Q1 miss, muted deals: What should investors do with Birlasoft stock now?

Birlasoft share price post Q1 results: Software firm Birlasoft’s disappointing June quarter (Q1FY26) performance has prompted analysts to trim earnings estimates and target prices, with brokerages largely maintaining a cautious stance on the stock. 

 

Birlasoft shares fell up to 3.4 per cent to an intraday low of ₹368.70 per share on Friday, reflecting investor reaction to the below-par results and weak deal momentum. Around 10:00 am, Birlasoft share price was trading 2.70 per cent lower at ₹371.40. In comparison, BSE Sensex was trading 0.47 per cent lower at 80,240.86 levels.

 

Birlasoft Q1 results

 

The company’s consolidated net profit fell sharply by 29.2 per cent year-on-year (Y-o-Y) to ₹106.4 crore, while revenue declined 3.2 per cent Y-o-Y to ₹1,284.8 crore. Ebit dropped 21 per cent Y-o-Y to ₹138 crore and the Ebit margin narrowed to 10.7 per cent from 13.7 per cent a year earlier. 

 

Deal total contract value (TCV) came in at $141 million, down 40 per cent quarter-on-quarter (Q-o-Q) and 12 per cent Y-o-Y – a clear indicator of demand weakness. 

 

Nomura: Little growth visibility, retain ‘Neutral’

 

Analysts at Nomura flagged that Birlasoft's Q1 revenue decline of 1.8 per cent in constant currency (CC) was steeper than expected, driven by project closures and insourcing trends, especially in the manufacturing vertical. The brokerage noted that deal wins were tepid, with net new deals down 19 per cent Y-o-Y, and pointed out that around 70 per cent of Birlasoft’s portfolio is project-based and discretionary, making it highly vulnerable to macroeconomic headwinds and weak discretionary IT spending.

 

Nomura also expressed concern over the elevated tax rate of around 36 per cent versus the usual 25 per cent, which considerably impacted earnings. While some growth recovery is expected in Q2FY26, it hinges on deal closures in the medical devices subsegment and a large deal expected in August. However, Nomura believes that the company’s efforts to revive sales and enhance mining from large accounts will take time to show results. 

 

The brokerage cut its FY26 revenue growth forecast to -3.5 per cent from -2.2 per cent earlier and reduced its FY26/27 EPS estimates by 14 per cent and 3 per cent, respectively. It maintained a ‘Neutral’ rating with a reduced target price of ₹400 (from ₹410), valuing the stock at 18x FY27 EPS.

 

Antique Stock Broking: ‘Hold,’ target cut to ₹430

 

Antique Stock Broking echoed similar concerns, calling the Q1 performance “muted.” The brokerage attributed the revenue and margin pressure to project ramp-downs, deal delays, and client insourcing in the manufacturing segment. 

 

Despite management’s optimism for Q2 sequential growth, Antique believes Q3 performance will depend on how the deal pipeline shapes up in the current quarter, particularly given the seasonal impact of furloughs.

 

The decline in deal TCV was also noted, with Antique flagging the postponement of a large deal as a key reason behind the weak net new win figure of $76 million. Ebit margin contraction of 80 basis points was also seen as a concern, though partly explained by the high base effect from a one-time gain in Q4FY25.

 

Antique trimmed its FY26 and FY27 revenue growth estimates by 1-2 per cent and lowered its target price to ₹430 from ₹450. It retained a ‘Hold’ rating, valuing the stock at 20x FY27 EPS. 

 

Nuvama: 'Reduce' on growth, margin concerns

 

Nuvama remained the most bearish of the three, maintaining a ‘Reduce’ rating and slashing its FY26 and FY27 EPS estimates by 17.4 per cent and 4.1 per cent, respectively. It cited disappointing performance across all fronts – revenue, margins, and deal wins. The Ebit margin of 10.7 per cent came in below its estimate of 11 per cent, and the revenue decline was steeper than expected.

 

Nuvama flagged weak deal momentum as the key structural issue, calling it a major overhang on future growth visibility. It now values the stock at 15x FY27 EPS and cut the target price to ₹340 from ₹350.

 

That said, while Birlasoft’s management expects sequential recovery beginning Q2, brokerages remain wary amid tepid deal wins, revenue pressure, and margin headwinds. 

 

Most analysts recommend staying cautious, with little upside potential seen in the near-term unless growth visibility improves meaningfully. Investors may want to wait for signs of deal momentum revival and margin stability before turning more constructive on the stock.