Summary
Birlasoft Limited - Q3 FY 2026 Earnings Call Summary Wednesday, January 28, 2026 5:30 PM IST
Event Participants
Executives 3 Abhinandan Singh (Head - Investor Relations), Angan Guha (CEO & MD), Chandrasekar Thyagarajan (CFO)
Analysts 8 Abhishek Shindadkr, Dipesh Mehta, Manik Taneja, Manish Bhandari, Priyank Chheda, Pulkit Chawla, Ravi Menon, Vibhor Singhal
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue ($) | $150.8 million | +0.1% QoQ, +0.3% CC growth; Manufacturing ramp-ups offset seasonal holiday furloughs. |
| Revenue (₹) | ₹1,347.5 crores | +1.4% QoQ; Growth supported by milestone achievements in the ROW region. |
| EBITDA Margin | 18.2% | +212 bps QoQ; Driven by mix shift to offshore, operational efficiencies, and 110 bps of one-offs. |
| Adjusted PAT | ₹180.2 crores | +22.1% QoQ; Normalized for exceptional labor code provisions and US tax impacts. |
| Order Book (TCV) | $202 million | +89% QoQ; Strong rebound after Q2 slippages, with 46% ($94M) being new engagements. |
| Cash & Equivalents | ₹2,491 crores | +6% QoQ, +21% YoY; Reflects robust collections and disciplined capital management. |
| DSO | 54 days | Improvement QoQ; Management cited this as among the best in the IT industry. |
| Headcount | Not explicitly cited | Management noted a reduction in offshore headcount and subcontractors (now 8% of total). |
Geographic & Segment Commentary
- Manufacturing: The vertical showed growth due to the ramp-up of delayed projects won two quarters ago, though management expects softness to return in Q4 before a potential turnaround in Q1/Q2 FY27.
- Americas: Remains the dominant geography at 85% of revenue; the company hired Komal Sharma to lead this market and drive new leadership and client strategies.
- Rest of World (ROW): Delivered significant growth and margin improvement this quarter, specifically driven by milestone-based ERP project realizations and infrastructure deals.
- BFSI & E&U: These verticals were described as steadier demand environments; while BFSI showed optical degrowth due to furloughs, management expects steady performance in Q4 and growth next fiscal year.
Company-Specific & Strategic Commentary
- Shift to Outcome-Based Models: Birlasoft is aggressively moving away from “staff augmentation” toward fixed-price, outcome-based engagements to improve margins and offshore ratios.
- AI Capabilities: Multiple new deals were secured for AI-led projects, including conversational AI for a payments client and AI-enabled smart manufacturing material tracking.
- Cost Rationalization: The company is “spring cleaning” its cost structure and rationalizing its client base to focus on high-potential accounts, evidenced by million-dollar clients increasing from 78 to 85.
- Offshore Delivery: Increased offshore revenue mix was a deliberate strategy to improve quality of revenue and mitigate the impact of pricing pressures during renewals.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| EBITDA Margin | 15%+ (Sustainable) | Long-term target net of one-offs and forex; accounts for accelerated investments in capabilities and people. |
| Q4 Order Booking | Higher than Q3 ($202M) | Based on current pipeline and client conversations; management aims for 10-20% growth in signings. |
| Effective Tax Rate | ~28% (FY27) | Current higher ETR is due to US federal tax provisions; expected to normalize to historical levels next fiscal. |
| Revenue Outlook | “Cautiously Optimistic” | Headwinds in Manufacturing/ERP and 3 fewer working days in Q4 may temper immediate sequential growth. |
Risks & Constraints
| Risk | Context |
|---|---|
| Pricing Pressure | Management expects renewals to occur at lower price points due to client demands for productivity gains, necessitating the 15% margin floor. |
| Vertical Headwinds | The Manufacturing and Life Sciences (specifically Med-Tech) sectors continue to face macroeconomic uncertainty and tariff-related pressures. |
| Discretionary Spending | Demand remains constrained globally as customers focus on spend optimization rather than new discretionary digital transformations. |
Q&A Highlights
Deal Momentum & Signings
- Question: Why is the new deal TCV still below the $250M historical average? (Priyank Chheda)
- Answer: Q3 included the catch-up of two large deals from Q2. While Q1 is seasonally soft, the current pipeline supports higher signings in Q4 than Q3. (Angan Guha)
Margin Sustainability
- Question: How do the 110 bps of one-offs affect the reported 18.2% margin? (Dipesh Mehta)
- Answer: Stripping one-offs (110 bps) and forex (70-80 bps), the steady-state margin is ~16.5%. The guidance of 15% allows for aggressive reinvestment in sales and AI leadership. (C. Thyagarajan)
Segment Headwinds
- Question: What is driving the weakness in Life Sciences? (Vibhor Singhal)
- Answer: 80% of our Life Sciences exposure is Med-Tech/Manufacturing. Tariff uncertainties are causing pricing pressure, though volume remains steady. Expect turnaround by Q2 FY27. (Angan Guha)
Capital Allocation
- Question: With ₹2,491 crores in cash, what is the plan for a buyback? (Manish Bhandari)
- Answer: The Board is “seized of the matter.” We are looking at opportunistic M&A for capabilities, but capital allocation remains a Board-level priority. (C. Thyagarajan)
Key Takeaway
Birlasoft delivered a resilient Q3 FY26, characterized by high margin expansion and a sharp recovery in deal signings. While constant currency revenue growth was muted at 0.3% due to seasonal furloughs, EBITDA margins reached 18.2%, significantly aided by 110 bps of one-time provision reversals and 70-80 bps of forex tailwinds. Strategically, the firm successfully pivoted toward outcome-based, fixed-price contracts, which boosted offshore delivery and cash collections, resulting in a record cash balance of ₹2,491 crores. Management maintains a “cautiously optimistic” stance for Q4, prioritizing a strong order book (targeted to exceed $202 million) over immediate revenue acceleration, particularly as the Manufacturing and Life Sciences verticals continue to navigate pricing pressures and tariff-related macro headwinds. Investors should expect margins to settle around 15% in the long term as the company reinvests excess profits into US-based sales leadership and AI domain expertise to drive sustainable growth into FY27.
Want more insights like this?
Subscribe to get deep dives delivered to your inbox.
More Earnings Summaries
Explore more Q3 FY26 earnings call analyses: