How Tech Mahindra Is Regaining Its Market Position, Improving Margins and Driving Growth

Synopsis: Tech Mahindra’s turnaround story focuses on restoring growth and margins through Vision 2027, structural cost fixes, and large deal wins. With Q3FY26 revenue up 8.3% YoY, EBITDA up 30.8%, and a $500-million deal, recovery signals are strengthening.

Tech Mahindra is going through a crucial phase as it works to regain lost ground in a highly competitive IT services market. After a period of slower growth and margin pressure, the company has been reshaping its strategy through leadership changes, cost control measures, and a sharper focus on key verticals and digital services. 

With demand conditions gradually stabilising and execution becoming the key differentiator, investors and industry watchers are closely tracking how Tech Mahindra’s ongoing actions translate into improved performance in the coming quarters.

Tech Mahindra Limited, with a market capitalization of Rs. 1,70,005.01 crore, closed at Rs. 1,735.20 per equity share, down by 1.88 percent from its previous day’s close price of Rs. 1,768.40 per equity share.

Tech Mahindra is a global IT services company that helps businesses use technology better across industries such as banking, telecom, healthcare, manufacturing, retail, and travel. Founded in 1986 and headquartered in Pune, Tech Mahindra operates across India, the Americas, Europe, and other international markets, focusing on helping enterprises become more digital, efficient, and future-ready.

It provides services like software development and maintenance, cloud consulting, data analytics, artificial intelligence, cybersecurity, and digital transformation. Along with IT services, it also offers business process services such as customer support, finance and accounting, supply chain management, and automation-driven solutions. The company has developed several AI- and cloud-based platforms and tools to improve workforce management, customer experience, network operations, and enterprise processes.

A Turnaround That Began Under Pressure

When Mohit Joshi became CEO and Managing Director of Tech Mahindra in June 2023, he stepped into a company facing deep challenges: compressed margins, stagnant growth, and heavy dependence on the telecom sector. Soon after his arrival, the situation worsened when a major client went bankrupt, and several large projects concluded, pushing EBIT margins down from 11.2 percent to 6.8 percent, with projections indicating they could fall further to around 4.7 percent. 

Despite this difficult backdrop, the company’s performance indicators have begun to show signs of stabilisation. Revenues have started to grow again, margins are slowly improving, and investor confidence has strengthened. In the Q3FY26, the company reported the EBITDA margin of 16 percent increased from 14 percent year-over-year.

Vision 2027

To pull out of this slump, Tech Mahindra laid out a three-year plan called Vision 2027. Under this roadmap, FY25 focuses on initiating the turnaround, FY26 on stabilising results, and FY27 on outperforming peers. The plan includes specific financial goals such as reaching a 15 percent EBIT margin, achieving 30 percent return on capital employed (ROCE), and returning 85 percent of free cash flow to shareholders. This structured plan has helped create a clear path for recovery and set measurable expectations for shareholders and the market.

Project Fortius and Structural Margin Repair

A major plank of Vision 2027 is Project Fortius, Tech Mahindra’s internal programme aimed at improving margins. Rather than relying on short-term cost cuts, Fortius is designed to address structural inefficiencies.

In 2024, the company announced the key steps under Fortius, which includes rebuilding the talent pyramid by hiring freshers to balance out higher-paid experienced staff, reducing the company’s reliance on subcontractors, and enhancing internal skills through learning programmes. Additionally, Tech Mahindra has transitioned from a geographically oriented delivery model to a centralised delivery model, improving cost control and operational efficiency.

New Deals and Better Client Mining

Margin repair alone would not constitute a true turnaround; growth recovery is equally critical. Tech Mahindra has strengthened its growth prospects on several fronts.

A significant catalyst is the $500 million-plus, five-year deal it won from Telefónica O2, one of its largest contracts ever and its biggest in Europe. Under the agreement, Tech Mahindra will modernise Telefónica O2’s IT infrastructure, with revenue expected to ramp up in the second half of fiscal 2027. This deal provides rare revenue visibility and momentum, especially at a time when large technology contracts are increasingly scarce. For reference, the company’s previous largest deal was a $700 million contract in 2008 from BT plc, highlighting the scale of the Telefónica win.

This new contract not only adds substantial revenue potential, translating to roughly $100 million annually, or about 1.6 percent of Tech Mahindra’s total revenue base of $6.26 billion, but also reinforces its credentials in the telecom vertical and strengthens its footprint in Europe.

Sector and Geographic Stabilisation

A meaningful sign of recovery is the stabilisation in some of Tech Mahindra’s core markets. The telecom vertical, which contributes over one-third of revenue, grew by 4.6 percent year-on-year in USD terms, breaking a pattern of decline seen in nine of the previous ten quarters. Strengthening demand in telecom is crucial because it has historically been a major drag on growth.

While parts of the US portfolio continue to see stress, there has been evidence of stabilisation and growth in the Asia Pacific telecom business and Europe, providing further confidence in the broadness of the recovery.

Beyond operational improvements, recent financial results and market behaviour also support the narrative of recovery. Tech Mahindra reported revenue growth after a period of contraction and posted a stronger net profit, even after absorbing a one-time labour charge. Net new order bookings rose sharply to $1.1 billion from $745 million a year earlier, indicating stronger deal momentum.

Financials

In Q3FY26, the company reported revenue of Rs. 14,393 crore, reflecting a healthy YoY growth of about 8.3 percent compared to Rs. 13,286 crore in Q3FY25, and a moderate QoQ increase of around 2.8 percent over Rs. 13,995 crore in Q2FY26. Operating performance improved strongly, with EBITDA rising to Rs. 2,366 crore, up sharply by nearly 30.8 percent YoY from Rs. 1,809 crore, and growing about 9.3 percent QoQ from Rs. 2,165 crore, indicating better operating leverage and margin expansion.

Profit after tax for Q3FY26 stood at Rs. 1,119 crore, marking a YoY growth of roughly 13.1 percent over Rs. 989 crore in Q3FY25. However, on a QoQ basis, profit declined by about 6.9 percent from Rs. 1,202 crore in Q2FY26, suggesting some sequential pressure despite strong annual growth and improved operating performance.

A return on equity (ROE) of about 14.6 percent and a return on capital employed (ROCE) of about 18.6 percent, and debt to equity ratio at 0.07 demonstrate the company’s financial position. The stock is currently trading at a P/E of 35.6x higher as compared to industry P/E of 23.4x.

Based strictly on the data you provided, Tech Mahindra’s recovery is supported by structural margin improvement, a disciplined turnaround roadmap, significant new deal wins, targeted account growth, and early signs of sectoral stabilisation. While risks remain and the journey to full recovery is not yet complete, the combination of improved revenue trends, margin progress, and landmark contracts like the Telefónica O2 deal shows that the company is moving beyond contraction toward a period of renewed performance.

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