Tech Mahindra Shares Surge After Strong Q3 FY26 Earnings

Introduction to Tech Mahindra's Q3 Performance

Shares of Tech Mahindra Ltd. surged nearly 4% on Monday, January 19, 2026, after the IT services major announced a robust performance for the third quarter of the financial year 2025-26. The company delivered an all-around beat on market expectations, driven by strong revenue growth, expanding margins, and a record-breaking deal pipeline. The positive results prompted a strong investor reaction, with the stock price climbing to ₹1,734.9 per share, signaling renewed confidence in the company's turnaround strategy and future growth trajectory.

Detailed Financial Breakdown

Tech Mahindra reported a consolidated net profit of ₹1,122 crore for the quarter ended December 31, 2025, marking a 14.1% increase compared to the ₹983.2 crore profit in the same period last year. However, on a sequential basis, the net profit saw a 6% dip from ₹1,194.5 crore in the previous quarter. This decline was attributed to a one-time exceptional charge of ₹272.4 crore related to the implementation of new labor codes in India, which impacted gratuity and leave liabilities.

Revenue from operations stood at ₹14,393 crore, an 8.3% year-on-year growth and a 2.8% quarter-on-quarter increase. This figure surpassed analyst estimates, which had pegged revenue closer to ₹14,209 crore. The company's operational performance was a key highlight, with Earnings Before Interest and Taxes (EBIT) rising 40.1% year-on-year to ₹1,892 crore.

Record Deal Wins Signal Strong Momentum

The most significant highlight of the quarter was the company's new deal wins, which reached a Total Contract Value (TCV) of $1.1 billion ($1,096 million). This represents a 47% year-on-year increase and a 34% sequential jump, marking the highest quarterly bookings for Tech Mahindra in the last five years. This robust order inflow provides strong revenue visibility for the upcoming quarters and indicates a healthy demand environment for its services. Management confirmed that the deal pipeline is broad-based, with a particularly large contract secured from a European telecom client, reinforcing the company's strength in the communications vertical.

Margin Expansion and Operational Efficiency

Tech Mahindra's operating margin expanded by approximately 100 basis points quarter-on-quarter to 13.1%. This marks the ninth consecutive quarter of margin improvement, a testament to the company's focus on operational efficiency and cost management programs like 'Project Fortius'. The consistent margin expansion, even amidst wage hikes and other cost pressures, was a key factor that impressed analysts and investors. The company's ability to improve profitability while growing revenue points to a successful execution of its long-term strategic goals.

Management's Confident Outlook

The company's leadership expressed strong confidence in its future prospects. CEO and Managing Director, Mohit Joshi, stated, “Our deal wins on an LTM basis are the highest we have achieved in the past five years, reflecting an improved deal-win run-rate over the past several quarters.” He attributed this success to investments in sales, a solution-oriented go-to-market approach, and the increasing relevance of AI-led offerings. The management reiterated its target of achieving a 15% EBIT margin by FY27 and growing at a rate higher than the peer average, a statement the market is now treating as a credible roadmap rather than a mere aspiration.

Market Reaction and Analyst Views

The stock market reacted positively to the earnings announcement. Tech Mahindra's shares rose for the second straight session, trading at 16 times the average 30-day volume. The performance stands out, especially when compared to the benchmark Nifty 50's modest gains.

Brokerages offered a mixed but generally constructive view:

• Antique Stock Broking noted the strong quarter with a beat across all parameters and raised its FY27 and FY28 earnings per share estimates.
• Nomura highlighted the company's progress in its turnaround journey, supported by strong deal wins. It marginally raised its target price to ₹1,810.
• Emkay Global, while acknowledging the all-around beat, retained a 'Reduce' rating, citing rich valuations, and maintained a target price of ₹1,600.

Sectoral Performance and Headwinds

Growth during the quarter was primarily driven by the manufacturing and the retail, logistics, and transport verticals, both of which grew by 11.7% year-on-year. The communications segment, a traditional stronghold for the company, grew by 4.7%. However, the recovery remains uneven, with the Banking, Financial Services, and Insurance (BFSI) vertical declining by 0.8% and the technology, media, and entertainment segment falling by 4.6% year-on-year, indicating persistent softness in certain areas.

Conclusion: A Turning Point for Tech Mahindra

Tech Mahindra's Q3 FY26 results have shifted the market narrative from cautious recovery to sustained momentum. The combination of record deal wins, consistent margin expansion, and a confident management outlook suggests that the company's turnaround strategy is yielding tangible results. While challenges in certain verticals remain, the strong order book provides a solid foundation for future growth. Investors will now closely watch whether this deal momentum translates into accelerated revenue growth and if the company can continue its margin expansion journey towards its FY27 goals.