Tech Mahindra's Comeback Quarter — A Double-Digit Return After Two Years

Revenue beat. EBIT (Earnings Before Interest & Taxes) up 39%. Margins expanding for ten straight quarters. 

Let's talk about a company that has spent two years doing the unglamorous work. Not winning headlines. Not posting blowout numbers. Just quietly, methodically, quarter after quarter, fixing what was broken.

On Wednesday, April 22, Tech Mahindra filed its Q4 FY26 results with the BSE and NSE. Revenue of ₹15,076 crore for the January-March quarter, up 12.6% year-on-year. EBIT of ₹2,084 crore, up 48.3% year-on-year. For the full year, EBIT hit ₹7,152 crore, a 39.2% jump over FY25. And in a sector where every other company was bleeding on Wednesday morning, the Tech Mahindra stock erased all its pre-results losses and closed flat.

That is not a normal outcome on a day when HCL Tech crashes 9%.

So what exactly happened here, and why does it matter?

The Number That Changes the Narrative

Before anything else, one figure from the press release deserves to stand alone: EBIT margins expanded for the tenth consecutive quarter.

Not one quarter. Not three. Ten.

That is a statistic that CFO Rohit Anand specifically called out in his remarks, and it is the kind of number that tells a different story from the headline revenue and profit figures. It says that the internal machinery of this company has been quietly, persistently getting more efficient every single quarter for two and a half years.

The EBIT margin for Q4 FY26 came in at 13.8%, up roughly 70 basis points sequentially and a significant 330 basis points higher than Q4 FY25's 10.5%. For the full year, EBIT margin stood at 12.6%, a 290 basis point improvement over FY25. Two years ago, that number was in the 9-10% range. The recovery has been real and it has been consistent.

The Full Year Picture: Bigger Than One Quarter

The quarterly numbers are good, but the full year story is arguably more compelling.

For FY26, Tech Mahindra reported consolidated revenue of ₹56,815 crore, up 7.2% year-on-year. Profit after tax for the full year came in at ₹4,811 crore, up 13.2% over FY25. Free cash flow for the year reached $616 million, with free cash flow to PAT at 115%, meaning the company generated more actual cash than its reported profit. That is a sign of a business with healthy collections and working capital discipline, not one papering over weak cash conversion with accounting flexibility.

Deal wins for the full year totalled $3,794 million in total contract value, the highest in five years, up 41.6% year-on-year. The pipeline coming into FY27 is the strongest it has been since the company began its restructuring.

To reward shareholders who held through the difficult chapters, the board recommended a final dividend of ₹36 per share, taking the total FY26 dividend to ₹51 per share inclusive of the ₹15 interim dividend paid earlier in the year. The company called this the highest ever dividend in its history. That is a meaningful signal about management's confidence in the cash generation trajectory.

The Profit Miss: Reading It Correctly

Now for the complication.

Net profit for Q4 came in at ₹1,354 crore, against analyst estimates of roughly ₹1,492 to 1,504 crore. That is a miss of around 10%. And the free cash flow for Q4 specifically was $99 million, down sharply from $194 million in Q3, with free cash flow to PAT at 68%. Both numbers are weaker than they look on a quarterly basis.

Part of this reflects the nature of Q4 for most IT services companies. Wage hike cycles, higher variable pay payouts, and seasonal patterns in billing all tend to compress cash in the January-March quarter. But it is also true that Tech Mahindra is still mid-investment in its transformation. The company disclosed in the earnings presentation that 80% of its global workforce is now AI-enabled, 76% have completed advanced AI training and certification, and an enterprise-wide Claude Code Training Program has been launched. These investments in people cost money today and pay dividends later.

There is also the exchange rate factor to acknowledge. The dollar averaged ₹92.6 against the rupee during Q4 FY26, compared to ₹86.5 in Q4 FY25. That is a roughly 7% rupee depreciation over the year, which mechanically inflates rupee-denominated revenue and profit even when dollar revenue growth is modest. Dollar revenue for Q4 grew 4.9% year-on-year to $1,625 million, and for the full year grew only 1.9% to $6,385 million. Constant currency growth for the year was an even more modest 0.6%. The rupee tailwind, in other words, did some heavy lifting on the headline numbers.

What the Verticals Are Telling Us

The vertical breakdown in the earnings presentation is worth sitting with for a moment.

Communications, which accounts for a third of Tech Mahindra's revenue, grew 5.6% year-on-year in Q4. That is not a number that should be underestimated. This vertical was the reason the stock spent two years in the doghouse. Its recovery changes the fundamental risk profile of the business.

Manufacturing grew 11.8% year-on-year. BFSI grew 4.7% and showed an impressive 8% sequential jump, suggesting deal ramp-ups are beginning to convert into revenue. Technology, Media and Entertainment grew 6.6%. Retail, Logistics and Transport grew 6.2%. Healthcare and Lifesciences grew 4.7%.

