Tech Mahindra shares slip after Q2 results despite operating beat; analysts divided in views

Shares of Tech Mahindra Ltd. opened higher but soon erased gains to trade lower on Wednesday, October 15, following the company's September quarter earnings announcement.

The IT major delivered a better-than-expected operating performance in the second quarter. Both revenue and margins came in ahead of estimates, with constant currency revenue growth at 1.6% versus expectations of 1%. This also marked the strongest growth in the past 10 quarters.

Tech Mahindra reiterated that its FY27 guidance, which includes growth above the industry average and an operating margin of around 15%, remains unchanged. The company said FY27 growth should surpass FY26 levels, although it may be muted compared to initial expectations.

Brokerage views

CLSA maintained its 'High Conviction Outperform' rating but cut its target price to ₹1,695. The brokerage said there is "greater ambiguity" around Tech Mahindra's ambition to outperform peers in FY27.

However, it added that investors should "keep faith in high-quality management," citing the company's track record and operational improvement over the last six quarters.

Jefferies retained an 'Underperform' rating with a target price of ₹1,270. It said that second-quarter revenues and margins were broadly in line, but profits missed estimates due to foreign exchange losses.

The foreign brokerage said while strong deal wins should support growth in the second half of FY26, Tech Mahindra does not foresee a sharp recovery in FY27. It also cautioned that on-site wage inflation due to H-1B visa costs could make the company's FY27 margin target of 15% look optimistic.

Morgan Stanley has an 'Underweight' rating with a target price of ₹1,555. The brokerage mentioned strong deal wins, improving client stability, and gradual margin recovery as positives.

However, it flagged slow deal-to-revenue conversion, weakness in verticals like manufacturing, and a challenging macro environment as key concerns.

Tech Mahindra's stock, it said, trades at a 1.6% discount to HCL Technologies, making the risk–reward less favorable.

Nomura, on the other hand, remained positive with a 'Buy' rating and target price of ₹1,670. It said Q2FY26 was strong across most parameters, with healthy deal wins and a robust pipeline.

The brokerage added that the company is making steady progress in its three-year turnaround plan, with expectations of better revenue growth in FY26 compared to FY25.

At present, Tech Mahindra shares were down 0.9% at ₹1,455. The stock has fallen nearly 14% so far in 2025 and currently trades at 18.3 times FY27 forward earnings per share (EPS).

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