Mphasis Q2 FY26: AI-Driven Growth and Strategic Expansion

Mphasis Limited has delivered a robust performance in Q2 FY26, showcasing its strategic prowess in leveraging Artificial Intelligence to drive business transformation. The company reported its highest-ever quarterly revenue of $445 million, marking a 2% sequential growth and a 6% year-on-year increase in constant currency terms. This strong top-line growth was complemented by an impressive Earnings Per Share (EPS) of INR 24.7, also a record high for the company. These headline financials underscore Mphasis's ability to execute effectively in a dynamic market, with growth primarily fueled by strong performances in the Insurance and Technology, Media, and Telecom (TMT) verticals.

The company's segment-wise performance further illustrates its strategic focus. The Applications (APPS) segment contributed the lion's share of revenue at $327 million, representing 73.48$66 million in revenue, accounting for 14.83%, while the IT Operations (ITO) segment brought in $52 million, or 11.69%. ITO also demonstrated strong sequential growth of 7.0%, propelled by steady ramp-ups in integrated Build + Run deals. Geographically, the Americas continued to be a dominant market, growing sequentially by 2.1% due to ramp-ups in recent large deals, with EMEA and Rest of World also showing robust growth.

AI-Powered Transformation and Strategic Initiatives

Mphasis's journey towards becoming an AI-first, platform-driven company has been a decade in the making, culminating in the recent launch of its NeoIP™ Agentic Platform. This breakthrough AI platform is designed to orchestrate purpose-built AI agents, integrating various Mphasis.ai solutions for continuous enterprise transformation. Early client deployments have already demonstrated significant impact, with up to 60% efficiency gains and a 50% reduction in IT incident resolution time, alongside measurable margin improvements. The platform's core, Ontosphere, acts as a dynamic knowledge base, fostering intelligent engineering and end-to-end enterprise transformation.

Further solidifying its leadership in advanced technologies, Mphasis also announced the launch of two quantum technology-focused solutions: Mphasis qCryptsec™ and Mphasis QOptiDecision™. qCryptsec aims to strengthen enterprise resilience with quantum-safe cryptography, mitigating cybersecurity threats and ensuring regulatory compliance. QOptiDecision leverages hybrid quantum-classical and quantum-inspired computing to accelerate complex enterprise decisions, such as scheduling and resource allocation, with enhanced accuracy. These initiatives underscore Mphasis's proactive approach to anticipating future technological shifts and delivering cutting-edge solutions to its clients.

Pipeline Strength and Client Engagement

The company's strategic investments in AI are clearly reflected in its robust pipeline and strong Total Contract Value (TCV) wins. Mphasis reported sustained strong TCV wins of $528 million for Q2 FY26, marking the second consecutive quarter above$500 million. The pipeline is at record levels, growing 9% QoQ and an impressive 97% YoY, with 69% of this pipeline being AI-led. This indicates a significant demand for Mphasis's AI-driven offerings and a strong competitive advantage.

Client engagement remains a key focus, with the client pyramid showing significant strengthening. Mphasis added clients across multiple revenue bands, including one 100 million+ deal with a new Banking & Financial Services (BFS) client and two 50 million+ deals in Q2 FY26. The BFS pipeline alone is up 45% YoY, and the non-BFS pipeline surged by 139% YoY. The company's top 10 accounts grew 10.8% YoY, and the next 20 accounts grew 10.7% YoY, demonstrating deep and expanding relationships with marquee clients. Despite some headwinds, the BFS segment's direct revenue grew 17.3% YoY, driven by wallet share gains and new account wins.

Outlook and Management Focus

Mphasis's management is optimistic about the future, guiding for growth to be greater than 2x the industry average, driven by strong H1 performance and steady conversion of TCV wins to revenue. The company aims to maintain its operating EBIT margin within the band of 14.75% to 15.75%, balancing investments in AI-led propositions with profitability. While the Logistics & Transportation vertical experienced a segment margin loss in Q2 FY26 due to a specific investment, management expects sequential growth from Q3 and a return to normalcy in margins from Q3 onwards. The increase in Days Sales Outstanding (DSO) to 89 days is also expected to normalize over the next three to four quarters.

Mphasis's Q2 FY26 performance underscores its strategic clarity and disciplined execution in an AI-first world. The company's continuous investments in cutting-edge AI and quantum technologies, coupled with strong client relationships and a robust pipeline, position it for sustained growth and market leadership. The focus on converting pipeline to revenue and maintaining stable margins reflects a balanced approach to expansion and profitability, reinforcing investor confidence in its long-term vision.