KPIT Technologies: Will the IT stock rebound anytime soon?

SYNOPSIS: KPIT Technologies faces near-term growth and margin pressures amid weak global auto spending, but management expects recovery from FY27, with brokerages remaining cautiously optimistic on long-term software-led growth.

A global partner to the automotive and mobility ecosystem for making software-defined vehicles a reality, and a leading independent software development and integration partner, is finding it harder to hold on to investor enthusiasm and earnings momentum.

We’re talking about KPIT Technologies Limited. Not long ago, optimism around the automotive software specialist was running high. Today, however, the company appears to be struggling with slowing growth visibility, muted investor interest, and rising concerns from the Street.

This article breaks down what’s really going on at KPIT – what management is saying about the business, how earnings are shaping up, and how brokerages are viewing the stock’s near-term and long-term prospects.

Stock Movement

With a market cap of Rs. 26,383.6 crores, shares of KPIT Technologies Limited moved down by around 2 percent on BSE to close in the red at Rs. 962.4 on Thursday. The stock has delivered negative returns of around 33 percent in one year, and has fallen by over 16 percent in the last one month.

Additionally, the stock is currently trading at a discount of nearly 34 percent from its 52-week high of Rs. 1,454.55 on BSE, recorded on 10th February 2025, and is down by around 50 percent from its all-time high of Rs. 1,928.7 hit on 12th July 2024.

Financials

For Q3 FY26, KPIT Technologies posted a consolidated revenue from operations of Rs. 1,617 crores, reflecting a sequential growth of just 2 percent QoQ compared to Rs. 1,588 crores in Q2 FY26. On a year-on-year basis, revenue grew by over 9 percent from Rs. 1,478 crores recorded in Q3 FY25.

However, growth momentum remained subdued. Revenue growth in dollar terms was nearly flat at 0.2 percent QoQ, while constant-currency growth stood at 1.5 percent. Importantly, the company reported negative organic growth during the quarter.

Net profit for the quarter declined to Rs. 133 crore, down by more than 21 percent QoQ from Rs. 169 crores in Q2 FY26 and about 29 percent lower from Rs. 187 crores reported in Q3 FY25. Profitability was impacted by a one-time impact of Rs. 59.7 crore linked to the implementation of the new labour code. Excluding this exceptional item, profit would have shown a sequential improvement.

Operating performance also saw some pressure. EBIT fell 4.5 percent QoQ to Rs. 234 crore, from Rs. 246 crore in the previous quarter. As a result, EBIT margins narrowed by 100 basis points, declining to 14.5 percent from 15.5 percent in Q2 FY26. Management also flagged that margins could remain under pressure in Q4 FY26 due to annual wage hikes, which contributed for around 50 bps of margin contraction in the December quarter.

During the quarter, KPIT completed the integration of Caresoft and N-Dream. While these acquisitions contributed around 3.4 percent to QoQ revenue growth, they also resulted in significant cash payouts, with payouts of Rs. 435.8 crore for Caresoft and Rs. 197.3 crore for N-Dream. Despite this, the company maintained a healthy balance sheet, ending the quarter with net cash of Rs. 904.6 crore.

Looking ahead, KPIT did not issue formal financial guidance. However, management indicated in its latest investor presentation that steady deal wins are expected to support stronger growth in FY27 compared to FY26. The company added that recently secured transformative engagements are likely to contribute to higher-quality and more sustainable revenue growth over the medium term.

Management Comments

As per Business Today, Sachin Tikekar, Joint MD and Co-founder of KPIT Technologies, said that the passenger car segment has remained under pressure for nearly the past 18 months. During 2025, several original equipment manufacturers (OEMs) reduced R&D and overall spending by around 20-25 percent. Despite these cost cuts, average profitability across OEMs has continued to decline, leading companies to adopt a more cautious and selective approach toward investments.

On the commercial vehicle front, Tikekar noted that global truck sales experienced a cyclical downturn in 2025. However, he indicated that the company expects conditions to improve, with a recovery likely to begin in H2 FY26.

Further, CFO Priya Hardikar said that KPIT’s current order pipeline stands at ~$202 million, which provides visibility for near-term revenue. She added that the company expects the fourth quarter to be among the strongest quarters in FY26.

Meanwhile, in comments reported by CNBC, Tikekar mentioned that certain large client programmes in Asia are currently winding down, which has contributed to a temporary slowdown. He noted, however, that KPIT expects growth to pick up across India, China and Southeast Asia as new programmes come on stream and client spending gradually stabilises.

