PERSISTENT

Outperforms in Q2, Reaffirms $2 Billion FY27 Revenue Ambition

reported strong Q2FY26 results, with sequential Constant Currency (CC) revenue growth of 4.4%, surpassing the consensus estimate of 3.5%. •The robust growth was broad-based, led by strong momentum in the Banking, Financial Services, and Insurance (BFSI) vertical, as well as the healthcare segment and the Europe geography. Deal wins gained traction after a subdued Q1, boosting revenue visibility. The trailing 12-month total contract value (TCV) rose 15% year-on-year (y-o-y) to $609 million, resulting in a healthy 1.5x book-to-bill ratio. •The company's EBIT margin expanded by 80 bps sequentially to 16.3%, beating the 15.7% estimate, driven by lower software costs, currency gains, and an offshore shift, which offset softer utilization rates. •Management remains confident, reiterating its $2 billion revenue ambition for FY27, expecting strong growth in FY26 led by BFSI and hi-tech, with a gradual recovery in healthcare. Future margin expansion is expected, with the management guiding for a 100 bps margin expansion in both FY26 and FY27. •However, caution is advised as the October 2025 wage hikes are expected to cut Q3FY26 margins by approximately 180 bps. Additionally, with utilization already at 87%, key margin levers are considered peaked. •The stock has been rewarded for its superior growth, gaining 24% in the last six months versus a 9% rise in the Nifty IT index, but its valuations have become expensive (41x FY27 estimated earnings). •The high valuation and prevailing challenges, such as client caution and rising competition, make the sustained growth streak difficult to maintain, with some analysts doubting the ability to hit the $2 billion FY27 revenue target.