Six out of seven verticals growing year-on-year. The only exception is the catch-all "Others" bucket, which shrank 32.1% year-on-year and represents less than 3% of revenue.

Geographically, Americas grew 7.7% and Europe grew 7.4%, both meaningful improvements. The Rest of World segment slipped 2.7%, which bears watching but is the smallest contributor to the mix.

This breadth of growth matters enormously. A recovery concentrated in one segment is fragile. A recovery spread across six out of seven segments and two major geographies is structural.

The Deal Machine Has Woken Up

Possibly the most significant number in Wednesday's announcement is not a financial metric at all.

Total contract value of new deal wins for Q4 reached $1,073 million, the second consecutive quarter above the $1 billion mark. For the full year, the $3,794 million in deal wins represents the highest level in five years. Return on capital employed hit 26.2% in Q4, up from 22.6% a year ago.

The deals themselves tell a story about what Tech Mahindra is pitching and winning. A large multi-year AI-led transformation engagement with a major European telecom operator, embedding agentic AI into the operating model for zero-touch operations. A North American automotive OEM for application development across mission-critical enterprise systems. A European retail bank for managed services. A Fortune 500 energy major as sole strategic partner for infrastructure and cloud. A global public health alliance.

This is a company that has graduated from winning small, tactical work to securing large, multi-year, strategically significant mandates. That shift in deal character, from transactional to transformational, is exactly what a turnaround story needs to demonstrate to be taken seriously.

The AI Bet: Real or Theatrical?

Every IT company in India is calling itself an AI company right now. The question is always whether the substance matches the language.

In Tech Mahindra's case, there are some indicators that the AI pivot is more than press release material. The company launched IndusLLM, an eight-billion parameter model supporting agentic AI in Hindi, aimed at democratising education. It collaborated with NVIDIA on an industry-first AI-powered Telco Network Operations Reasoning Agent. It partnered with Microsoft to build an ontology-driven agentic AI platform on Microsoft Fabric and Azure AI Foundry. And it disclosed that 84% of customer-facing employees are now AI-enabled.

More concretely, the earnings presentation listed over a dozen specific AI deal wins this quarter alone, spanning aerospace, pharma, energy, banking, insurance, logistics, and real estate. A European bank built a unified deposit platform using AI across the software development lifecycle, achieving a claimed 30% improvement in development velocity. A pharmaceutical leader deployed AI agents to migrate over 1,300 projects from legacy infrastructure. These are outcomes, not experiments.

Whether this AI momentum translates into the margin expansion and revenue acceleration that investors are waiting for is the central question for FY27.

What FY27 Needs to Deliver

Management said the company is "on track to delivering its FY27 commitments" without specifying what those commitments are publicly. The market will be watching four things closely.

First, whether revenue growth in dollar constant currency terms can meaningfully accelerate from FY26's 0.6%. The rupee tailwind will not be infinite, and dollar growth needs to carry more of the weight. Second, whether EBIT margins can sustain their upward trajectory toward the 15% range that would bring Tech Mahindra closer to its larger peers. Third, whether the $1 billion-plus quarterly deal win momentum holds, which would require deal ramp-ups to offset natural attrition in existing contracts. And fourth, whether the profit miss in Q4 was a timing issue or signals something more persistent about cost structure.

The client metrics from the earnings presentation offer cautious optimism. Clients spending over $50 million annually grew to 29, up from 25 a year ago. Clients spending over $20 million grew to 66 from 59. Revenue concentration in the top 5 clients actually declined from 15.5% to 14.9%, suggesting the business is becoming less dependent on a handful of large accounts. These are signs of a healthier revenue base.

The Honest Assessment

Tech Mahindra had a genuinely good quarter. Not a perfect quarter, not a blowout quarter, but a good one that validates the direction of a two-year turnaround effort.

The 10-quarter margin expansion streak is real. The deal pipeline is the strongest it has been since before the company's problems began. Six out of seven verticals growing means the recovery is broad-based, not concentrated. The full-year PAT growth of 13.2% and EBIT growth of 39.2% represent genuine improvement, not financial engineering.

The profit miss and the modest free cash flow in Q4 are genuine concerns, not to be dismissed. But they exist within a broader context of a company that is clearly moving in the right direction, investing in the right capabilities, and beginning to see those investments reflected in client spending decisions.

The stock closing flat on one of the worst days for Indian IT in recent memory is perhaps the most eloquent summary of where Tech Mahindra stands today. Not celebrated. Not punished. Watched.

FY27 is when the watching becomes a verdict.

This piece is for informational purposes only. It does not constitute investment advice. Please consult a SEBI-registered financial advisor before making any investment decisions.