Motilal Oswal has maintained its BUY rating on Tech Mahindra with a target price of ₹2,350, offering a potential upside of 41%. The recommendation comes after the IT services company delivered a strong Q3FY26 performance that exceeded several key estimates.

Strong Revenue Performance Across Segments

Tech Mahindra reported Q3FY26 revenue of USD 1.6 billion, registering growth of 1.7% quarter-on-quarter in constant currency terms. This performance significantly outpaced Motilal Oswal's estimate of 0.5% constant currency growth.

While most segments showed positive momentum, the Banking, Financial Services and Insurance (BFSI) vertical experienced a decline of 6.2% quarter-on-quarter in USD terms.

Margin Expansion Beats Estimates

The company's operational efficiency showed marked improvement during the quarter. EBIT margin expanded by 100 basis points quarter-on-quarter to reach 13.1%, surpassing Motilal Oswal's estimate of 12.7%.

The adjusted profit after tax of ₹13.00 billion came in below the brokerage's estimate of ₹15.00 billion, primarily due to a one-time impact of ₹2,724 million related to changes in labor codes.

Deal Wins Show Strong Momentum

Tech Mahindra's new deal wins demonstrated robust growth momentum during the quarter. The company secured new deals with a total contract value (TCV) of USD 1,096 million, representing substantial growth of 34% quarter-on-quarter and 47% year-on-year.

Valuation and Investment Outlook

Motilal Oswal continues to express confidence in Tech Mahindra's bottom-up turnaround story. The brokerage has valued the stock at 26 times FY28E earnings per share, leading to the target price of ₹2,350. This valuation reflects the firm's positive outlook on the company's operational improvements and growth prospects in the IT services sector.

Tech Mahindra has achieved a significant technical breakthrough by breaking out from a prolonged consolidation phase to hit a fresh 52-week high on the daily charts. The IT sector stock has demonstrated strong upward momentum, attracting attention from technical analysts and short-term traders.

Recent Performance Highlights

The stock has shown impressive performance metrics in recent trading sessions:

Technical Analysis and Price Targets

Technical experts have identified promising opportunities for short-term traders following the breakout. The stock's movement above its consolidation range has opened up new upside potential, with analysts suggesting a possible target of ₹1,850 in the next 1-2 months.

The breakout is particularly significant given the stock's previous trading pattern, where ₹1,700 had acted as a stiff resistance level. This resistance zone had previously capped the stock's upward movement, making the current breakout a notable technical development.

Market Positioning

As part of the IT sector, Tech Mahindra's strong performance reflects both company-specific factors and broader sectoral dynamics. The fresh 52-week high represents a key milestone for investors who have been tracking the stock's consolidation phase.

The combination of strong recent performance metrics and positive technical indicators has created an optimistic outlook among market experts, particularly for traders with shorter investment horizons looking to capitalize on the momentum.