Shares of Mphasis Ltd. were trading around 8% higher on Friday, November 6, after the IT services company reported a strong performance for the September quarter (Q2FY27) and indicated that its full-year revenue growth would be at the upper end of its guidance range.
The company reported a 3.3% quarter-on-quarter increase in constant-currency revenue and 9.7% growth year-on-year. Mphasis said this was its highest sequential constant-currency revenue growth in several years.
Management expects revenue growth for FY27 to be at the upper end of its earlier guidance range of high single digits to low double digits. It also reiterated its EBIT margin guidance of 14.75-15.75%.
In dollar terms, revenue increased 3.2% sequentially to $486 million from $471 million. Revenue in rupee terms rose 4.5% quarter-on-quarter to ₹4,580.9 crore from ₹4,384 crore.
EBITDA increased 4.5% to ₹831 crore from ₹795.2 crore, while EBIT also rose 4.5% to ₹677.4 crore from ₹648.1 crore. The EBIT margin remained unchanged at 14.8%, at the lower end of the company’s target range of 14.75-15.75%.
Net profit increased 14.6% sequentially to ₹561.1 crore from ₹489.5 crore. However, the growth was partly supported by a 78% rise in other income to ₹147.2 crore from ₹82.9 crore.
Gross margin improved 20 basis points sequentially to 27.1%, although it was down 100 basis points year-on-year.
The company said the first half of FY27 had laid a strong foundation and expects the momentum to continue in the second half. It is targeting a conversion of 80% of net income into operating cash flow, with the conversion expected to normalise in FY28.
Deal wins and pipeline
Mphasis reported a total contract value (TCV) of $466 million in the September quarter, compared with $461 million in the previous quarter. Around 66% of the TCV was AI-led, and the company signed five large deals during the quarter.
The trailing 12-month TCV stood at $1.8 billion, with TCV from deals valued at less than $20 million increasing 26% over the period.
The company’s deal pipeline reached a record high, rising 4.4% sequentially and 23% year-on-year. Around 71% of the pipeline was AI-led, compared with 70% in the previous quarter.
FY27 outlook
Mphasis expects revenue growth to be at the upper end of its earlier guidance range of high single digits to low double digits, despite the uncertain macroeconomic environment. Management attributed the outlook to strong execution and expects the momentum seen in the first half to continue through the second half.
The company retained its EBIT margin guidance at 14.75-15.75%. It also reiterated its target of converting 80% of net income into operating cash flow, with the conversion expected to normalise in FY28.
Mphasis shares jump 8% after Q2 results; FY27 revenue growth seen at upper end of guidance