Tech Mahindra Q3 FY26: 13.1% margin, $1.1bn deals

What changed in the December 2025 quarter

Tech Mahindra’s December 2025 quarter (Q3 FY26) reinforced the turnaround message the company has been building since it laid out a three-year roadmap in April 2024. Management said the focus is moving from stabilisation to acceleration as enterprise clients shift towards AI-empowered design and engineering. The quarter combined a step-up in operating profitability with a sharp rise in deal bookings, even as the broader IT services market continues to see delayed discretionary spending and slower ramp-ups.

For Q3 FY26, Tech Mahindra reported revenue of ₹14,393 crore, up 2.8% quarter-on-quarter and 8.3% year-on-year. Profitability strengthened more meaningfully: EBIT rose to ₹1,892 crore, up 40.1% YoY, while net profit increased 14.1% YoY to ₹1,122 crore. The company also flagged a ₹272 crore one-time labour code cost during the quarter.

Deal bookings hit a five-year high

The standout datapoint was new deal momentum. Tech Mahindra’s total contract value (TCV) of new deal wins rose to $1,096 million, which the company described as the highest quarterly booking in five years. Deal wins were also reported as up 47% YoY and up 34% QoQ, pointing to stronger conversions and improved go-to-market execution.

CEO and Managing Director Mohit Joshi said the LTM (last twelve months) deal wins are the highest in five years, and linked the improvement to investments in sales, a solution-oriented approach, and AI-led offerings. Management framed the demand environment as fragile, with no expectation of a sharp recovery in the near term, but said it is seeing stabilisation and “hopefully growth” in the second half of the year.

Ninth consecutive quarter of margin expansion

Tech Mahindra’s operating margin expanded to 13.1% in Q3 FY26. The company said this was a close to 100 basis point improvement in the quarter and also marked the ninth consecutive quarter of margin expansion. Another report on the same results highlighted that EBIT margin expanded by around 290 basis points YoY to 13.1%, underlining the scale of recovery versus the prior year.

Brokerage commentary also pointed to execution. PL Capital said the 13.1% margin was ahead of its 12.6% estimate, and attributed the expansion largely to gross margin improvement from Project Fortius-led efficiencies, alongside a 20-30 basis point currency tailwind.

Cash discipline improved, DSO fell to 90 days

Alongside margin gains, Tech Mahindra reported improved working-capital metrics in the quarter. Free cash flow stood at $194 million, supported by tighter controls. Days sales outstanding (DSO) improved to 90 days, and cash and cash equivalents were ₹7,666 crore at quarter-end.

CFO Rohit Anand said the quarter reflected a “well-rounded” performance marked by margin expansion and cash generation, and added that working-capital discipline improved cash flows and DSO. He also said the company remains on track toward its FY27 goals.

Strategy reset: Vision 2027 and the org restructure

Tech Mahindra’s current positioning is anchored in the phase-wise three-year turnaround roadmap announced in April 2024, branded Vision 2027 to Scale at Speed. Joshi said the intent was to strengthen the organisation by sharpening the portfolio, simplifying operations, improving execution discipline, and reinforcing confidence among clients, employees, and investors. He added that the strategy has started translating into measurable outcomes over the last 18 months.

As part of the reset, Tech Mahindra restructured into six strategic business units to improve agility and accountability. The company also identified FY25 as a turnaround phase, FY26 as a stabilisation period, and FY27 as the phase for reaping returns.

What the FY24 base looked like

The turnaround narrative is set against a weak FY24 base. Tech Mahindra ended the March 2024 quarter with a 41% YoY fall in consolidated profit to ₹661 crore (from ₹1,118 crore) and a 6% YoY dip in quarterly revenue from operations. For FY24, profit more than halved to ₹2,358 crore, while revenue declined about 2.4% to ₹51,996 crore, reflecting margin pressure at the time.

The company’s Project Fortius programme (FY25-FY27), launched in April 2024, is aimed at raising operating (EBIT) margins from roughly 6% in FY24 to 15% by FY27.

Workforce and operating metrics

Tech Mahindra’s operational indicators suggested a steadier talent environment. Headcount stood at 149,616, down marginally year-on-year, while IT attrition was 12.3%. The company has also indicated workforce adjustments as part of efficiency efforts.

What analysts are watching now

Despite the improved quarter, brokerages have flagged near-term uncertainties. Reports cited concerns over delay in project ramp-ups and short-term challenges linked to US policy decisions on tariffs and H1B visa. Analysts were said to have lowered earnings expectations by 2-6% for FY26 and FY27, and reduced 12-month target prices by 5-9% after the results.

Axis Securities highlighted uncertain demand conditions and noted that rising subcontracting costs and cross-currency headwinds could pressure margins. It increased its FY26 revenue estimate by 1% to ₹55,669 crore, but reduced its FY26 net profit estimate by 2% to ₹5,096 crore citing near-term challenges. Separately, ICICI Securities reduced EPS estimates by 4.2% due to a one-time exceptional charge related to labour codes, while increasing EPS estimates for FY27 and FY28 by 4.2% and 1.9%, respectively, led by higher revenue estimates and margin improvement expected for FY26.

On valuation expectations, an average of analysts’ 12-month target price was reported at ₹1,651 after a 7% cut, with the stock trading at ₹1,448.3 at the end of a Tuesday special trading session on the BSE, implying 14% upside to the target.

Key numbers at a glance

Why this quarter matters for investors

The Q3 FY26 print matters because it ties together three elements investors look for in IT turnarounds: consistent margin expansion, better deal conversion, and improved cash discipline. The company is using Project Fortius to drive efficiency-led gross margin improvement, while pushing for higher-quality, AI-led engagements as enterprises rework their technology roadmaps.

At the same time, the commentary around fragile demand, delayed discretionary spending, and ramp-up risks indicates that execution will remain the key variable. Tech Mahindra’s own phasing of FY25 as turnaround and FY26 as stabilisation suggests management is still treating growth normalisation as a process rather than a quick rebound.

Conclusion

Tech Mahindra’s Q3 FY26 results showed stronger profitability, a ninth consecutive quarter of margin expansion at 13.1%, and $1,096 million in new deal wins, the highest quarterly booking in five years. The company is keeping focus on Vision 2027 execution, Project Fortius efficiencies, and AI-led offerings, while monitoring near-term demand uncertainty and project ramp-up timelines. Management has also not decided the wage hike cycle for the current fiscal as it evaluates the implications of the new labour code notification.