Tech earnings surge 34% in Q1 for Tech Mahindra, driven by robust verticals and disciplined margin management
Published on July 16, 2025
In a recent financial report, IT services giant Tech Mahindra announced its Q1 2025-26 results, revealing a consolidated net profit of ₹1,141 crore, marking a 34% year-on-year increase. However, the company faced challenges in its pre-services business, resulting in a 2.6% year-on-year rise in revenue from operations to ₹13,351.2 crore.
The year-on-year headwinds in Tech Mahindra's pre-services business are mainly due to the company's ongoing strategy to manage underperforming areas. This restructuring of the pre-services business has impacted revenue growth negatively compared to the previous year. Additionally, there has been a spend reduction in the automotive sector, which also contributed to the headwinds.
To address these challenges, Tech Mahindra is taking several strategic measures. The company is rightsizing the pre-services business, adjusting its scale and operations to improve efficiency and profitability. It is also focusing on growth in other sectors such as communications, retail, and BFSI (banking, financial services, and insurance), which have driven recent performance.
Moreover, Tech Mahindra is pursuing strong deal wins with improved contract values and margins, pointing to a strategic shift towards higher-quality business deals. The company is also implementing measures like Project Fortius to enhance EBIT margins, offsetting wage revision impacts and benefiting from currency fluctuations.
In an effort to build a strategic reserve of employees, Tech Mahindra has built up its workforce in the past quarter, planning to deploy these resources as demand escalates. The company's hiring strategy focuses on a mixture of freshers and experienced talents, with an average employee experience of 9-10 years.
Despite the challenges, Tech Mahindra's European business demonstrated a strong growth of 11.7% compared to the same period last year. However, the Technology, Media, and Entertainment vertical experienced a 3.3% decline in Q1 2025-26, while the Americas region saw a decline of 5.9% in business. The rest of the world registered a 2.9% increase.
Notably, Tech Mahindra secured new deals with a total contract value (TCV) of $809 million for Q1 2025-26 and successfully added two clients in the $50 million-plus revenue category over the past year. These achievements, however, are not mentioned in this specific report.
As the broader economic environment remains mixed, with certain sectors still not conducive to significant investments, Tech Mahindra continues to navigate headwinds by restructuring its pre-services business, focusing on more profitable verticals, improving margin management through operational efficiencies, and securing better contract deals.
Shares of Tech Mahindra closed at ₹1,609 apiece on the BSE on Wednesday, up 1.94% from the previous close. The company is set to consider issuing bonus shares on July 19, but this is not related to the current report. Meanwhile, L&T is investing ₹1,000 crore in its ship building complex at Katupalli, an unrelated development.
- Tech Mahindra's pre-services business faced challenges due to restructuring and spend reduction in the automotive sector, leading to a slower growth rate compared to the previous year.
- In response, Tech Mahindra is focusing on growth in sectors such as communications, retail, and BFSI, and is rightsizing its pre-services business to improve efficiency and profitability.
- The company is also engaging in strategic measures like pursuing high-quality business deals, implementing Project Fortius to enhance EBIT margins, and building up its workforce.
- Despite these challenges, Tech Mahindra's European business grew by 11.7% compared to the same period last year, but the Technology, Media, and Entertainment vertical and the Americas region experienced declines.
- Tech Mahindra secured new deals with a total contract value of $809 million for Q1 2025-26 and added two clients in the $50 million-plus revenue category, although these achievements are not mentioned in the specific report.
- As the broader economic environment remains mixed, Tech Mahindra is navigating headwinds by restructuring, focusing on more profitable verticals, improving margin management, and securing better contract deals.
