Summary
Tata Elxsi Limited - Q3 FY 2026 Earnings Call Summary Tuesday, January 13, 2026 5:00 PM IST
Event Participants
Executives 4 Gaurav Bajaj (CFO), Manoj Raghavan (MD & CEO), Nitin Pai (CSO & CMO), Sneha V (Company Secretary)
Analysts 10 Abhishek Shindadkar (InCred Capital), Amit Chandra (HDFC Securities), Ankur Pant (IIFL), Bhavik Mehta (JPMorgan), Debashish Mazumdar (Svan Investments), Jalaj (Svan), Karan Uppal (PhillipCapital), Rishi Modi (RDM Advisory), Rohit Jain (Tara Capital), Sajal Kapoor (Antifragile Thinking), Sulabh Govila (Morgan Stanley), Vimal Gohil (Alchemy Capital)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Constant Currency Growth | +3.2% QoQ | Driven largely by volume growth and accelerated ramp-ups in the Transportation business. |
| EBITDA Margin | 23.3% | +220 bps QoQ; aided by operational excellence (+200 bps) and FX (+35 bps), partially offset by wage hikes (-110 bps). |
| PBT Margin | 24.2% | +200 bps QoQ; excludes a one-time exceptional item related to the new labor code provision. |
| Transportation Revenue | 55%+ of total | +7.7% QoQ; fueled by SDV deal ramp-ups and normalization of work with a strategic OEM. |
| Media & Comm. Revenue | Marginal Decline | -0.3% QoQ; impacted by seasonal furloughs and administrative delays in deal awards. |
| Healthcare Revenue | Bottomed Out | Revenue stabilized following the runoff of legacy regulatory programs; new GenAI deals won. |
| Utilization | ~75% | Improved in line with business growth; management identifies further runway to 80-85%. |
Geographic & Segment Commentary
- Transportation: Representing over 55% of revenue, the segment grew 7.7% QoQ. Growth was driven by Software Defined Vehicle (SDV) deals, electrification (BEV/Hybrid), and a recovery in a strategic OEM account that faced disruptions in Q2.
- Media and Communication: The segment saw a 0.3% QoQ decline due to December furloughs and paperwork delays. Management expects a turnaround in Q4 FY26 backed by a strong deal pipeline and recent large deal wins.
- Healthcare and Life Sciences: This segment reached its “bottom” in Q3 after the conclusion of large manual regulatory programs. Strategic shifts toward GenAI-powered regulatory workflows and new customer additions are expected to drive growth starting Q4 FY26.
- Geographies: Performance was broad-based in the US and Europe. India saw some pressure from automotive suppliers, while Japan is in a consolidation phase following previous ramp-ups.
Company-Specific & Strategic Commentary
- Software Defined Vehicles (SDV): Accelerated deployments of the “AVENIR” SDV suite are a primary growth driver, with significant traction in top 5-10 accounts.
- Operational Efficiency: Higher utilization and cost discipline contributed 200 bps and 80-85 bps respectively to margin expansion this quarter.
- Aerospace & Defense: Management is doubling down on this segment, targeting Global Capability Centers (GCCs) in India and electrification in aerospace, despite longer sales cycles.
- Non-PV Transportation: Adjacency businesses (off-road, rail) currently contribute 7.5-8% of transportation revenue, with a long-term target of 20%.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | Double-digit growth | Aspirational target for FY27 across Transportation and Healthcare segments. |
| Margins | Return to historical levels | Management expects to reach “Tata Elxsi levels” of profitability by the exit of FY27. |
| Segment Turnaround | Q4 FY26 | Expected growth recovery for both Media & Communication and Healthcare segments. |
| Utilization | 80% to 85% | Targeting 80% before resuming large-scale hiring; 85% is now viewed as comfortable due to AI tools. |
Risks & Constraints
| Risk | Context |
|---|---|
| Macroeconomic Headwinds | Global spending remains cautious with slow decision-making cycles despite the company’s strong value proposition in offshore engineering. |
| Client Concentration | Growth is currently concentrated in the top 5-10 accounts; management is actively working to diversify geography and account risk. |
| Labor Code Changes | While a one-time provision was made, notified rules could lead to further adjustments, though current ongoing impact is estimated at only 15-20 bps. |
Q&A Highlights
Transportation Momentum
- Question: Is the 7.3% [sic] growth driven primarily by the anchor customer? (Debashish Mazumdar)
- Answer: Growth is a combination of the anchor customer recovery, ramp-up of large SDV deals, and new adjacency/off-road business. (Manoj Raghavan)
Margin Sustainability
- Question: Where can margins go in the next few quarters? (Bhavik Mehta)
- Answer: Operating leverage and utilization provided a ~200 bps uplift. We expect to move back to our historical margin trajectory by the end of next year. (Gaurav Bajaj)
Hiring Strategy
- Question: Will hiring return to a positive trajectory? (Vimal Gohil)
- Answer: Large-scale hiring is likely a quarter or two away. We intend to leverage existing bench strength to move utilization toward 80% first. (Manoj Raghavan)
IP & Creativity
- Question: Can you name a successful idea that initially seemed unbillable? (Sajal Kapoor)
- Answer: Our NEURON network automation platform was ahead of its time. We focus on engineering-led creativity to ensure concepts are manufacturable and commercially viable. (Nitin Pai)
Key Takeaway
Tata Elxsi delivered a resilient Q3 FY26, characterized by a 3.2% CC revenue growth and a significant 220 bps EBITDA margin expansion to 23.3%. The performance was propelled by the Transportation vertical (+7.7% QoQ), which benefited from Software Defined Vehicle (SDV) ramp-ups and the recovery of a strategic OEM account. While Media and Healthcare segments saw marginal declines or remained flat, management signaled that both have bottomed out and are positioned for a Q4 turnaround. Strategically, the company is shifting toward GenAI-enabled engineering and non-linear growth models, allowing for higher comfortable utilization targets of 85%. Although macroeconomic headwinds persist and decision-making remains measured, the company is entering the final quarter with a strong order book and an aspirational outlook for double-digit growth in key verticals for FY27. Success remains contingent on the sustained recovery of the Media and Healthcare segments and navigating global macro volatility.
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