Tech Mahindra shares surged nearly 4% following the company's Q3 results announcement, which revealed strong sequential performance and record deal momentum. The IT services company reported better-than-expected revenue growth and significant margin expansion, prompting positive analyst reactions including a major upgrade from JPMorgan.

Share Price Performance

Tech Mahindra shares climbed 3.57% to ₹1,730.10, trading close to their 52-week high after the quarterly results announcement. The stock has gained close to 8% so far this year, with the rally driven by investor optimism over improved financial metrics and enhanced business outlook under CEO Mohit Joshi's leadership.

Financial Performance Overview

The company delivered robust performance in Q3, with revenue growth significantly outpacing estimates and margins showing sharp sequential improvement.

Revenue grew 1.7% in constant currency terms, comfortably beating analyst estimates of 0.6%. The EBIT margin improvement to 13.1% from 12.1% marked the ninth consecutive quarter of margin expansion, representing a sharp recovery from the low of 4.7% seen in Q2FY24.

Record Deal Momentum

Tech Mahindra achieved record deal wins during the quarter, with management highlighting that deal wins on a last-twelve-month basis were the highest achieved in the past five years. Total contract value reached $1,096 million, including a significant $500 million deal win in Europe within the communications vertical. The telecom segment, accounting for approximately 35% of total revenue, posted year-on-year growth of 4.6% in dollar terms, breaking a trend of contraction seen in nine of the last 10 quarters.

Analyst Upgrades and Target Revisions

JPMorgan upgraded Tech Mahindra to 'Overweight' from 'Neutral', raising its price target to ₹2,100 per share. The brokerage expects the company to post a relatively strong exit growth rate of 1.9%, which combined with mega deal ramp-ups, could help it match HCL Technologies and Infosys with around 6% growth in FY27E.

Following the improved outlook, JPMorgan raised its revenue estimates by 2-3% and margins by 30-70 basis points, resulting in EPS upgrades of 3-8% over FY26-28E. The brokerage also increased its target valuation multiple to 24x from 20x, citing stronger and more sustainable growth prospects.

Business Outlook

Management reiterated its aspiration to reach 15% EBIT margins by FY27, alongside industry-leading growth. The communications vertical showed signs of recovery, with analysts expecting the company's growth trajectory to provide incremental operating leverage supporting the margin target. The turnaround is expected to be supported by rising AI-led spending and enhanced deal conversion capabilities.

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.