Tech Mahindra delivered mixed financial performance in Q3, with revenue and margins exceeding analyst expectations while profit fell short of estimates due to a significant one-time charge. The IT services company reported consolidated revenue of ₹14,393 crore, surpassing poll estimates of ₹14,209 crore, while net profit of ₹1,122 crore missed estimates of ₹1,385 crore. The quarter was notably impacted by a one-time charge of ₹2.72 billion due to new labor laws in India, affecting overall profitability despite strong operational performance.

Financial Performance Overview

The company's Q3 results showcase contrasting performance across revenue and profitability metrics, with the one-time regulatory charge creating additional headwinds. The comprehensive financial performance demonstrates strong operational execution despite profit pressures:

On a year-on-year basis, net profit declined 6.00% from ₹1,194.50 crore, while revenue grew 2.80% from ₹13,995 crore. EBIT increased 11.30% to ₹1,891.60 crore from ₹1,699 crore, with margins improving to 13.10% from 12.10%.

Strong Deal Momentum and Operational Metrics

Tech Mahindra demonstrated exceptional performance in new business acquisition during the quarter, with deal wins reaching the highest levels in five years. Key operational highlights include:

The company reported days of sales outstanding at 90 days and cash equivalents of ₹7,666 crore at quarter-end, reflecting strong working capital management.

Management Commentary and Strategic Outlook

Mohit Joshi, CEO and Managing Director, highlighted the company's improved deal-win trajectory, stating that deal wins on a last twelve months basis represent the highest achieved in five years. He attributed this momentum to sustained investments in sales, solution-oriented go-to-market approach, and growing relevance of AI-led offerings in addressing client needs.

Rohit Anand, Chief Financial Officer, emphasized the well-rounded financial performance, noting the ninth consecutive quarter of margin expansion and continued strength in cash generation. He confirmed the company remains on track toward its fiscal 2027 goals, with sustained focus on working capital discipline leading to improved cash flows despite the one-time regulatory impact.

Regulatory Impact and Business Positioning

The ₹2.72 billion one-time charge related to new labor laws in India represents a significant regulatory adjustment that impacted Q3 profitability. However, the company's ability to exceed revenue and margin estimates while securing substantial new contracts indicates effective client relationship management and competitive positioning. Management maintains confidence in achieving FY27 targets, emphasizing that the regulatory charge is a one-time event that does not affect the underlying business trajectory or long-term strategic goals.

Tech Mahindra is scheduled to announce its December quarter earnings on Friday, January 16, 2026, with analysts expecting continued improvement in profitability and operational margins. The IT services company is projected to deliver strong quarter-on-quarter growth in key financial metrics.

Financial Performance Expectations

The company is expected to report significant improvement in bottom-line performance for Q3FY26. According to analyst estimates, Tech Mahindra's financial metrics are projected to show the following quarter-on-quarter changes:

Margin Expansion Trajectory

Tech Mahindra has demonstrated consistent margin improvement over recent quarters. The company's EBIT margin has shown steady progression over the last six quarters, reflecting operational efficiency improvements and cost optimization measures.

A CNBC TV18 poll suggests constant currency revenue growth of 0.6% quarter-on-quarter, indicating modest revenue expansion while margin improvement is expected to continue.

Forward Guidance and Outlook

For FY27, Tech Mahindra maintains its guidance for growth above the industry average and targets an EBIT margin of around 15%. While growth in FY27 is expected to surpass FY26 levels, it may be muted relative to initial expectations. The company's consistent margin expansion trajectory suggests management's focus on profitability improvement alongside revenue growth.

Market Performance

On Wednesday, January 14, shares of Tech Mahindra ended at ₹1,592.00, down by ₹21.05, or 1.30%, on the BSE. The upcoming earnings announcement will be closely watched by investors for insights into the company's operational performance and future growth prospects.