Tech Mahindra shares slip despite 34% profit jump as muted revenue, macro worries weigh on sentiment

Shares of Tech Mahindra fell by at least 2% on Thursday morning. At 10.04 am, the scrip was trading at ₹1,582.40, down ₹25.50 or 1.59%, as investors reacted to the company’s Q1 FY26 results.

The tech major posted a robust 34% year-on-year (YoY) rise in consolidated net profit to ₹1,141 crore; however, the muted revenue growth could have kept investor sentiment subdued.

Tech Mahindra's revenue for the quarter rose marginally by 2.7% YoY to ₹13,351 crore, while dollar revenue increased by just 0.4% to $1,564 million. Profit after tax (PAT) stood at $133 million, up 30.2% YoY in dollar terms.

On the operational front, earnings before interest and tax (EBIT) rose 34% YoY to ₹1,477 crore, with margins improving by 260 basis points to 11.1%. In dollar terms, EBIT came in at $172 million.

During the earnings call, Tech Mahindra's CEO, Mohit Joshi had reiterated the company's commitment to attain 15% earnings before interest and taxes (EBIT) margin by FY27.

“Tech Mahindra is actively pursuing margin expansion through Project Fortis, which includes productivity enhancements; AI-enabled interventions across delivery and operations; operational discipline and integration of acquired portfolio companies; and improving project-level ratios and efficiency metrics. These initiatives aim to systematically lift operating margins to 15% by FY27,” Joshi said.

In fact, last year, in a bid to make its margins more efficient, the tech major had launched Project Fortius, under which Tech Mahindra would cut overhead costs and hire more freshers, steps it believes would help it attain the target of 15% EBIT by 2027.

Tech Mahindra’s share price has come under pressure this July, slipping nearly 6% and poised to break its three-month winning streak.

Year-to-date, the stock is down almost 7%, underperforming the broader market. In comparison, the Nifty IT index has declined 13%, while the benchmark Nifty 50 has gained 6% over the same period.

Regarding the broader IT sector, brokerage firm Equirus Securities had warned earlier this month that macroeconomic headwinds are expected to cast a shadow over the earnings of top-tier companies and could offset the usual seasonal gains for IT services, leading to subdued performance in Q1. Top-tier IT firms are likely to post muted sequential growth in constant currency terms, ranging between a decline of 2.6% and a modest uptick of 1.4%.