Q3FY26: IT midcaps companies remain a mixed bag, orderbook holds up despite seasonality

Quarterly performance  

In a seasonally weak quarter laden with furloughs, Indian IT mid-cap companies continued to outperform their larger peers in growth pace in the third quarter of fiscal 2026. Persistent and Coforge led the pack with the companies' reporting revenues of $422.5mn and $478.2mn respectively. This translates to a quarter-on-year (QoQ) growth of 4.0% and 17.3% year-on-year (YoY) for Persistent and 17.3% (QoQ) and (YoY) 22.60% respectively. The company saw an overall growth with BFSI, Healthcare, and Tech witnessing a sequential growth of 4.6%, 4.8%, and 3.0% respectively.  

At the investor call company’s CEO Sandeep Kalra said that the company was firmly on track towards its aspiration of reaching $2 billion by March 2027 and laying the foundation of $5 billion by March 2032. “In the last 3 to 4 months, we saw a significant amount of discussions on application and data modernization when it came to healthcare life sciences or BFSI.  We also saw in healthcare life sciences a good amount of discussions on transformation programs in mid to large firms in high-tech. We saw the adoption of AI in terms of product development related productivity," he said.  

Coforge with a reported revenue of $ 478.2 million in the quarter saw its revenue grow 3.5% QoQ and 22.60% YoY. The 7th largest company in the IT pecking order, Coforge recently announced a $2.3 bn enterprise value share swap acquisition of Encora. With an EBIT margin of 13.4% for the quarter, expects the margins to improve in the next fiscal compared to Fy26 .  

On the other hand, LTTS which has been exiting lower margin businesses, saw its sequential revenue drop by 3.2% with revenue at $326 for the quarter, however the Q3 margins improved by 120 bps. The management attributed the profitability improvement to a mix of its strategic business call, operational efficiencies, as well as rupee depreciation. "We are guiding for mid-single overall growth in FY26. Meanwhile, our focused business areas will see double-digit growth in the same period”, said Amit Chadha, MD of the company. Mphasis grew 1.5% q-q and +7.4 y-y in constant currency. Despite furloughs, the BFSI sector saw a +3.7% QoQ growth, however others such as TMT, and Logistics remained weak.   

Orderbook  

The orderbook for the midcaps remained healthy, indicating a strong finish for the fiscal year and improved confidence stepping into the next fiscal year. During the quarter, Persistent reported strong deal wins, with total contract value (TCV) 14% to $675mn from $609mn in 2QFY26. The net new TCV and ACV were also up 11% and 31% y-y, respectively, and the trailing 12-month new business ACV rose 18% to $1.6bn. Coforge whose order book for Q3Fy26 was $ 593 Mn, has an ACV of $1.72 billion for the next 12 months , is an increase of 30.4% YoY. The company also signed 6 large deals in the  quarter across North America, Europe and APAC “The momentum in large deals across geographies reflects the strength of our client relationships and the relevance of our digital, cloud and data-led offerings,” Sudhir Singh, CEO, said during the post-results press conference.  

Mphasis saw the new TCV wins at $ 428mn with 64% being in the Newgen services, and the management sees the earlier lag in conversion phase behind them. LTTS also saw its large deal wins hold steady with TCV of $180 Mn in the quarter. With its recent restructuring of its sales teams, the company attributed this to be one of reasons that it has been able to sign around $200 Mn dollars TCV for five straight quarters. 

What analysts say 

Persistent:  

Nomura Analysts raised their FY27-28F EPS outlook for the company’s stock by 2% and maintains a neutral rating given the stock’s rich valuation following its results. However, in its post earnings note analysts pointed that given that the company’s stocks trading at nearly 41.5x FY27F EPS, it prefers Coforge  in the mid-cap India IT services space.  

Elara Capital on the other hand noted that given the company’s strong Q3 performance on both revenue and margin front, it does not see any risk to the company’s guidance of reaching $2 bn by FY27. It has raised both target price and maintains and accumulate call, a lower-than- expected revenue growth and margin expansion not panning out as per expectations as the key downside risks.  

LTTS:  

ICICI Securities report on the Q3Fy26 earnings noted that the company reported a miss on revenue and in-line margins in Q3FY26, partially caused by recalibration of portfolio (primarily hi tech). “Management has reduced FY26 revenue growth guidance from double digit to mid-single digit on 1) Portfolio recalibration, 2) SWC trimming; it is aiming for a pivot from AI to EI (physical, digital and industrial AI) to become a leading full stack engineering player. Rationalisation of low-margin business has raised segmental margins across hi-tech and sustainability. However, prolonged portfolio rationalisation and underwhelming Q3 growth print have resulted in sharp EPS cuts with FY26-28E EPS down 7-10%,” the January 16th said.  ICICI Securities has a reduce call on L&T Technology Services.  

PL Capital in its outlook for the company following the quarterly results noted that 5-year strategy (“Lakshya”) to doubling down on high growth areas and focus on quality revenues, while eliminating commoditized play though is margin accretive from Q3Fy26 ,  but plugging the topline gaps would be challenging in the near-term, where Sustainability remains the only growth engine. “ Despite the strategic move, the milestone to achieve ~16% margin remains intact. We are building in 5.0%/3.5/9.0% CC revenue growth, while estimating margins at 13.9%/15.2%/15.7% for FY26E/FY27E/FY28E. With this strategic exercise, our EPS revised downward by 7% each in FY27E/FY28E,” the research note said.  

Mphasis:  

On the company, MOFS analysts are positive on the BFSI exposure as it remains relatively resilient amid current uncertainties. Reiterating a buy on the stock , “With strong TCV growth in 9MFY26 and large client issues now normalized, we see improving visibility on revenue growth over the next few quarters. Over FY25-28, we forecast a USD revenue CAGR of 10.8% and an INR PAT CAGR of 14%,” the Q3 earnings report note said .  

PL Capital which also maintains a buy call on the stock noted that the revenue growth performance (+1.5% QoQ CC) exceeded the  estimates (+0.5% QoQ CC), on the back of steady revenue conversion and timely ramp up of large deals and the  company has maintained a narrow band on margin despite the drop in Q3 utilization . “We are baking revenue growth of 7.0%/9.2%/10.7 YoY CC with EBIT margin of 15.3%/15.7%/16.0% for FY26E/FY27E/FY28E,” the note said.