 FY26 with Robust Growth and Strategic AI Investments

Datamatics Global Services Limited has reported a strong performance for the second quarter of Fiscal Year 2026, showcasing significant growth across key financial metrics. The company's consolidated revenue for Q2 FY26 stood at an impressive Rs. 490.2 crores, marking a 4.8% increase quarter-on-quarter (QoQ) and a substantial 20.5% rise year-on-year (YoY). This robust top-line growth was complemented by an even more impressive surge in profitability, with EBITDA reaching Rs. 88.8 crores, up 17% QoQ and a remarkable 82.2% YoY. The EBITDA margin expanded by 613 basis points YoY to 18.1%, reflecting the company's strong focus on operational efficiency and prudent cost management. Profit After Tax (PAT) also saw a healthy increase of 25.5% QoQ and 49.3% YoY, closing at Rs. 63.2 crores, with a PAT margin of 12.5%.

The company's segment-wise performance highlights a strategic alignment with digital transformation trends. The Digital Technologies segment emerged as a strong performer, recording revenue of Rs. 153.1 crores, a 6.1% QoQ increase, and achieving its best EBIT of 10.8% in several quarters. This indicates successful execution in deploying digital technologies to enhance client productivity. The Digital Operations segment also demonstrated solid growth, with revenue increasing by 6.6% QoQ to Rs. 272.5 crores. However, the Digital Experiences segment faced a softer quarter, with revenue declining by 4.4% QoQ to Rs. 64.6 crores, primarily due to a couple of clients transitioning their work to captive centers. Management acknowledges this softness and anticipates some continued challenges in Q3 FY26 for this segment.

Datamatics' strategic vision is clearly centered on leveraging emerging technologies, particularly Artificial Intelligence, to drive future growth. The company consistently invests between Rs. 40 crores to Rs. 50 crores annually in innovative technologies, treating this as an ongoing expense rather than capitalization. This commitment ensures they remain relevant and competitive in a rapidly evolving tech landscape. These investments are channeled into building AI-based accelerators for digital technologies, enhancing platforms like FINATO for finance transformation, and augmenting customer service agents with AI to improve efficiency and turnaround times. The company also emphasizes strong partnerships with hyperscalers such as Microsoft, Google, and Salesforce, which are crucial for integrating advanced AI capabilities into their solutions and driving growth.

Geographically, the U.S. remains the largest contributor to Datamatics' business, accounting for 56% of revenue, followed by the U.K. and Europe at 21%, India at 15%, and the Rest of the World (ROW) at 8%. The company maintains a healthy client concentration, with its top 5, 10, and 20 clients contributing 26%, 39%, and 52% of revenue, respectively. This diversification helps mitigate risks associated with over-reliance on a few large clients. Management expressed confidence that the softness observed in Western markets appears to be bottoming out, anticipating a positive outcome in the near future.

Datamatics Global Services Limited's Q2 FY26 performance underscores its strategic clarity and disciplined execution. Despite minor headwinds in the Digital Experiences segment, the company's robust financial growth, healthy balance sheet, and proactive investments in AI position it strongly for sustained expansion. Management's commitment to operational efficiency, technological innovation, and market expansion provides a solid foundation for continued value creation for its stakeholders.