Mphasis Q3 results: Net profit grows marginally 3.3% as high costs impact bottomline

Mid-tier IT services company Mphasis posted a modest growth of 3.3% in consolidated net profit at Rs 442 crore in the October - December quarter of FY26 compared to around Rs 428 crore in the year ago period. 

However, sequentially net profit declined 5.7% from Rs 469 crore in the quarter ended September 30, weighed down by cost pressures and one-time exceptional charge of Rs 35.5 crore due to impact of new labour codes.

 The company reported steady topline numbers with consolidated net revenue at Rs 4,002 crore, an increase of 12.4% year-on-year compared to Rs 3,561 crore in the corresponding quarter of previous fiscal, and 2.6% from the preceeding quarter of Rs 3,901 crore on the back of robust AI-led deal pipeline and strong performace in the banking and financial services and insurance verticals. In terms of constant currency, which eliminates the impact of exchange rate fluctuations,revenue grew 7.4% year-on-year and 1.5% from the July - September quarter.

The Bengaluru-based company reported a marginal drop in earnings before interest and taxes (EBIT) margin of 10 bps year-on-year and on a sequential basis at 15.2%. Net proft margin after one-time exceptional cost of Rs 35.5 crore related to impact of new labour codes was 11%, a decline of 100 bps from the year ago period and second quarter of the current fiscal.

Deal momentum strong

During the quarter under review, Mphasis said it won new deals with total contract value (TCV) of $428 million with 64% of these orders in new-gen services. The company had reported TCV of $351 million in the year ago period, and $528 million in July - September quarter of the current fiscal.

Sounding optimsitic about the deal pipeline, CEO and Managing Director Nitin Rakesh said strong growth in the pipeline provides further visibility to sustaining momentum in deal wins.

"Since the launch of Mphasis AI, the pipeline has grown 2.5x. We currently have the largest ever deal pipeline and have strong TCV wins in this quarter as well, led by large deals. Despite strong TCV conversions over the last three quarters, we continue to add deals to the pipeline, which is now 69% AI-led," he said in a post earnings analysts conference call.

In October last year, the company had launched its AI platform, Mphasis NeoIP™, that integrates multiple Mphasis.ai innovative solutions, designed for continuous enterprise transformation and differentiating competitive advantage. 

BFSI key revenue growth driver

Banking and financial services, which contributed 52% of the total revenue share, reported nearly 21% year-on-year growth in revenue at Rs 2,091 crore in the quarter ended December 31. On a sequential basis, revenue grew marginally 3.7% from Rs 2,016 as of quarter ended September 30.

Revenue from insurance segment surged to Rs 604 crore, a growth of 45.4% from Rs 415 crore in the year ago period. It grew 9.7% quarter-on-quarter from Rs 550 crore reported in quarter ended September 30.

Technology, media and teelcom segment was another key contributor to the topline growth with 23.1% on year increase in revenue at Rs 742 crore.

In terms of geographies, Americas contributed 83.3% of the total revenue at Rs 3,363 crore. This was a 16% on year growth from Rs 2,898 crore in the corresponding quarter of previous fiscal. 

Europe, Middle East and Africa region followed next with 9.3% share of the total revenue at Rs 375 crore, and an increase of 10.1% year-on-year from Rs 361 cr.

From the India region, Mphasis reported revenue of Rs 202 crore compared to Rs 212 crore in the year ago quarter.