Coforge Q4 FY26: Record Exit Margins, Strong Order Book, and a High-Conviction FY27 Setup

Coforge ended FY26 with its strongest profitability quarter to date and used the investor presentation and earnings call to make a clear point: the company believes its margin profile has structurally reset from FY27 onward.

In Q4 FY26, Coforge reported revenue of $489.1 million, up 21.2% year on year and 1.7% quarter on quarter. The quarter’s defining metric was EBIT margin at 16.6%, which management described as an all-time high and an “exit margin” level that should better represent FY27 margins than the FY26 full-year average.

For the full year, Coforge reported revenue of $1,870.3 million, up 29.2% year on year. FY26 EBIT margin expanded to 14.4% from 10.7% in FY25. PAT and EPS were boosted by a one-time accounting benefit related to the reversal of deferred tax liabilities following the Cigniti merger, which management highlighted clearly in both the presentation and the call.

FY26 performance: growth stayed strong and margins expanded sharply

Coforge’s FY26 revenue growth was broad-based, with management emphasizing wallet-share gains in key accounts. The company also highlighted large-deal execution, with 21 large deals signed during the year and 11 of them in the second half.

The financial improvement was most visible in operating leverage. Selling, general and administration costs as a share of revenue reduced to 15.3% in FY26 from 19.5% in FY25, supporting the step-up in EBITDA margin to 18.6%.

A key nuance is that Q4 PAT was impacted by a non-cash deferred tax liability reversal related to the Cigniti merger. The CFO stated the normalized effective tax rate for the quarter was 22% and for the year was 23%, and guided for a steady-state effective tax rate of 23% to 24% in FY27.

Mix and demand signals: order book strength, concentrated but growing key accounts

Coforge reported Q4 FY26 fresh order intake of $648 million and FY26 total intake of$2,262 million. The 12-month executable order book stood at $1,752 million, up 16.4% year on year.

Client concentration remains meaningful. Top 5 clients contributed 21.8% of Q4 revenue and 21% of FY26 revenue. Top 10 clients contributed 31.4% of Q4 revenue and 30.8% of FY26 revenue. Management argued this concentration is supported by strong growth in key accounts, with top 5 accounts growing 45.8% year on year and top 10 growing 40.4%.

The Q4 FY26 geography mix was led by the Americas at 56.7%, followed by EMEA at 28.3% and Rest of World at 15.0%. The FY26 geography mix was similar: Americas 56.9%, EMEA 28.9%, Rest of World 14.2%.

On delivery, the onsite-offshore mix for IT revenue stayed stable, with Q4 FY26 offsite at 52.4% and onsite at 47.6%. Project mix also remained steady, with fixed price at about 46% and time and materials at about 54%.

The FY27 narrative: margin reset, cash conversion upgrade, and Encora integration

Management’s FY27 messaging is unusually direct on profitability and cash flow. The CFO guided for consolidated EBITDA margin of 20.5% to 21% in FY27. EBIT margin guidance was 16.5% to 17% on a standalone basis excluding Encora, and 15.5% on a consolidated basis including Encora. Management stated the margin gap between standalone and consolidated is largely due to amortization and quantified amortization at roughly $40 million per year.

On cash flows, Coforge reported FY26 free cash flow of $135.4 million, up 68% year on year. More importantly, the company raised its medium-term cash conversion expectation. Management guided that free cash flow to PAT will be maintained at 100% plus from FY27 onward, compared with earlier guidance of 70% to 80%. The CFO attributed this confidence to tighter collections follow-up, payables management, and contract structuring.

Encora is central to FY27 execution. The company announced the successful closure of the Encora acquisition and disclosed that it has secured a $550 million, three-year loan at a fixed interest rate of 4.6% to fund the transaction, and therefore called off plans for a QIP. The company also stated Encora financials will be consolidated into Coforge effective May 1, 2026, implying FY27 results will include 11 months of Encora operations.

Management also disclosed an explicit pruning action. Coforge plans to discontinue a low-margin India portfolio. In the earnings call, the CFO quantified the impact as roughly $15 million to$20 million of pass-through revenue in Q1 itself, and stated that despite this, Q1 is expected to be flattish quarter on quarter on a reported basis due to offsetting growth from other deals and the order book.

AI strategy: positioned as both revenue lever and margin lever

The investor presentation was heavily focused on AI and positioned Coforge as an “AI-native engineering services leader.” The company claimed a OneAI platform with 60+ vertical solutions and highlighted a “mod squad” model that combines AI agents with human oversight, with claimed 40% to 50% faster time-to-market.

On talent, Coforge stated it has a 30K+ AI-enabled workforce and 11K+ data and AI practitioners, and disclosed $5.5 million of investment in AI learning and training in FY26. The management team framed AI as both a demand driver through new value pools such as data and integration, orchestration, and AI managed services and governance, and a profitability driver through productivity gains and a disciplined approach to holding G&A costs constant in absolute terms.

The strategic argument is clear, but investors will likely focus on what is most measurable in the near term: the Q4 margin print, the FY27 margin and cash conversion guidance, and the integration execution of Encora.

Takeaways

Coforge finished FY26 with strong growth, a record Q4 exit EBIT margin of 16.6%, and improved free cash flow. Management is guiding for a step-up in FY27 profitability and has raised expectations for cash conversion to 100% plus FCF to PAT.

The next year will be shaped by execution on three linked priorities: delivering against the executable order book, sustaining the margin reset through automation and tighter cost control, and integrating Encora into the consolidated financials from May 1, 2026 while capturing the stated G&A synergies.