LTM's 0.3% Q1 revenue rise pressures FY27 guidance
LTM's anemic 0.3% quarterly revenue growth raises doubts about its ability to meet full-year targets and a lofty goal to double sales by 2031.
Indian IT services company LTM posted just 0.3% sequential constant currency revenue growth in its June quarter, marking a sluggish start to the fiscal year. The underperformance was primarily driven by the delayed ramp-up of India's PAN card 2.0 project and broader war-related disruptions, while consumer and production segments remained weak.
The muted top-line performance stands in contrast to a better-than-expected bottom line. Earnings before interest and tax margins expanded 40 basis points sequentially to 15.5%. Currency benefits and operational efficiencies from the New Horizon program offset the financial impact of annual wage hikes, with management guiding for full-year margins above FY26's 15.4%.
Management expects revenue to accelerate from the current quarter onward, ultimately delivering full-year growth that exceeds FY26's 5.3% constant currency increase. However, Nuvama Research noted that the weak first quarter makes this guidance a "tall ask." The firm now requires a significant step-up in execution over the remaining three quarters to hit its target.
Concerns also extend to LTM's long-term ambitions. The company reiterated its target to double revenues by FY31 under project Lakshya. Nirmal Bang Institutional Securities warned that achieving the necessary double-digit growth will be difficult if the order book remains stagnant.
Total contract value of deal wins was flat sequentially at $1.68 billion, up just 3% year-on-year. This lack of deal momentum compounds the pressure on management to deliver on its aggressive growth roadmap.
There were notable pockets of strength in the quarter. Technology and services verticals grew 3.4% sequentially, while financial services rebounded with 3.2% growth after several weak quarters. Constant currency revenue from the top five and top ten clients rose 4.5% and 4.3%, respectively.
LTM also said its artificial intelligence revenue reached a quarterly run-rate of around $150 million. This was supported by investments in enterprise AI firm Uniphore and the launch of new AI products.
Near-term revenue growth will have to rely entirely on organic channels. The planned Randstad acquisition is not expected to close until the third quarter or later. Despite the addition, LTM does not expect the deal to significantly impact its margin trajectory.
Shares were flat in early trading on Monday. While the stock has fallen 10% so far in 2026, that decline is far less severe than the 26% drop in the broader Nifty IT index. Even so, the stock trades at an FY28 price-to-earnings multiple of around 18, a valuation that offers little comfort to investors if the top-line recovery stalls.
