Revenue growth was led by the services segment while the technology solutions business was a drag.
Operating profit margins, at 16.1 per cent, were flat on a sequential basis.
The company reiterated its double-digit growth guidance for FY27 given the H1FY27 performance and pipeline conversion.
While the growth outlook remains robust, brokerages believe that valuations are already factoring in the growth and are at a premium to peers.
Revenue growth for the ER&D major was up 1.9 per cent on a sequential and constant currency basis and was powered by the 4.3 per cent growth in the services segment.
Within the services space, the auto segment (80 per cent of services revenues) saw a growth of 2.6 per cent while non-auto business posted a 9.3 per cent sequential growth.
The auto segment revenue growth, excluding Germany-based Es-Tec (acquired last year), was robust at 7.6 per cent sequentially.
The company remains optimistic about anchor customers given Jaguar Land Rover’s (JLR’s) focus on North America, Iveco acquisition by Tata Motors Commercial Vehicles and new developments at Tata Motors Passenger Vehicles.
Demand at Es-Tec remains subdued, particularly from its largest German customer, with some additional softness expected in Q3FY27.
Near-term weakness is linked to restructuring and cost-optimisation measures among German original equipment manufacturers (OEMs).
However, Motilal Oswal Research believes the gradual globalisation of research and development (R&D) spending beyond Germany will create opportunities for Tata Technologies.
Analysts, led by Abhishek Pathak of the brokerage, are building a 13.9 per cent organic growth year-on-year (Y-o-Y) on a constant currency-basis.
Given premium valuations, the brokerage, however, has a sell rating with a target price of ₹630
Technology solutions segment disappointed with a decline of 7.2 per cent quarter-on-quarter (Q-o-Q).
It was primarily due to the timing of revenue recognition in education business and the change in accounting treatment for certain OEM-hosted Software as a Service (SaaS) licence within the product business, effective July.
The change recognises revenue over the licence term rather than upfront.
Excluding this, consolidated revenue growth in rupee terms would have been 2.8 per cent rather than the 2.1 per cent reported by the company.
Deal wins remained healthy, with five large wins in Q2, including a $138 million full-vehicle engineering programme for a leading European luxury OEM, marking the second consecutive quarter of $100 million-plus deal wins.
The IT major reiterated its expectation of a strong double-digit consolidated revenue growth in FY27.
Growth in the second half of FY27 would be supported by the recently-secured large engagements.
The margin performance was lower than expected as it fell 40 basis points (bps) sequentially to 12.9 per cent.
This was due to a 100 bps impact of annual wage hikes and increased subcontracting costs due to deal ramp-ups.
The company expects margins to expand in Q3FY27 despite seasonality and believes that the upward trend will continue through to Q4FY27.
PL Capital has reduced its operating profit margin estimates over the next three years by 40-70 bps, factoring in higher subcontracting costs and investments associated with programme ramp-ups.
Analysts led by Pritesh Thakkar of the brokerage raised its target multiple (to 26 times) and revised its target price upwards to ₹670 (from ₹630) due to growing large deal velocity and steady revenue conversion.
However, it has a ‘reduce’ rating, given that the stock is currently trading at 28 times FY28 earnings and leaves no potential upside.
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