Digitide Q4 FY26: Tech and Digital accelerates, cash flow surprises, and FY27 becomes the margin test

Digitide Solutions closed Q4 FY26 with revenue of 800 crore, up 9.2 percent year on year and 2.5 percent quarter on quarter. The quarter also marked the first time the company crossed the 800 crore quarterly revenue level. EBITDA was steady at 88 crore with an 11.0 percent margin, reflecting resilience even after the company absorbed around 4 crore of impact from new wage code compliance in the quarter.

The profit line was weaker. Reported PAT for Q4 FY26 was minus 5 crore, and adjusted PAT was 11 crore versus 24 crore in Q3 FY26. Management attributed the sequential decline mainly to accounting and transition-related factors below EBITDA. These included about 4 crore of incremental Ind AS financing cost from lease reclassification and about 4 crore of additional depreciation due to changes in the residual value policy for certain assets. Separately, the reported PAT was also impacted by a 16 crore exceptional charge related to past service cost from the new wage code.

Mix shift continues: Tech and Digital becomes a larger engine

The key operating narrative in Q4 FY26 was the continued rise of Tech and Digital. Tech and Digital revenue grew to 249 crore in Q4 FY26, up 27.2 percent year on year and 5.8 percent sequentially. Its share of revenue increased to 31.1 percent in Q4 FY26 from 26.7 percent in Q4 FY25, reinforcing the management message of a transition from a domestic BPM-led company to an AI-first Tech and Digital and BPM platform.

BPM remained stable and large. BPM revenue in Q4 FY26 was 551 crore, up 2.6 percent year on year and 1.1 percent quarter on quarter. While BPM continues to be the bigger base, the faster growth is clearly coming from the technology-led segment.

Segment margins improved sharply in Q4 FY26. BPM segment EBITDA margin improved to 16.3 percent and Tech and Digital segment EBITDA margin improved to 12.1 percent, both showing sequential improvement. This segment-level improvement sits against a consolidated EBITDA margin that remained near 11 percent, as the company continues to carry corporate and transition costs.

Financial snapshot

International scaling and commercial momentum

Geographically, Q4 FY26 international revenue rose to 304 crore and represented 38.1 percent of revenue. Domestic revenue was 496 crore or 61.9 percent. Management highlighted international growth of 16.4 percent year on year and positioned this as an important lever for better realization and revenue quality.

Sales momentum remained healthy. Total contract value bookings were 620 crore in Q4 FY26 and 2,355 crore for FY26. The company added 29 key logos in Q4, including eight international logos. Management also emphasized that the pipeline is increasingly partner-driven, stating that about 15 percent of the overall pipeline is hyperscaler-led.

Digitide also pointed to formal relationships across all three hyperscalers, AWS, Microsoft and Google Cloud. The CEO cited an enterprise win to set up a dedicated AI center of excellence in Bengaluru and Coimbatore for a global P and C insurance major, and referenced Pulse.Nerve, its agentic AI orchestration framework, as delivering 40 to 50 percent productivity and about 3.4x faster deployment.

Cash conversion is the cleanest positive signal

The strongest operational datapoint in Q4 FY26 was cash conversion. Operating cash flow was 145 crore in Q4 FY26, stated as 165 percent of EBITDA. The CFO explained that the year had been affected by contract novation after the demerger, which disrupted billing and collections in the first quarter. As processes normalized, the second half saw improved cash discipline.

For the full year FY26, operating cash flow was 263 crore, representing a 76.5 percent conversion of FY26 EBITDA of 343 crore. DSO improved to 75 days in Q4 FY26 from a peak of 91 days in Q1 FY26.

The balance sheet remained net cash positive. Net cash improved to 182 crore in Q4 FY26, and the company disclosed ICRA ratings of A plus stable and A1 plus for its facilities and commercial paper.

FY26 in full: growth, but lower margins versus the proforma base

For FY26, revenue was 3,080 crore, up 7.1 percent year on year. Tech and Digital revenue for FY26 was stated at 910 crore, around 30 percent of the company, while BPM revenue was stated at 2,170 crore.

However, FY26 EBITDA fell to 343 crore versus 401 crore in FY25 proforma, and EBITDA margin declined to 11.1 percent from 13.9 percent. Management attributed this margin moderation to demerger-related costs, the new structural corporate cost for Digitide, the wage code impact, and targeted investments in international expansion.

Adjusted PAT for FY26 was 70 crore versus 133 crore for FY25 proforma, while reported PAT was 6 crore. The company indicated that exceptional items aggregated to 65 crore for FY26, linked to demerger-related costs and labor and wage code related adjustments.

Strategy and what to track next

Digitide is positioning its next phase through a 3x3x3 strategy. The investor presentation targets 950 to 1000 million dollars revenue by FY31P, with domestic revenue of 415 to 435 million dollars, international revenue of 345 to 355 million dollars and inorganic revenue of 190 to 210 million dollars. It also indicates 2 to 3 acquisitions planned between FY27 and FY30.

On the earnings call, management guided for early to mid-teens revenue growth in the near term and stated confidence in delivering about 100 bps EBITDA margin expansion by exit FY27. The CEO broke the margin bridge into three buckets: Tech and Digital mix, international mix and operational efficiencies.

For investors, the next year is likely to be judged on three measurable items. First, whether Tech and Digital can sustain its growth pace while maintaining improving segment margins. Second, whether international growth continues to outpace the base and moves the mix closer to 50 percent over time. Third, whether the company can translate segment-level margin improvement into consolidated margin expansion, especially after the wage code related changes and higher depreciation and lease accounting charges settle into a new run rate.

The quarter showed that the operating engine is improving on mix, bookings and cash collection. But it also highlighted that reported profitability is still sensitive to accounting transitions, lease structure and one-time adjustments. FY27, as management repeatedly said, is positioned as the shift from foundation to acceleration. That makes execution on margin expansion and cleaner profit conversion the most important proof points.