The secret to Tech Mahindra’s 14% profit rise amid an industry-wide margin squeeze

While major Indian IT firms including TCS, Infosys, and Wipro reported profit declines this quarter, Tech Mahindra delivered a 14.1% year-on-year increase in consolidated net profit. The company’s profit reached Rs 1,122 crore for the third quarter ending 31 December 2025, up from Rs 983 crore in the previous year.

Navigating the New Labor Code and holiday slump

The Indian IT sector faced significant headwinds this quarter due to the implementation of the New Labor Code. This regulatory change requires companies to adjust their salary structures, often leading to higher provisions for gratuity and leave encashment. Tech Mahindra took a one-time exceptional hit of Rs 272.4 crore because of these rules.

Additionally, the December quarter traditionally sees lower productivity across the industry due to the holiday season and fewer working days. While these factors caused a 14% profit slide for TCS and a 7% dip for Wipro, Tech Mahindra managed to absorb the costs. Although its profit fell 6% compared to the previous quarter, its annual growth remained strong.

The turnaround strategy: Project Fortius

The primary reason for this outperformance is "Project Fortius," a strategic plan designed to improve operational margins. The firm reported an EBIT margin of 13.1%, an expansion of 290 basis points over the last year. This result marks the ninth consecutive quarter of margin improvement.

CFO Rohit Anand attributed the success to disciplined working capital management and consistent execution. The company reduced its "Days Sales Outstanding" (DSO) to 90 days, which improved cash flow despite the broader market challenges.

Record-breaking deal wins

Tech Mahindra also reported its highest quarterly deal bookings in five years. The company secured new contracts worth USD 1.1 billion, a 47% increase compared to the same period last year. CEO Mohit Joshi noted that many of these large deals are "AI-infused," reflecting a shift from experimental AI pilots to scaled, multi-year programs.

One key example includes a major partnership with a European telecom operator. The company also expanded its work with Google Cloud to help enterprises adopt the Gemini platform.

Efficiency over headcount

In a move that mirrors global tech trends, Tech Mahindra’s total headcount fell by 872 people year-on-year to 149,616. Management stated this reduction is not a sign of distress but a result of driving efficiency through fixed-price contracts and AI-driven automation. By doing more with fewer resources, the company successfully offset the rising costs that hampered its competitors.