Tech Mahindra shares in focus as Q2 PAT falls 4% YoY. Should you buy, sell or hold?

Tech Mahindra is set to be in the spotlight on Wednesday as investors react to the company’s Q2FY26 earnings report. The IT major reported a 4.4% year-on-year (YoY) decline in its consolidated net profit, which stood at Rs 1,194 crore, compared to Rs 1,250 crore in the same quarter last year.

Despite the dip in profit, the revenue from operations rose by 5.1% to Rs 13,995 crore, up from Rs 13,313 crore in the year-ago period. The company’s Earnings Before Interest and Taxes (EBIT) also showed strong growth at Rs 1,699 crore, marking a 15% increase sequentially and a 32.7% jump YoY.

On a sequential (QoQ) basis, PAT rose 4.7% from Rs 1,141 crore in Q1FY26, while the topline grew 4.8% QoQ, up from Rs 13,351 crore in the April-June quarter.

After the company’s Q2 results, here’s what brokerage firms have said:

Goldman Sachs: Sell| Target price: Rs 1,410

Goldman Sachs maintains a ‘Sell’ rating on Tech Mahindra, revising its target price to Rs 1,410 from Rs 1,380. The firm noted that Tech Mahindra’s results beat expectations across the board, including revenue growth, margins, and deal wins.

While management expects FY27 to be better than FY26, they do not anticipate a significant improvement, citing limited recovery in industry growth as a key constraint. Furthermore, downside risks have increased, as the broader IT industry’s FY27 revenue growth estimate of 5.5% YoY is now at higher risk of being revised downwards.

Despite all major peers delivering in-line or better-than-expected growth, investor concerns linger due to weak demand visibility and disruption driven by AI. Goldman Sachs also emphasized that the bearish narrative around the sector has strengthened, as demand recovery timelines remain unclear.

Finally, margins and growth guidance remain under pressure, primarily due to sluggish industry conditions, indicating a challenging environment for sustained outperformance.

Morgan Stanley: Underweight| Target price: Rs 1,555

Morgan Stanley maintains an 'Underweight' rating on Tech Mahindra, with a revised target price of Rs 1,555. The brokerage noted that Q2 results were in line with peers, but Tech Mahindra’s EBIT margin performance stood out and is expected to be well-received by investors.

Deal wins remained robust at over USD 800 million, with management projecting stronger growth in H2FY26 compared to the first half, excluding seasonality effects. Client mining remains healthy, as 17 out of 45–50 new clients have already surpassed the USD 1 million revenue run rate.

Morgan Stanley highlighted that margin expansion is likely to stem from gross margin improvements and SG&A leverage. However, the overall recovery is still modest, with delays in decision-making and only a gradual rebound expected in the communications segment.

The 15% EBIT margin target by FY27 is seen as ambitious, especially in the face of macroeconomic volatility and US visa regulatory headwinds. While FY26 margin estimates have been raised post-results, FY27–28 EPS projections have been cut by up to 2.8%.

Finally, Morgan Stanley noted that Tech Mahindra trades at a 1.6% discount to HCLTech, but due to limited upside to the target price, the Underweight stance is maintained.

Nuvama: Reduce| Target price: Rs 1,350

Nuvama has maintained a ‘Reduce’ rating on Tech Mahindra, revising its target price to Rs 1,350 from Rs 1,300. The company reported revenue of USD 1,586 million for the quarter, representing 1.6% QoQ growth in constant currency (CC) terms, which exceeded Nuvama's estimate of 0.9% CC growth.

The EBIT margin improved 110 basis points sequentially to 12.1%, beating expectations of 11.8%. However, PAT came in at Rs 1,190 crore, which was slightly below Nuvama’s estimate. Despite this, the Total Contract Value (TCV) remained strong at USD 816 million, marking a 35% year-on-year increase.

Nuvama acknowledged that Tech Mahindra is progressing steadily towards its FY27 goals, but also cautioned that future margin expansion could become increasingly difficult. The firm cited challenges such as a low-growth environment, weak macroeconomic conditions, and limited levers for improvement.

Lastly, Nuvama tweaked its FY26E and FY27E EPS forecasts marginally by +0.1% and +1.1%, respectively. It also revised the rolling forward valuation to 18x, compared to the earlier 19x, based on the average of FY27E–28E P/E.

Also read: Axis Bank Q2 preview: Profit seen falling 19% YoY as margin and cost pressures persist

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)