Mastek Navigates Q3FY26 Headwinds with AI-Led Growth and Strong Backlog

Mastek Limited, a global AI-first, digital engineering, and cloud transformation partner, announced its financial results for the third quarter and nine months ended December 31, 2025. The quarter saw the company navigate near-term headwinds, including higher furloughs and project go-lives, yet deliver a robust bottom-line performance driven by operational discipline and AI-led efficiencies. While revenue experienced a sequential decline, Mastek demonstrated strong growth in profitability and a significant increase in its order backlog, signaling confidence in its long-term strategy.

For Q3 FY26, Mastek reported a consolidated revenue from operations of INR 905.7 crore, marking a 4.2% year-on-year growth. However, on a quarter-on-quarter basis, revenue declined by 3.7% in rupee terms. This sequential dip was primarily attributed to higher furloughs, particularly in the UK and among public sector clients, as well as planned project go-lives in the US and AMEA, which led to a right-shift of new engagements. Despite these top-line challenges, the company's operating EBITDA margin expanded by 60 basis points quarter-on-quarter to 16.1%. Net Profit (PAT) grew by a healthy 11.2% sequentially to INR 108.4 crore, with diluted Earnings Per Share (EPS) rising to INR 34.7. This strong profitability was a result of Mastek's relentless focus on operational rigor and the benefits derived from AI-led productivity improvements.

Financial Highlights at a Glance (Q3 FY26)

Strategic Momentum and AI-Led Transformation

Mastek's strategic focus on AI-led transformation continues to yield significant results. The company successfully closed over 26 new engagements leveraging Generative and Agentic AI deployments, delivering substantial ROI for its customers. This scaling of AI-led services is a testament to Mastek's continued investment in its AI capabilities, which has helped bridge the technology differentiator gap with larger market players. The company's proactive approach involves offering commercial benefits to clients, including 15% to 30% productivity savings over a three-year tenure, fostering trust and expanding its wallet share within existing accounts.

The order backlog remains a strong indicator of future growth. The 12-month order backlog surged by 24.3% year-on-year in rupee terms, reaching INR 2,658.5 crore ($295.8 million). Sequentially, the 12-month order backlog grew by 7.0%. This robust backlog, coupled with the addition of 17 new clients during the quarter, bringing the total active client count to 333, underscores Mastek's ability to secure new business and expand existing relationships.

Segmental Performance and Geographical Focus

From an industry segment perspective, Government & Education remained the largest contributor to revenue at 39.7%, followed by Health & Life Sciences at 24.9%. Retail/Consumer, Manufacturing & Technology, and Financial Services contributed 11.0%, 11.8%, and 12.6% respectively. The company noted strong demand in the Healthcare and Life Sciences segments across the UK, US, and AMEA, aligning with its core focus areas.

Geographically, the UK and Europe continue to be key markets. While the US market has been undergoing fundamental changes, Mastek has made significant corrections in its capabilities and leadership team, resulting in a $30 million-plus order book in North America this quarter. Management anticipates sustainable improvement in the US business starting next year. The Middle East region experienced some project go-lives and delays in contract signings, with revenue recognition expected in Q4 FY26.

Operational Efficiency and Employee Metrics

Mastek''s commitment to operational efficiency is evident in its improved EBITDA margins despite revenue headwinds. The company's utilization rate, including trainees, stood at 76.7%. The total employee count as of December 31, 2025, was 4,676, with 3,198 employees based offshore in India. The last twelve months' attrition rate improved to 17.6% in Q3 FY26, compared to 18.5% in Q2 FY26, indicating better employee retention.

Cash Position and Shareholder Returns

Mastek maintains a strong balance sheet and healthy cash position. The total cash, cash equivalents, and fair value of Mutual Funds stood at INR 798.8 crore as of December 31, 2025, a significant increase from INR 656.1 crore on September 30, 2025. The company generated INR 210 crore in operating cash during the quarter. Reflecting its strong financial health and commitment to shareholder returns, Mastek declared an interim dividend of 160%, or INR 8 per share.

Recognitions and ESG Leadership

Mastek's efforts in sustainability and industry leadership were recognized during the quarter. The company achieved an outstanding score of 82/100 in the S&P Global ESG Corporate Sustainability Assessment (CSA) 2025, a substantial leap from 74/100 last year. This reflects its commitment to embedding ESG excellence across its operations. Mastek was also recognized as a Leader in Smart/Digital Factory Services by ISG Provider Lens™ 2025, a Major Contender in Banking IT Services by Everest Peak Matrix 2025, and an Emerging Specialist in Gartner's Emerging Market Quadrant for GenAI Engineering.

Outlook

Looking ahead, Mastek remains confident in its long-term strategy. Management expects FY27 to be a stronger year for growth compared to FY26, driven by sustained demand in key verticals and the scaling of its AI-led solutions. The company aims to maintain its operating EBITDA margin between 16.5% to 17% and expects the effective tax rate to remain in the 25%-26% range. Mastek's focus on fundamental improvements, differentiated capabilities, and a strong leadership team positions it for continued sustainable and profitable growth.