Summary
L&T Technology Services Limited - Q3 FY26 Earnings Call Summary Thursday, January 15, 2026 19:00hrs IST
Event Participants
Executives 4 Alind Saxena, Amit Chadha, Rajeev Gupta, Sandesh Naik
Analysts 6 Dipesh Mehta, Nitin Padmanabhan, Ravi Menon, Sandeep Shah, Sudheer Guntupalli, Vibhor Singhal
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue (USD) | $326.3 Mn | +4.6% YoY, -3.2% QoQ; sequential decline due to strategic portfolio/regional rationalization. |
| Revenue (INR) | ₹2,924 crores | +10.2% YoY, -1.9% QoQ; reflect selective revenue discontinuation in line with Lakshya 5-year strategy. |
| EBIT Margin | 14.6% | +120 bps QoQ; driven by improved revenue quality, operational efficiency, and discontinuation of strategic support. |
| Net Income | ₹329.1 crores | 11.3% of revenue (excl. exceptional items); excludes one-time ₹35.4 cr impact of New Wage Code. |
| Average TCV | $180 Mn | Fifth straight quarter with healthy deal wins; pipeline grew double digits YoY. |
| DSO (Combined) | 112 days | Improved from 114 days in Q2; within target range of 110-115 days. |
| Free Cash Flow | ₹470 crores | YTD FCF at ₹886 crores; healthy FCF/Net Income ratio of 91%. |
| Headcount | 23,639 | Flat QoQ (23,678 in Q2); 30% of workforce already trained in AI. |
| Attrition | 14.6% | Historically stable; slightly improved vs Q2. |
Geographic & Segment Commentary
- Sustainability: Grew 11.4% YoY and QoQ, maintaining its position as the highest-margin segment at 28.8% EBIT. Growth is driven by Industrial/Plant sub-segments, particularly LNG, Oil & Gas, and CPG, with major ramp-ups in $100 Mn deals.
- Mobility: Showed modest sequential uptick despite furloughs; 50% of Q3 large deals were in this segment. The Auto sub-segment has turned the corner with focus on SDVs and luxury OEMs, while Aero & Rail remain positive.
- Tech: EBIT margins improved 160 bps QoQ to 10.6% following the exit from low-margin/commoditized businesses in Israel and India. Management is doubling down on AI/EI solutions and high-end semiconductor platform work.
Company-Specific & Strategic Commentary
- Engineering Intelligence (EI) Pivot: Transitioning from point AI solutions to full-stack EI solutions across PDLC and manufacturing lifecycles. Filed 229 patents in AI/GenAI this quarter (1,655 total) and launched the AgenticIQ platform.
- Portfolio Rationalization: Deliberately exited commoditized regional offerings in Israel, specific low-margin Europe/US tech labs, and non-profitable Indian contracts. This “empty calorie” removal directly contributed to the 120 bps margin expansion.
- Lakshya 2031 Roadmap: Finalizing the 5-year strategy starting April 1, 2026, targeting futuristic technology profit pools like SDV, Digital Manufacturing, and Engineering Analytics.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | Mid-single digit (FY26) | Re-balanced from double-digit to account for intentional exit from low-margin portfolios. |
| EBIT Margin | Mid-16% (Q4 FY27 - Q1 FY28) | Driven by capital allocation to Sustainability/Mobility, operational efficiencies, and AI-led delivery. |
| Wage Hikes | Q4 FY26 | Global wage hikes planned for Q4; expected ~100 bps impact to be absorbed by operational gains. |
Risks & Constraints
| Risk | Context |
|---|---|
| Regional Macro | While US Auto shows “green shoots,” Europe remains focused on cost-optimization and deferring new vehicle model investments. |
| Technology Obsolescence | Management identified specific tech stacks (legacy testing/mechanical) becoming commoditized, necessitating an immediate exit to protect long-term margins. |
| Wage Code Impact | One-time exceptional hit of ₹35.4 crores due to New Labour Codes, though partially mitigated by previous base salary adjustments. |
Q&A Highlights
Restructuring Rationale
- Question: What was the nature of the restructuring and why now? (Vibhor Singhal)
- Answer: Exited commoditized business in Israel, old tech labs in the US/India, and low-margin India contracts to focus on “Engineering Intelligence” (Amit Chadha).
Mobility Turnaround
- Question: What gives confidence in a Mobility recovery given macro uncertainty? (Vibhor Singhal)
- Answer: US markets have bottomed out; momentum in Software Defined Vehicles (SDV) remains high, and Europe is shifting work from high-cost suppliers to LTTS (Alind Saxena/Amit Chadha).
Margin Trajectory
- Question: With low-margin exits, why hasn’t the 16.5% target been pulled forward? (Sandeep Shah)
- Answer: Current guidance includes a level of prudence; intent is to deliver earlier, but integration of acquisitions and wage hikes are factored in (Rajeev Gupta).
SWC Integration
- Question: Is the restructuring primarily focused on the Smart World (SWC) acquisition? (Sudheer Guntupalli)
- Answer: No, it is a mixed portfolio including Israel tech and legacy mobility in Europe. Profitable parts of SWC like Cybersecurity and Telco Infra are expanding in the US and Middle East (Amit Chadha).
Key Takeaway
L&T Technology Services delivered a strategically significant Q3 FY26, prioritizing margin health over volume by exiting commoditized regional and technology portfolios. While this led to a downward revision of FY26 revenue guidance to mid-single digits, EBIT margins expanded 120 bps QoQ to 14.6%. The company is pivoting toward a “full-stack Engineering Intelligence” (EI) provider, backed by a robust $180 Mn TCV deal intake and double-digit growth in its high-margin Sustainability segment. Mobility has bottomed out and is expected to grow in CY26, fueled by SDV and luxury OEM wins. Despite a planned 100 bps impact from Q4 wage hikes, management maintains an aspiration for mid-16% EBIT margins by late FY27, positioning the firm for its next 5-year growth cycle starting April 2026.
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