Tech Mahindra surges on Q1 beat, brokers raise growth outlook

Tech Mahindra reported net profit of Rs 1,465 crore for the first quarter of fiscal 2027, up 28% year-on-year and more than 8% sequentially. Revenue reached $1.660 billion in constant currency terms, a 6.6% annual increase that surpassed expectations, while the EBIT margin expanded to 14.4%.

The outperformance was broad-based across verticals, driven by the early execution of a large European automotive programme and the ramp-up of major telecommunications projects. New deal wins totalled $1.078 billion in total contract value, representing a 33% annual surge. Nomura noted that margin expansion was largely driven by its ongoing Project Fortius and currency depreciation.

The results signal a decisive shift in the company's growth trajectory. Motilal Oswal argued the performance positions Tech Mahindra to be the fastest-growing large-cap IT firm in fiscal 2027, projecting 6% to 7% growth compared to the 2% to 3% expected for most peers. “We believe this quarter brings a material step-up in Tech Mahindra’s growth trajectory, with growth expectations moving from ~3-5% to ~6-7% over the next couple of years. If this momentum sustains, it could warrant another round of re-rating,” the brokerage said.

Management expects revenue to grow faster than the industry average this year, supported by the rollout of two mega telecom deals won in the second half of fiscal 2026. “The company expects to sustain its growth momentum in Q2 and the whole of FY27, driven by the ramp of the other large telco project and broad-based growth. We raise our growth expectation from 5.1% to 5.9% y-y in USD terms for FY27,” Nomura said.

Brokerages responded by lifting valuations, though with varying degrees of optimism. Motilal Oswal named the stock its preferred large-cap pick with a target price of Rs 1,900. Nuvama maintained its buy rating with a target of Rs 1,800, stating: “TechM delivered a strong start to FY27 with broad-based growth, continued margin expansion and robust deal-wins, setting the stage for the final phase of its transformational journey.” Systematix set a target of Rs 1,740 and Dolat Capital upgraded to 'Accumulate' with a Rs 1,690 target, citing progress toward a 15% margin aspiration.

Not all analysts were bullish on the valuation. Antique Stock Broking kept its 'Hold' rating, raising its target only slightly to Rs 1,475. “Management remains cautiously optimistic about the underlying demand environment amid macro uncertainty and AI-led deflation, but expects to outgrow the peer average in FY27, supported by a growing multi-year deal pipeline, including two large deals in the communications vertical that are set to start contributing from Q2 FY27, and relatively minimal delays in client decision-making,” it said.