Tech Mahindra drops 2% after Q1 miss; margin woes ahead or chance to buy?

Tech Mahindra shares fell 2 per cent after the firm reported a sequential decline in first-quarter earnings. Analysts remain cautious over margin improvements

Shares of Tech Mahindra fell over 2 per cent on Thursday after the company reported a sequential decline in first-quarter earnings, prompting analysts to express caution over margin improvement prospects.

 

The information technology (IT) firm's stock fell as much as 2.21 per cent during the day to ₹1,572 per share. The stock pared some losses to trade 1.22 per cent lower at ₹1,588 apiece, compared to a 0.07 per cent decline in Nifty 50 as of 9:33 AM.   CATCH STOCK MARKET LATEST UPDATES LIVE

Tech Mahindra Q1 results 

The IT services and consultancy firm's net profit for the June quarter of the current financial year (Q1-FY26) fell 2.2 per cent sequentially to ₹1,140 crore, while its revenue fell 0.25 per cent to ₹13,351 crore. The results missed Bloomberg estimates on both profit and revenue, which were expected to be ₹1,195.1 crore and ₹13,422.3 crore for the quarter.

 

 

Communications and banking, financial services and insurance (BFSI) business aided the topline figures, contributing 33.8 per cent and 16.4 per cent to the revenue, respectively. Manufacturing, which includes auto, declined 4 per cent while the technology, media and entertainment business was down 3.3 per cent.

 

New deal wins for the first quarter were $809 million, up 51.5 per cent from last year. The company expects new deals to contribute to the topline from the second quarter. 

Tech Mahindra management commentary

The market is very volatile, and the macro environment continues to remain uncertain. The sentiment is not conducive for discretionary investments, according to Mohit Joshi, chief executive officer of Tech Mahindra. “It is too early to say the tide has turned for significant growth,” cautioned Joshi.  “Hi-tech has been volatile, and clients cut spending quickly if they fear a recession. During the quarter, the segment was also impacted due to a semiconductor company in the US. We expect a better second half for this business.”

Analysts on TechM Q1 results

Nuvama Institutional Equities said Tech Mahindra’s Q1 performance was mixed, with revenue and profit missing estimates, while Ebit margin was in line with expectations. While the firm has delivered healthy deal wins, Nuvama flagged concerns over its ability to expand margins further amid a weak macro environment and limited operational levers. 

 

Despite its relatively lower margin and return profile, the stock continues to trade at valuations comparable to large-cap peers. Nuvama trimmed FY26 and FY27 earnings estimates by under 2.5 per cent and maintained a 'Reduce' rating with a target price of ₹1,300.

 

Antique Stock Broking noted that while Tech Mahindra maintained its FY27 guidance of achieving a 15 per cent Ebit margin and delivered above-average revenue growth, the muted demand environment could make meeting that target difficult. 

 

The brokerage currently estimates 7 per cent CC revenue growth for FY27, with Ebit margin improving to 14 per cent, below the company's guidance. Antique maintained a 'Hold' rating with a target price of ₹1,725.

 

Centrum Broking said the near-term demand environment remains constrained in certain verticals, with muted traction in the mobility segment due to client-specific issues. However, ramp-ups in large deals and progress in newer markets like the Middle East are expected to support sequential growth across key segments. The brokerage maintained an 'Add' rating and raised its target price to ₹1,821 from ₹1,604 earlier. 

TechM share price history

Shares of the company snapped a two-day gaining streak and currently trade at 14 times the average 30-day trading volume, according to Bloomberg. The counter has fallen 6.7 per cent this year, compared to a 6.5 per cent advance in the benchmark Nifty 50. Tech Mahindra has a total market capitalisation of ₹1.55 trillion.