Tech Mahindra shares surged nearly 4% following the company's Q3 results announcement, which revealed strong year-on-year growth and record deal momentum. The IT services company reported mixed sequential performance but demonstrated resilience with significant contract wins and improved market positioning.

Share Price Performance

Tech Mahindra shares climbed as much as 3.8% to ₹1,734.05 on the BSE, extending gains after the company reported stronger-than-expected quarterly performance. The rally was driven by investor optimism over the company's record deal wins and improved business fundamentals under CEO Mohit Joshi's leadership.

Financial Performance Overview

The company delivered a robust year-on-year performance in Q3, though sequential metrics showed mixed trends. Revenue growth momentum continued while profitability faced some quarter-on-quarter pressure.

Record Deal Momentum

Tech Mahindra achieved record deal wins during the quarter, with total contract value reaching $1,096 million. A significant highlight was a large $500 million deal win in Europe within the communications vertical, marking a key inflection point after prolonged decline in this segment. The telecom segment, accounting for approximately 35% of total revenue, posted year-on-year growth of 4.6% in dollar terms.

Brokerage Recommendations Split

Analyst opinions diverged following the results announcement. Nuvama upgraded Tech Mahindra to 'Hold' from 'Reduce', raising its target price to ₹1,650 from ₹1,350, citing strong Q3 execution and record deal wins. However, the brokerage remained cautious about valuation concerns and expressed skepticism about the company's 15% margin target.

Motilal Oswal maintained a more bullish stance with a 'Buy' rating and target price of ₹2,350, implying 41% upside potential. The brokerage highlighted the turnaround in communications business and steady margin expansion, with EBIT margin improving 100 basis points quarter-on-quarter to 13.1%.

Business Outlook

The communications vertical showed signs of recovery, breaking a trend of contraction seen in nine of the last 10 quarters. Analysts expect the company's growth rate to improve, supported by rising AI-led spending and enhanced deal conversion capabilities. The 15% EBIT margin target for the upcoming period appears increasingly achievable according to market observers.

Tech Mahindra has outlined its strategic approach for achieving revenue growth leadership by FY27, with company executives confirming that growth will be primarily organic with no major acquisitions planned. The company continues to build on its strongest quarterly deal performance in five years while maintaining confidence about outperforming industry peers through internal capabilities and operational excellence.

Organic Growth Strategy Takes Center Stage

Tech Mahindra executives have clearly stated that the company's path to FY27 growth leadership will be through organic expansion rather than major acquisitions. This strategic decision reflects the company's confidence in its internal capabilities and existing business momentum, building on the foundation of record deal wins and strong global pipeline strength.

Record-Breaking Deal Performance Supports Organic Approach

The company's decision to focus on organic growth is supported by its highest deal wins in five years during the current quarter. Company executives have highlighted the strength of their global deal pipeline, positioning this momentum as sufficient foundation for anticipated superior revenue growth compared to industry peers by FY27 without requiring major external acquisitions.

Mixed Sector Performance Reinforces Internal Focus

Tech Mahindra's organic growth strategy comes amid mixed performance across different sectors. The company reports strong growth in aerospace and industrial areas of manufacturing within the US market, while facing continued challenges in technology, media, and entertainment sectors due to cost pressures. This varied performance landscape supports the company's decision to focus on optimizing existing operations rather than pursuing major acquisitions.

Strategic Positioning for Organic Leadership

The combination of record deal wins, strong global pipeline, and executive commitment to organic growth demonstrates Tech Mahindra's confidence in achieving FY27 revenue leadership through internal capabilities. By ruling out major acquisitions, the company is positioning itself to maximize returns from existing strengths in aerospace and industrial manufacturing while addressing weaknesses in other sectors through operational improvements and strategic focus.