This article first appeared on GuruFocus .
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Revenue:USD 451 million for Q3 FY26, 1.5% sequential growth, 7.4% year-over-year growth in constant currency terms.
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Direct Business Revenue:98% of overall revenue, 1.9% sequential growth, 9.6% year-over-year growth in constant currency terms.
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EBIT Margin:Stable at 15.2%.
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Operating Profit:INR 6,099 million, 2.2% sequential growth, 11.6% year-over-year growth.
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Net New TCV Wins:USD 428 million for the quarter, including four large deals.
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LTM TCV:USD 2.1 billion, doubled over the last four quarters.
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Operating Cash Flow:USD 43 million for Q3 FY26.
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DSO:91 days, increased by 2 days quarter-over-quarter.
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BFS Growth:2.5% sequential growth, 18% year-over-year growth in direct BFS.
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Insurance Vertical Growth:8.1% sequential growth, 36.6% year-over-year growth in constant currency terms.
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Pipeline Growth:66% year-over-year, 69% AI-led.
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Large Deal Pipeline:Up 91% year-over-year.
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Release Date: January 22, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Mphasis Ltd ( BOM:526299 ) reported strong growth in its AI-led pipeline, which grew 66% year-over-year, with 69% of the pipeline being AI-led.
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The company achieved net new TCV wins of USD 428 million, including four large deals, two of which are over $50 million.
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Mphasis Ltd ( BOM:526299 ) launched its flagship AI platform, NeoIP, which has accelerated record deal wins and represents clients contributing more than 50% of company revenue.
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The BFSI vertical showed strong performance, with BFS growing 14.8% year-over-year and insurance growing 36% year-over-year.
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The company maintained its EBIT margin within the stated band of 14.75% to 15.75%, demonstrating margin discipline while investing for growth.
Negative Points
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The company's DSO increased by 2 days quarter-over-quarter, primarily due to unbilled receivables pertaining to milestone contracts.
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Despite strong TCV conversion, the revenue growth rate has not fully matched the pace of deal wins, indicating a lag in deal ramp-up.
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There is a consistent increase in debt, which was used for acquisition payouts and cash flow mismatches across geographies.
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The TMT vertical was impacted by seasonality, which affected its sequential performance.
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The company faces challenges in ensuring that AI-led transformation deals convert to revenue at the expected pace, given the complexity of such deals.
Q & A Highlights
Q: In deals executed with a combination of humans and AI agents, do you believe margins can be higher, and will competition affect this? A: Nitin Rakesh, CEO: The infusion of AI agents provides operating leverage by reducing human effort and complexity, potentially leading to higher margins. While some value may be shared with customers, the approach allows us to unlock complex deals and invest in platform development. Over time, we expect to capture more value internally.
Q: Considering strong deal wins and recovery from furloughs, could Q4 be the strongest sequential quarter for the year? A: Nitin Rakesh, CEO: Directionally, yes. Based on our guidance of greater than 2 times industry growth, Q4 is expected to be the strongest growth quarter for FY26.
Q: Why is the debt consistently increasing? A: Aravind Viswanathan, CFO: The increase in debt is due to cash flow mismatches across geographies and acquisition-related payouts. We use short-term borrowing to manage these, considering interest rate arbitrage, and it's not a long-term trend.
Q: How did Q3 pan out versus expectations, and are there any client-specific issues in the top 10 client bucket? A: Nitin Rakesh, CEO: Q3 met our expectations, with no significant surprises or client-specific issues in the top 10 bucket. We are seeing good growth across all client categories and geographies.
Q: Are there signs of change or improvement in discretionary spending and short-cycle projects? A: Nitin Rakesh, CEO: Discretionary spending as we knew it is unlikely to return in the same form. However, there is a reprioritization of spend towards AI and efficiency, with stable to slightly increased overall spending expected this year.
Q: Despite strong deal wins, why hasn't revenue growth matched the pace of deal wins? A: Nitin Rakesh, CEO: The correlation between TCV and revenue growth is improving. Some deals are still ramping up, and transformation deals take time to reach full revenue potential. We expect continued acceleration in growth as these deals mature.
Q: What is the impact of AI on application modernization, and are clients more confident in touching legacy systems? A: Nitin Rakesh, CEO: There is a significant increase in confidence and appetite for modernization using AI, driven by reduced complexity, time, and cost. We are seeing a 4x increase in our modernization pipeline, opening up large program opportunities.
Q: How should we think about growth across industry segments, especially BFSI, in the foreseeable future? A: Nitin Rakesh, CEO: BFSI momentum is expected to hold steady or intensify, supported by strong deal pipelines and execution. We anticipate broad-based growth across segments, with FY26 likely better than FY25, setting a positive template for FY27.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
