Tech Mahindra FY26: Margin-led recovery, deal wins momentum, and an AI-first push

Tech Mahindra closed FY26 with a familiar pattern for the current IT services cycle. Revenue growth stayed modest in constant currency, but profitability and bookings improved sharply. For FY26, the company reported revenue of USD 6,385 million, up 1.9% year on year in reported terms and 0.6% in constant currency. EBIT rose to USD 797 million, up 31.4% year on year, and EBIT margin expanded to 12.6%, up 290 basis points.

In Q4 FY26, revenue was USD 1,625 million, up 0.9% quarter on quarter and 4.9% year on year in reported terms. EBIT for the quarter was USD 223 million, and EBIT margin improved to 13.8%, around 70 basis points higher sequentially.

FY26 in one view: growth steady, margins and bookings stronger

While topline growth was not strong in constant currency, Tech Mahindra emphasized disciplined execution. The CFO stated FY26 marked the end of the stabilization phase of its transformation, with margins expanding for the 10th consecutive quarter.

A major highlight for the year was deal momentum. New deal wins TCV for FY26 was USD 3,794 million, up 41.6% year on year. Q4 deal wins were USD 1,073 million. Management positioned these bookings as evidence that the transformation narrative and an AI-led approach are resonating with clients.

Where the growth came from: verticals and geographies

The earnings presentation provided a clear snapshot of the revenue mix by vertical and geography for Q4 FY26 and FY26. In FY26, Communications remained the largest vertical at 33.3% of revenue mix, followed by Manufacturing at 18.0% and BFSI at 16.3%. Retail, Logistics and Transport contributed 8.3%.

Geographically, the Americas remained the largest region at 49.8% of FY26 mix, Europe at 25.8%, and the rest of the world at 24.4%. Europe stood out with 8.9% year on year growth for FY26, while the Americas was broadly flat.

On operational metrics, the company reported Days Sales Outstanding of 89 days in Q4 FY26 and LTM IT attrition of 12.1%. Total headcount was 147,623.

AI Delivered Right: positioning for the next cycle

Across both the press release and the Analyst Day transcript, management repeatedly emphasized an AI-first transition. The message was not just about adopting AI tools, but embedding AI across services and moving clients from pilots to scaled programs.

The presentation listed several partnerships and solution launches in this theme. These included an ontology-driven Agentic AI platform with Microsoft (built on Microsoft Fabric and Azure AI Foundry) and an AI-powered Telco Network Operations Reasoning Agent with NVIDIA aimed at enabling communication service providers toward Level 4+ autonomous networks.

Tech Mahindra also highlighted workforce enablement metrics. The company stated that 80% of its global workforce is AI-enabled, 76% have completed advanced AI training and achieved AI certification, and 84% of customer-facing employees are AI-enabled.

Capital allocation: record dividend alongside investments

The board recommended a final dividend of Rs. 36 per share, taking total FY26 dividend to Rs. 51 per share. The CFO stated this was the highest ever annual dividend and that the FY26 dividend payout ratio worked out to 104% of PAT and 91% of free cash flow.

On liquidity, the earnings deck showed cash and cash equivalents including investments and margin money at USD 892 million and borrowings at USD 7 million in Q4 FY26.

Key risks flagged in the filings

Two disclosures are notable from a risk perspective.

First, the auditor’s report includes an emphasis of matter related to matters from erstwhile Satyam, where claims by 37 companies for alleged advances are presented under Suspense Account (net) amounting to INR 12,304 million. Management stated it believes these claims will not be payable on final adjudication.

Second, the company disclosed an order dated December 17, 2025 from the Regional Provident Fund Commissioner directing remittance of INR 12,874 million. The company has filed a writ petition before the Bombay High Court and stated it does not expect any material financial impact.

What to watch in FY27

Management reiterated FY27 commitments, including organic constant currency revenue growth above the peer group average and an EBIT margin target of 15%. In the Q&A, the CEO said industry growth is hard to predict and indicated that current estimates appear to be in the 2% to 5% range.

For investors, the key monitorables appear straightforward. One is whether the strong deal wins translate into a stronger revenue trajectory through FY27. The second is whether the company can maintain its margin expansion while continuing investments in AI platforms, partnerships and talent.