TechM Q2 results: Order wins at 14-quarter high; should you buy this IT stock?

Tech Mahindra (TechM) reported better-than-expected revenue growth and margin expansion for the September quarter, backed by strong order wins. Despite the operational improvement, analysts remain divided on the stock’s outlook.

The company posted revenue of $1,586 million, up 1.6 per cent sequentially in constant currency terms, versus an estimate of 0.9 per cent. EBIT margin improved 110 basis points quarter-on-quarter to 12.1 per cent, ahead of the 11.8 per cent estimate. PAT was marginally below expectations, while total contract value (TCV) rose 35 per cent year-on-year to $816 million — the highest in 14 quarters and the fourth consecutive quarter above $700 million.

Nirmal Bang Institutional Equities
Nirmal Bang said while it remains positive on Tech Mahindra’s turnaround story and execution, growth will only get tougher from here. The brokerage reiterated its ‘Hold’ rating with a revised target price of Rs 1,674 (from Rs 1,679 earlier), citing a strong Q2 performance but limited near-term upside.

Motilal Oswal Financial Services

MOFSL retained its ‘Buy’ rating and target price of Rs 1,900, valuing the stock at 23 times June 2027E EPS — implying a 29 per cent upside. The brokerage expects EBIT margins of 12.3 per cent in FY26 and 14.4 per cent in FY27, leading to a 28 per cent CAGR in PAT over FY25–27. It said the ongoing restructuring under the new leadership is progressing well, adding that continued strength in BFSI and efficiency gains should drive further margin expansion.

Nuvama Institutional Equities
Nuvama noted that Tech Mahindra has made commendable progress under CEO Mohit Joshi, with margins nearing its 15 per cent target. However, it pointed out that margins remain below the five- and ten-year averages of 13.4 per cent and 13.8 per cent, respectively, while revenue growth still lags peers. The brokerage said TechM has essentially “come back to where it started” and that the turnaround will take longer than the market expects. Given valuations comparable to TCS and Infosys, Nuvama maintained its ‘Reduce’ rating, calling the risk-reward “unfavourable.”