LTTS Q1 misses estimates; brokerages cautious amid macro headwinds

Brokerages on LTTS: L&T Technology Services (LTTS) delivered a subdued performance in the first quarter of FY26 (Q1FY26), falling short of street expectations on several fronts. 

 

While deal momentum remained robust, macroeconomic headwinds and seasonal challenges weighed heavily on the company’s topline growth, prompting brokerages to cut earnings estimates and adopt a cautious stance on the stock.

 

Muted financial results

 

For the quarter under review (Q1FY26), LTTS reported a marginal 0.7 per cent sequential increase in net profit to ₹316.1 crore, compared to ₹311.1 crore in Q4FY25. 

 

Revenue declined 3.9 per cent quarter-on-quarter (Q-o-Q) to ₹2,866 crore in Q1FY26 from ₹2,982.4 crore in Q4FY25, while earnings before interest and tax (Ebit) fell 1.3 per cent to ₹381.5 crore. Ebit margin stood at 13.3 per cent, marginally higher than the previous quarter’s 13.2 per cent.

 

 

In dollar terms, revenue came in at $335.3 million, registering a 4.2 per cent sequential decline in constant currency (CC) terms, and falling short of analyst expectations. Despite the weakness, Y-o-Y USD revenue growth stood at a healthy 13.6 per cent, supported by traction in newer verticals and sustained deal wins.  Track Stock Market LIVE Updates

Brokerage reactions: Cuts to estimates, mixed outlook

 

Nuvama Institutional Equities termed the results as weak, noting that the revenue miss was sharper than anticipated. 

 

“Revenue came in significantly below our estimate of -2.8 per cent CC Q-o-Q,” the brokerage said, adding that the performance was impacted by seasonality in the Software & Communications (SWC) segment, macro headwinds, and mobility-related softness. 

 

Therefore, Nuvama cut its FY26/27 EPS estimates by 2.5 per cent and retained a ‘Hold’ rating with a revised target price of ₹4,200 (earlier ₹4,300), valuing the stock at 25x FY27E earnings.

 

Emkay Global also flagged the weak operating metrics, especially the 2.9 per cent Q-o-Q decline in reported USD revenue. “The softness was primarily driven by seasonality, macro challenges, and subdued demand in the Auto vertical,” it said. 

 

Despite the pressure, the brokerage highlighted LTTS' strong large deal wins - total contract value (TCV) crossed $200 million for the third straight quarter, including a marquee $50 million deal. 

 

Thus, Emkay reiterated its ‘Add’ rating with a target price of ₹4,750, valuing the company at 28x Jun-27E EPS, while trimming FY26–28 EPS estimates by 1-3 per cent.  Nomura, on the other hand, has retained its ‘Reduce’ rating on L&T Technology Services (LTTS) and cut the target price to ₹3,600 (from ₹3,760), citing a weak Q1FY26 performance marked by a revenue miss and margin pressure. Revenue declined 4.2 per cent Q-o-Q in constant currency terms to $335 million - below Nomura’s estimate - driven by project delays in the Auto segment and client discounts in the Tech vertical.  Ebit margin came in slightly above expectations at 13.3 per cent, but still down 230bps Y-o-Y, while EPS grew just 0.7 per cent Y-o-Y to ₹29.8. While deal wins remained strong at over $200 million (spread across 10 large deals), and the pipeline - especially in the Sustainability vertical - looks healthy, Nomura remains cautious on the company’s ambitious double-digit growth guidance for FY26, expecting only 9 per cent growth (including about 6 per cent from the Intelliswift acquisition).  Margins are likely to remain under pressure in Q2 amid continued client support and macro uncertainty, with recovery expected only in FY27–28. EPS estimates for FY26–28 have been cut by 1-14 per cent, and with the stock trading at about 30x FY27F EPS, Nomura sees limited near-term upside unless revenue and margin performance improve meaningfully.

 

Management commentary, outlook

 

LTTS CEO and MD Amit Chadha said, “We began the fiscal year with strong momentum in large deals, building on previous quarters. Both Europe and the US grew sequentially.”

 

He added, “Our multi-segment strategy remains resilient, with the Sustainability segment posting double-digit annual growth. Investments in advanced tech and our ‘Go Deeper to Scale’ approach are deepening client relationships and driving robust large-deal TCV.”

 

“AI is now central to our programmes, with 206 patents filed and multiple deployments underway. We’re launching PLxAI - our proprietary AI framework - to accelerate product development across verticals. Originally incubated in Mobility, it’s now scaled company-wide.”

 

“To meet growing demand, we’ve opened a new design centre in Plano, Texas, focused on advanced tech, cybersecurity, and AI,” Chadha said. “Backed by a strong order book and focus on profitable growth, we aim for double-digit growth in FY26 and are confident in reaching our $2 billion medium-term revenue target.”

 

While LTTS continues to execute well on the deal front and is investing in future-ready technologies, near-term challenges, particularly in mobility and macro-sensitive verticals, are impacting revenue visibility. 

 

That said, brokerages remain cautiously optimistic, acknowledging long-term strengths but flagging risks to near-term earnings momentum.