ALLETEC Navigates Macro Headwinds with Strategic AI Focus and Strong India Growth in H1 FY26

All e Technologies Limited (ALLETEC), a prominent player in digital transformation and Microsoft solutions, recently shared its performance for the second quarter and first half of the financial year 2026. The company reported a total income from operations of INR 37.13 crore for Q2 FY26, with a net profit of INR 7.38 crore. For H1 FY26, the total income from operations stood at INR 73.45 crore, yielding a net profit of INR 13.69 crore. While the Q2 income growth on a year-on-year basis saw a slight dip of -2.4%, the company demonstrated a quarter-on-quarter growth of 2.2%, indicating resilience amidst a dynamic global environment. The EBITDA margin remained robust at 28.2% for Q2 FY26 and 26.2% for H1 FY26, reflecting efficient operational management.

The company's performance in H1 FY26 was characterized by a mixed bag of regional dynamics. The India business showed significant momentum, marked by an increase in new customer additions and a growing interest in AI adoption. This domestic strength helped offset some of the challenges faced in international markets. Conversely, the international business experienced prolonged decision-making cycles and extended sales cycles, particularly due to an enhanced focus on mid-market customers and a generally sober global macroeconomic sentiment. These factors led to some deals shifting to the subsequent quarter and a lower-than-usual number of customer additions in Q2. Despite these headwinds, the services revenue from international operations remained consistent with the previous quarter, and overall profitability improved, underscoring the company's ability to manage costs and maintain margins.

Strategic Shifts and AI Integration

ALLETEC is undergoing a significant strategic alignment, positioning itself for future growth by embedding AI capabilities across all its offerings. The management believes this integration will fundamentally transform the business landscape within the next two to three years. Key initiatives include making Data Engineering and AI, leveraging Microsoft Fabric, Copilots, and AI Foundry, central to most customer conversations. The company is also intensifying its focus on the productization of solutions and services, aiming to make them more accessible and consumable for clients, especially in the SMB segment.

Another strategic move is increasing business share from mid-market customers. While these engagements often entail longer decision-making cycles, they promise higher project values. ALLETEC has also invested in developing new Intellectual Property (IP), such as a Configure Price & Quote (CPQ) solution, which has already seen a pilot customer go live. This demonstrates the company's commitment to innovation and catering to specific market needs. Furthermore, ALLETEC has successfully converted a couple of SAP customers to Microsoft Solutions, reinforcing its leadership in the Microsoft ecosystem.

Financial Performance Summary (INR Crore)

Note: All figures are consolidated and in INR Crore. Percentages are derived from the source documents.

Operational Excellence and Future Outlook

ALLETEC's business model is characterized by mission-critical solutions, IP-led sales, deep domain knowledge, and a significant geographical spread. The company's delivery model remains project-based, with over 95% of contracts directly with end customers, ensuring high customer stickiness. The alignment with Microsoft, as a full-stack partner across Microsoft 365, Dynamics 365, data engineering, and AI, is a cornerstone of its strategy.

In terms of new ventures, ALLETEC has established a cybersecurity practice, with a team in place and small deals already closed. The company is also pursuing SOC 2 certification, expected within the next six weeks, which will enhance its credibility in providing security solutions. Furthermore, new contact center offerings are gaining traction, with a Canadian customer project slated to go live this month, and many other opportunities in the pipeline.

Management anticipates that the revenue stream from AI offerings will begin to build in a few quarters. They expect growth momentum to return within two quarters, assuming no new unforeseen events. The company's focus on increasing its IP side, through productizing both services and solutions, is a key driver for future margin expansion. ALLETEC's robust CAGR on income (24%), EBITDA (34%), and net profit (36%) over the last five years (FY21-25) underscores its consistent performance and potential for sustained growth.

ALLETEC's Q2 and H1 FY26 performance reflects a company strategically adapting to evolving market dynamics. By prioritizing AI integration, expanding into mid-market segments, and strengthening its IP-led solutions, ALLETEC is positioning itself for sustained growth and enhanced profitability in the coming quarters. The management's proactive approach in navigating macroeconomic headwinds while investing in future-ready technologies instills confidence in its long-term trajectory.