Summary
Datamatics Global Services Limited - Q3 FY 2026 Earnings Call Summary Thursday, January 29, 2026, 05:00 P.M. IST
Event Participants
Executives 3 Ankush Akar (SVP & CFO), Mitul Mehta (EVP & CMO), Rahul Kanodia (Vice Chairman & CEO)
Analysts 5 Bimal Parekh (Sunidhi Securities), Dhanshree Jadhav, Grishma Shah (Envision Capital), Rahil (Sapphire Capital), Srinivasu (TIA), Yatin Shah (Investor)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹510.1 crores | +19.9% YoY and +4.1% QoQ; driven by strong growth in Digital Technologies and acquisition integration. |
| EBITDA | ₹96.2 crores | +76.4% YoY and +8.3% QoQ; reflects disciplined cost optimization and operational leverage. |
| EBITDA Margin | 18.9% | +604 bps YoY and +75 bps QoQ; significant improvement due to enhanced operational efficiency. |
| EBIT | ₹74.2 crores | +65.9% YoY and +7.7% QoQ; margin stood at 14.6%, up 404 bps YoY. |
| PAT (after NCI) | ₹36.4 crores | -42.5% QoQ; impacted by a one-time exceptional charge related to new labor codes. |
| PAT Margin | 7.0% | Normalizing for exceptional items, PAT margin would have been ~12.7%. |
| Billed DSO | 55 days | Maintained healthy levels as of December 2025. |
| Net Cash | ₹540.2 crores | Cash and investments net of debt; maintains a strong balance sheet for potential M&A. |
Geographic & Segment Commentary
- Digital Technologies: Revenue stood at ₹169.6 crores, up 10.8% QoQ with an EBIT margin of 10.8%. Growth is robust with a healthy pipeline supported by the Dextara (Salesforce) acquisition and cross-selling initiatives.
- Digital Operations: Revenue was ₹273.8 crores, up 0.5% QoQ with an EBIT margin of 18.1%. Margin improvement is driven by the transitioning of business processes toward AI-driven automation and autonomous workflow orchestration.
- Digital Experiences: Revenue reached ₹66.7 crores, up 3.2% QoQ but margins remain soft due to two large clients transitioning work to their own captive centers. Management expects a recovery in Q1 FY27 as new logos with healthier margins are onboarded.
- Geography (USA): Remains the largest market contributing 52% of revenue. While currently “lukewarm” due to political uncertainties and macro headwinds, management continues to focus on this geography as it represents a major portion of the global outsourcing market.
Company-Specific & Strategic Commentary
- Enterprise AI (Gemini): Rolling out Google Gemini Enterprise across the organization to empower all employees with AI tools, certifying 200 employees in Phase 1. The goal is to democratize AI and move from niche expert pockets to an “AI-first” culture.
- Agentic AI Solutions: Built industry-specific AI agents for insurance, banking, and logistics to handle autonomous workflow orchestration. These solutions are currently in the pilot/PoC stage with mainstream production anticipated in the coming quarters.
- M&A Integration: TNQ and Dextara integrations are performing well, contributing to sequential organic growth and expanding the service suite for cross-selling into the existing Datamatics customer base.
- R&D/Technology Investment: The company spends ₹40–50 crores annually on transformation technologies, shifting focus from legacy product investments to AI and Small Language Models (SLMs).
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | High single-digit (Organic) for FY27 | Conservative outlook due to U.S. political uncertainties and AI-related disruptions; excludes potential M&A. |
| Digital Experiences | Recovery starting Q1 FY27 | Q4 FY26 will remain soft as the final phase of captive transitions concludes before new logos ramp up. |
| Margins | Maintain/Improve current levels | Management is confident in sustaining the ~19% EBITDA margin through continued cost control and productivity gains. |
Risks & Constraints
| Risk | Context |
|---|---|
| Political/Macro Uncertainty | U.S. election cycles and political overhang are creating a “lukewarm” environment for new large-scale commitments. |
| Labor Code Impact | New labor codes caused a one-time ₹40.3 crore hit to PAT; while future impact is expected to be minimal (~0.5%), regulations are still evolving. |
| Client Captive Transition | Structural risk in the Digital Experience segment where clients moving work in-house causes short-term revenue and margin volatility. |
| Data Privacy/Security | BFSI and Publishing clients show hesitation in full AI adoption due to concerns over data leakage and intellectual property rights. |
Q&A Highlights
AI Strategy and Implementation
- Question: Is Google Gemini the primary AI tool and how does it fit the revenue mix? (Yatin Shah)
- Answer: It is being used to power internal productivity for every employee. For clients, Datamatics uses a multi-model approach (OpenAI, Anthropic, Llama) depending on the use case, but Gemini is the preferred internal platform for democratization (Rahul Kanodia, Mitul Mehta).
Digital Experience Performance
- Question: When will the decline in Digital Experiences margin and growth recoup? (Dhanshree Jadhav)
- Answer: The transition to captives takes 1-4 quarters. Q4 FY26 will see the full impact of this transition, with an upswing expected in Q1 FY27 due to new logo wins (Rahul Kanodia).
Growth Outlook & M&A
- Question: Why guide for high single-digit growth for FY27 when current growth is ~20%? (Rahil)
- Answer: Current 20% growth includes a bump from acquisitions. The FY27 outlook is conservative, reflecting 4% sequential organic growth and accounting for global uncertainty (Rahul Kanodia).
AI Spend and Revenue
- Question: What is the annual spend on AI and is it capitalized? (Bimal Parekh)
- Answer: Spending is ₹40-50 crores annually on transformation tech. It is fully expensed in the P&L rather than capitalized (Rahul Kanodia).
Labor Code Impact
- Question: Is the labor code impact a recurring cost? (Yatin Shah)
- Answer: No, the ₹40.3 crore charge is a one-time legacy/retrospective hit to gratuity and leave encashment. Future impact will be marginal and routine (Ankush Akar).
Key Takeaway
Datamatics reported a robust Q3 FY26 with revenue growing 19.9% YoY to ₹510.1 crores and EBITDA margins expanding significantly by 604 bps to 18.9%. While bottom-line performance was temporarily suppressed by a ₹40.3 crore exceptional charge related to new Indian labor codes, operational metrics remained strong across Digital Technologies and Digital Operations. The company is aggressively pivoting to an “AI-first” model, certifying staff on Google Gemini and piloting “Agentic AI” workflows for BFSI and logistics clients. Management maintains a conservative high single-digit organic growth outlook for FY27, citing U.S. political headwinds and the finalization of client transitions to captives in the Digital Experience segment. However, with a strong cash position of ₹540.2 crores and successful integration of recent acquisitions like Dextara and TNQ, the company is well-positioned to pursue further M&A and capitalize on the growing demand for enterprise AI integration.
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