Birlasoft Q3 results soft; recovery hinges on deal ramp-up, say analysts

Why Birlasoft share price rose today: Analysts remain optimistic about the company's medium-term recovery driven by deal wins, margin levers, and a gradual revival in key verticals

Birlasoft share price rallied 6 per cent on the BSE in Thursday's intraday session as Dalal Street analysts turned cautiously optimistic on the information technology firm post its December quarter (Q3FY26) results.

 

While they flag near-term growth pressures amid measured client spending, analysts remain optimistic about the company's medium-term recovery driven by deal wins, margin levers, and a gradual revival in key verticals such as BFSI and manufacturing.

 

"Birlasoft's Q3FY26 results were a mixed bag. Its revenue missed our expectations of $152 million, but Ebitda margin beat estimates owing to improved revenue quality, operational efficiencies, benefits accruing from favourable shift toward fixed-price business and offshore work, exchange rate tailwinds (70-80bps), and certain one-off items (+110bps). Deal intake was healthy in Q3, with expectations of a better show in Q4," noted analysts at Emkay Global Financial Services.

 

 

The brokerage has retained its ‘Add' rating with an unchanged share price target of ₹450.

 

On the bourses, Birlasoft shares hit an intraday high of ₹427.25 per share, before moderating partially to ₹423.55 per share (up 5.13 per cent). By comparison, the BSE Sensex index was down by 268 points (0.33 per cent) at 9:32 AM.

 

Birlasoft Q3 results: Key takeaways

For the quarter ended December 31, 2025, Birlasoft reported a revenue growth of 0.3 per cent quarter-on-quarter (in constant currency) at $150.8 million. The revenue was lower by 6.7 per cent year-on-year.

 

Its net profit, meanwhile, stood at ₹120 crore, including a one-time impact of the new labour code worth ₹46.08 crore.

 

Segment-wise, only the manufacturing segment registered a growth during the quarter, up 3.1 per cent Q-o-Q (in USD terms), while all other verticals declined sequentially.

 

The IT company's Ebit margin rose 220 basis points Q-o-Q to 16.7 per cent, of which 110bps was due to one-offs and 70-80bps due to forex movement.

 

Birlasoft's active client-count moderated to 232 (from 239 in Q2FY26 and 265 in Q3FY25), reflecting rationalisation in some tail accounts. The company's revenue growth from top 5/10 clients was 3.9 per cent/1.8 per cent Q-o-Q.

That apart, total contract value (TCV) from deal wins stood at $202 million in Q3, clocking a growth of 89 per cent sequentially.

 

Though this was lower by around 11 per cent Y-o-Y, the management noted that net new deal wins were $94 million (up 46.9 per cent Y-o-Y). Overall, Birlasoft's book-to-bill ratio was 1.34x.

 

Notably, the company's management pointed out that signed TCV was higher in Q3FY26, as a couple of deals which were certain in Q2 were not finalised, and were signed in this quarter. It, also, expects higher deal wins in Q4 vs Q3.

 

The management said it is focusing on increasing deal wins and improving the pipeline to ensure FY27E is a growth year.

 

Birlasoft Q3 result analysis: Brokerages highlight demand headwinds, margin pressure

According to Nomura, Birlasoft's Q3 performance was largely in-line with subdued expectations, keeping it cautious on the near-term growth momentum. 

 

Nomura pointed out that slower decision-making by clients and delays in deal execution continue to weigh on revenue growth, particularly in the BFSI vertical. 

 

Besides, the IT company's efforts to revamp its sales team and focus on mining efforts, in its large accounts to secure growth, may take time to yield results, it warned.

 

"With a book to bill ratio of 1.34x, timely closure of large deals in Q4 will be critical for Birlasoft to improve its revenue growth outlook. We lower our US dollar revenue estimates by 60-100bp and expect -4.9 per cent to +61 per cent Y-o-Y growth over FY26-28," Nomura said.

 

The brokerage believes that a gradual recovery in discretionary IT spending could aid growth from FY27 onwards, though near-term execution risks persist.

 

"We expect margins to improve due to some tail pruning and focus on larger accounts in FY27F. Steady-state Ebitda margin in Q3 was 16.5 per cent, but the management has guided for a 15-per cent steady-state Ebitda due to anticipated accelerated investments in the business. We, thus, expect Ebit margins of 13.4-13.9 per cent in FY26-28 vs 11.4 per cent in FY25," Nomura said.

 

Echoing similar views, Emkay Global noted that while Birlasoft's Q3 results did not throw up major negative surprises, they also lacked strong growth triggers.

 

The brokerage flagged that vertical concentration and slower ramp-up of large deals continue to cap upside in the near term. Cost optimisation initiatives, offshore mix improvement, and moderation in attrition, however, could provide margin support going forward.

 

"Birlasoft is streamlining its client base by exiting low-margin, non-scalable engagements. This led to a decline in total clients, albeit an increase in the $1-million client base to 85 from 78, reflecting sharper focus on profitable relationships. At the same time, the company is moving away from staff augmentation and pass-through work toward outcome-based fixed-price engagements, thus supporting a higher offshore mix and better margins," Emkay Global said.

 

Road ahead

Brokerages remain watchful of Birlasoft's ability to convert its order book into revenue. Analysts believe that sustained improvement in BFSI spending, recovery in manufacturing and energy verticals, and faster deal ramp-ups will be critical for re-rating the stock. Any pick-up in client confidence in the US and Europe could also act as a key catalyst.

 

From an investment perspective, Emkay Global has raised its FY26 and FY27 EPS (earnings per share) estimates by around 3 per cent and 1 per cent, respectively, while keeping FY28 EPS estimate largely unchanged.

 

Those at Nomura, too, increased Birlasoft's FY26 and FY27 EPS estimates by 7.5 per cent and 6.1 per cent driven by better Ebit margins.

 

The brokerage has also raised the stock's target price to ₹430 (from ₹410).