Summary
Mphasis Limited - Q3 FY 2026 Earnings Call Summary Thursday, January 22, 2026, 5:00 PM IST
Event Participants
Executives 3 Aravind Viswanathan (CFO), Nitin Rakesh (CEO), Vinay Kalingara (Head IR)
Analysts 7 Girish Pai, Manik Taneja, Nitin Padmanabhan, Rahul Jain, Sandeep Shah, Sudheer Guntupalli, Vibhor Singhal
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | $451 Million | +1.5% QoQ and +7.4% YoY in CC terms; Direct business grew 9.6% YoY. |
| Net New TCV | $428 Million | Includes 4 large deals (2 >$50 Mn); LTM TCV doubled YoY to $2.1 Bn. |
| EBIT Margin | 15.2% | Maintained within the 14.75%–15.75% band; stable QoQ. |
| Net Profit (PAT) | ₹6,089 Million | +2.2% QoQ and +11.6% YoY; operating profit growth despite seasonality. |
| EPS | ₹24.6 | +9% YoY, excluding exceptional labor law impact of ₹35.5 crores. |
| DSO | 91 Days | +2 days QoQ due to milestone-based unbilled receivables; expected to trend down. |
| Headcount | Not Disclosed | Increase noted in BPO/Mortgage units to support AI-led origination ramp-ups. |
Geographic & Segment Commentary
- Americas (Direct): Grew 1.4% QoQ and 10.8% YoY. Performance was driven by steady ramp-ups in recent large deals within the anchor geography.
- EMEA: Recorded 3.9% QoQ growth in constant currency. Momentum continues to be strong, supported by European insurance wins and global account structures.
- India/Rest of World: Grew 5% QoQ and 17.4% YoY in Direct business. Growth is attributed to an increasing presence in the GCC ecosystem and large deals structured via India.
- BFSI (Vertical): Grew 3.7% QoQ combined. BFS grew 18% YoY (Direct) fueled by wallet share gains; Insurance surged 36.6% YoY due to Life & Annuities and wealth distribution integration.
- TMT (Vertical): Impacted by seasonality on a sequential basis but registered 20%+ YoY growth in the Direct business.
Company-Specific & Strategic Commentary
- NeoIP Platform Launch: Launched a flagship AI intelligence platform integrating the “relearn-build-run” value chain. 69% of the current deal pipeline is now AI-led, with NeoIP contributing to clients representing >50% of total revenue.
- AI Archetypes: Modernization pipeline grew 4x YoY, focusing on retiring legacy monoliths using AI agents. Large deal pipeline increased 2x (91% YoY) as AI supersizes deal constructs.
- Savings-Led Transformation: Managing the “duality” of traditional service deflation versus high appetite for AI-led tech. The strategy focuses on using AI to crash timelines and effort, reinvesting gains into platform capabilities.
- Mortgage Origination: Setting up a lighthouse agentic AI-based mortgage origination unit. This is positioned to benefit from potential interest rate stability and volume recovery in the US.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | >2x Industry Growth | Management expects Q4 FY26 to be the strongest sequential quarter based on TCV to revenue conversion. |
| EBIT Margin | 14.75% - 15.75% | Commitment to stay within this band while reinvesting operating leverage into AI platforms. |
| DSO | Downward Trend | Expected to reduce progressively through the 2026 calendar year as milestones are met. |
| Client Spending | Stable to Slightly Up | FY27 outlook assumes a continuation of the “squeeze the run, feed the change” template to capture tech spend. |
Risks & Constraints
| Risk | Context |
|---|---|
| AI Deflation | Traditional people-based models are seeing deflation. Mphasis mitigates this by positioning as a transformation partner to capture the shift toward tech-heavy spend. |
| Seasonality | Q3 was impacted by furloughs and fewer working days, which softened TMT and sequential growth, though BFSI remained resilient. |
| Debt Levels | Short-term debt increased to fund acquisition earn-outs and geography-specific cash flow mismatches. Management views this as temporary arbitrage rather than a structural trend. |
| Exceptional Items | A ₹35.5 crore hit was taken this quarter due to changes in labor laws, impacting reported EPS. |
Q&A Highlights
Deal Margins & AI
- Question: Can margins expand by using humans plus AI agents? (Nitin Padmanabhan)
- Answer: It provides operating leverage by crashing timelines and effort. Management is currently reinvesting this leverage back into NeoIP platform development to build critical mass (Nitin Rakesh).
Growth Correlation
- Question: Why is revenue growth not as high as the 100%+ LTM TCV growth? (Vibhor Singhal)
- Answer: TCV figures are “net new.” Transformation deals take 2-3 quarters to reach full run-rate. Revenue growth excluding certain portfolio headwinds is already in the mid-teens (Nitin Rakesh).
Modernization Appetite
- Question: Are clients more confident in touching legacy systems now? (Sandeep Shah)
- Answer: Confidence is up an order of magnitude. AI has reduced the time to retire monoliths from 5-7 years to much shorter cycles, making modernization less risky and less expensive (Nitin Rakesh).
Cash & Debt
- Question: Why has debt increased while cash remains flat YoY? (Vibhor Singhal)
- Answer: Cash was utilized for a $130 Mn dividend payment and deferred acquisition payouts (contingent consideration). Short-term borrowing was used for geographic cash mismatches to exploit interest rate arbitrage (Aravind Viswanathan).
Key Takeaway
Mphasis delivered a resilient Q3 FY26 with 7.4% YoY CC growth, overcoming seasonal furloughs through strong BFSI performance. The strategic pivot toward an AI-first approach via the NeoIP platform has fundamentally “supersized” the pipeline, which is now 66% larger YoY and predominantly AI-led (69%). While traditional labor-intensive services face deflationary pressure, Mphasis is successfully capturing higher-value modernization and transformation spend, evidenced by LTM TCV doubling to $2.1 billion. The Direct business, particularly in the US and Insurance, remains the primary growth engine. Management maintained its margin guidance and expects Q4 FY26 to be the strongest quarter of the year, tracking toward a growth rate exceeding twice the industry average. Despite short-term debt increases for M&A payouts, the company’s focus remains on converting its record deal wins into high-margin, tech-centric revenue streams through FY27.
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