On deal wins, management said order intake during the period was around $200 million, compared to a historical average of $230–240 million. Tikekar described this as a normal variation rather than a slowdown, noting that the shortfall was roughly 10 percent, which he considers within a typical range.

He further pointed out that revenues across the global mobility industry have declined by about 10 percent, while profits have fallen sharply by nearly 50 percent. This downturn has impacted OEMs, Tier-1 suppliers and tool manufacturers globally. While some India-based automakers such as M&M, Tata Motors and Maruti Suzuki have remained relatively resilient, most of KPIT’s clients in the US, Europe, Japan and Korea continue to face pressure.

Brokerage Targets

ICICI Direct recommended a ‘buy’ rating on KPIT Technologies Limited with a target price of Rs.  1,400 per share, representing a potential upside of over 45 percent from its Thursday’s closing price. It notes that the stock correction over the last 6 months has improved the risk-reward profile, making valuations relatively attractive at present.

According to ICICI Direct, management expects Q4 FY26 to be the strongest quarter of the year, supported by a return to organic growth. The brokerage also expects FY27 growth to outpace FY26, as recent deal wins begin to scale and solution-led programs move into production. Based on this outlook, ICICI Direct estimates USD revenue to grow at a CAGR of 11.6 percent over FY26-FY28.

On margins, the brokerage highlighted that Q3 EBITDA was impacted by partial wage hikes, which are expected to recur in Q4, along with amortisation related to recent acquisitions. However, depreciation and interest costs are expected to stabilise going forward. ICICI Direct believes the gradual shift from effort-based services to solution-led and AI-enabled programs should support better pricing, productivity and margin resilience over time.

As solution penetration increases over the next 12-18 months, the brokerage expects operating leverage to improve, aided by higher revenue per employee, reported at Rs. 60,980, up 1.5 percent QoQ and 3.4 percent YoY, and greater adoption of outcome-linked pricing models. Reflecting this, the brokerage has factored in EBITDA margins of 19.8 percent in FY26E, 21.3 percent in FY27E and 21.5 percent in FY28E.

On the other hand, Motilal Oswal Financial Services Limited (MOFSL) also recommended a ‘buy’ rating on the stock with a target price of Rs. 1,350 per share, representing a potential upside of more than 40 percent. It expects EPS to grow at a CAGR of 12 percent over FY25-FY28, supported by KPIT’s continued leadership in automotive software engineering.

MOFSL believes FY26 will be a year of consolidation for KPIT, marked by relatively muted revenue growth but stable margins, as the company adjusts to changes in its operating model and completes the integration of CareSoft. Looking ahead, the brokerage expects constant currency revenue growth of 9.3 percent YoY in FY27.

Despite a challenging macro environment, MOFSL notes that KPIT continues to see steady opportunities in the digital cockpit and powertrain for ICE vehicles. It expects Q4 FY26 to show modest improvement, with around 1.7 percent QoQ CC growth. The brokerage highlighted that the early quarters of FY27 will be critical to assess whether a broader recovery in ER&D spending is taking shape.

On profitability, MOFSL expects EBITDA margins to remain around 21 percent in FY26, with potential upside in FY27 as utilisation improves, large deals scale up, and integration synergies from CareSoft begin to reflect in financials.

From a valuation perspective, MOFSL believes KPIT remains well-positioned to benefit from OEMs’ transition toward software-defined vehicles, backed by its strong domain expertise. However, the brokerage has trimmed its earnings estimates by around 4 percent, factoring in weaker-than-expected organic growth in Q3, softer near-term demand, and slightly higher depreciation linked to the CareSoft acquisition.

In a nutshell, KPIT Technologies is navigating a challenging phase marked by subdued organic growth, margin pressure, and cautious client spending across global automotive markets. The company continues to maintain a strong balance sheet, a reasonable order pipeline, and strategic positioning in software-defined vehicles and AI-led mobility solutions. 

Management commentary and brokerage views suggest that FY26 is likely to be a consolidation year, with a gradual recovery expected from FY27 as new programs scale, acquisitions integrate, and industry conditions stabilise. While risks persist in the short term, KPIT’s long-term fundamentals and domain expertise remain intact.

For investors, KPIT remains a patience game. Near-term volatility may persist, but any recovery in global auto spending and execution on solution-led programs could gradually restore growth momentum over the medium term.

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