LTIMindtree shares slide 7% as near-term margin pressures worry investors

Strong deal wins fail to calm near-term worries

LTIMindtree (LTIM) shares fell sharply on Tuesday after its 2025-26 (FY26) third-quarter (October-December/Q3) earnings, reflecting investor caution over near-term challenges despite signs of a gradual recovery under new management. On the BSE, LTIM slid as much as 7.7 per cent to an intraday low of ₹5,912.8 per share. 

At the close, the information technology (IT) major’s shares were down 6.67 per cent at ₹5,977.85, underperforming the benchmark Sensex, which fell 1.28 per cent to 82,180. 

LTIM reported revenue of $1.2 billion for Q3FY26, a 2.4 per cent quarter-on-quarter increase in constant currency terms. Operating margins edged up to 16.1 per cent, supported by cost-saving initiatives. However, the quarter included a one-time charge of ₹590 crore related to provisions for new labour laws, which dragged earnings per share down 11 per cent year-on-year (Y-o-Y). 

Brokerages described the quarter as largely in line with expectations, though execution risks and near-term margin challenges remain. Nomura termed the performance a “mixed bag”, citing strong sequential growth in manufacturing and health and public services — both up nearly 10 per cent in dollar terms — while margins slightly lagged estimates.

 

Emkay Global Research flagged broad-based growth across verticals, aided by the Fit4Future programme and favourable currency movements, partially offset by furloughs and fewer working days. Motilal Oswal said adjusted profits, excluding the labour-related charge, showed strong Y-o-Y improvement.

 

Brokerages struck a note of cautious optimism on the execution of the chief executive officer’s new strategy, which focuses on simplifying sales and leadership structures, sharpening the emphasis on large deals, and driving operational efficiencies.

 

Margins have improved by about 230 basis points (bps) since the fourth quarter (January-March/Q4) of 2024-25 (FY25), while deal momentum remains healthy, with total contract value of $1.69 billion and a book-to-bill ratio of 1.4x. Emkay highlighted continued traction in artificial intelligence-led offerings and a strong pipeline, while Motilal Oswal pointed to improving revenue visibility as large deal wins ramp up, supporting medium-term earnings growth of 13–15 per cent.

 

Despite these positives, analysts agree FY26 will remain a transition year. Nomura expects dollar revenue growth of 6.5 per cent in FY26, compared with 4.8 per cent in FY25, with operating margins improving to around 15.5 per cent and stabilising at 16.2–16.3 per cent from 2026-27 through 2027-28. The brokerage retained a ‘neutral’ rating with a target price of ₹5,900.

 

JM Financial Research revised its target price to ₹5,180 and maintained a ‘sell’ rating. While execution momentum, deal wins, and easing productivity headwinds are constructive, the brokerage remains cautious given modest growth expectations and near-term margin headwinds.

 

Management remains confident of ending FY26 with higher Y-o-Y operating margins. However, Q4 is expected to absorb wage hikes — covering 50 per cent of employees and impacting margins by around 100 bps — along with fewer working days.

 

Emkay, while trimming FY26 earnings estimates due to the one-time charge, maintained an ‘add’ rating with a target of ₹6,500, citing sustained deal momentum and margin improvement. Motilal Oswal took a more bullish stance, assigning a ‘buy’ rating with a target of ₹7,900 on improving execution and strong medium-term earnings visibility.

 

Nuvama Research has a ‘buy’ rating with a target price of ₹7,750. It observed that LTIM is currently trading between expensive high-growth Tier-II and cheaper low-growth Tier-I IT peers, with the premium over largecap peers likely to hold as growth outperformance widens.

 

The sharp fall in LTIM shares highlights investor caution as near-term performance remains weighed down by transition-related challenges. Even so, brokerages broadly agree that the strategic reset and deal traction position the company for stronger growth beyond FY26.