Birlasoft expects E&U recovery within two to three quarters

Birlasoft Limited expects its Energy and Utilities, or E&U, business to turn around within the next two to three quarters after a rampdown at a European client, which management described on October 28, 2026 as a one-time, client-specific event rather than a structural change to the vertical.

When will Birlasoft's E&U business recover?

Birlasoft expects E&U to recover over the next two to three quarters. Chief Executive Officer and Managing Director Angan Guha said the company does not expect the client rampdown to structurally alter E&U, although he declined to disclose the revenue affected or further client-specific details.

The recovery outlook is longer than the earlier expectation of an E&U turnaround from Q3. Management said there would be no short-term bounce-back, but maintained that the vertical would “absolutely turn around” over the subsequent two to three quarters. Birlasoft will continue serving both its wider E&U customer base and the client involved in the rampdown.

The disclosed timeline places the emphasis on execution beyond a single quarterly rebound. Birlasoft did not quantify the lost quarterly E&U revenue, identify the client, or say whether more work at that account could be reduced. The two-to-three-quarter expectation is therefore management’s directional assessment rather than a numerical revenue forecast.

Is Birlasoft's E&U weakness a structural demand problem?

Birlasoft says the E&U decline is client-specific and not a structural demand problem in the vertical. Guha called the rampdown a one-time issue and said Birlasoft would continue to serve the affected client, indicating that management has not presented the relationship as an exited account.

Across Birlasoft, management said the demand environment in Q2 was materially unchanged from the preceding quarter: steady, neither worsening nor improving. Birlasoft said it was holding more client conversations around artificial intelligence, or AI, and was being included as clients developed their AI posture, but did not say this had produced a broader improvement in demand.

The E&U event occurred while Birlasoft reported growth in its top-five, top-10 and top-20 client groups in Q2. Management also said its exit from non-profitable accounts was complete. With 209 or 210 active client relationships, depending on the speaker’s rounded figure, Birlasoft is investing in sales to expand existing accounts and add new logos after cutting accounts over the prior 24 to 36 months.

Which Birlasoft verticals are expected to support growth?

Birlasoft identifies Banking, Financial Services and Insurance, or BFSI, and manufacturing as verticals expected to support growth while E&U recovers. Management said BFSI remained a strong segment and delivered growth in Q2, while manufacturing was described as being on a directional bounce-back.

BFSI is expected to be slightly soft in Q3 because it is traditionally a furlough quarter, according to management. That expected Q3 softness is attributed to seasonal client furloughs rather than a structural change in financial-services demand. Guha said Birlasoft expects to grow financial services strongly from Q4 onward and called the vertical a focus area.

Manufacturing has a different operating mix. Birlasoft said it performs substantial work in discrete manufacturing and also serves process-manufacturing companies, with more activity in discrete manufacturing. Management did not provide a quarter-by-quarter manufacturing forecast, but said new logos were entering the funnel and that client conversations supported confidence in directional growth.

AI work is also influencing Birlasoft's delivery model. Management said all service lines, including data, digital, enterprise resource planning, or ERP, and infrastructure, are AI-infused. Advanced AI services have a higher offshore than onsite intensity, and management linked the broader offshore shift partly to this work. It characterized these engagements as margin-accretive, while saying resulting gains would be reinvested in sales and service-line capabilities.

What could delay Birlasoft's broader recovery?

Birlasoft says the principal constraint on growth beyond the next two to three quarters is order-book conversion and new deal signings. Management said it was not pleased with order-book performance and that signings were not yet close to where they needed to be, despite Q2 growth and expanded conversations with clients.

Management expects the second half to be better than the first half based on current client discussions and deals under pursuit. It said Q4 could be Birlasoft's strongest quarter if it executes its order book between October and January or February. However, Guha explicitly made that outlook conditional on avoiding the type of client surprises that caused sharp Q4 declines in the prior two financial years.

Birlasoft is seeking to improve conversion through larger deals, master service agreements, or MSAs, and a land-and-expand approach. Management said framework agreements and new account openings must ultimately become revenue, while deal sizes are increasing. The company has completed about 90% of its planned investment work across sales, service-line leadership and capabilities, but said newly hired leaders need a couple of quarters to become productive.

The profitability framework may also limit how quickly operating gains appear in reported margins. Management said machine-written code, using Agentic AI bots with humans in the loop, increased by 10% in Q2 and helped margins. Yet Birlasoft intends to reinvest efficiency gains in sales and capabilities, while targeting a steady-state margin of about 15% and acknowledging quarter-to-quarter revenue seasonality.

Conclusion

Birlasoft’s vertical picture is uneven, but management’s message is that E&U should recover within two to three quarters because the client rampdown is viewed as isolated. BFSI and manufacturing are expected to provide nearer-term support, while growth in the largest client cohorts, AI-led offshore delivery and the completed exit from non-profitable accounts provide the operating context for that view.

The next milestones are Q3 furlough effects in BFSI, manufacturing’s ability to convert new-logo discussions, and order-book execution through January or February. Management’s expectation that Q4 could be the strongest quarter remains conditional on no fresh client shock, while the outlook into FY28 depends on whether expanded sales and capability investments produce stronger deal signings in the second half.