Q1FY26 Result Highlights Consolidated revenues grew by 8.2% QoQ and 57% YoY to Rs.3689 cr in INR terms, up 9.6% QoQ, up 54.5% YoY in USD terms; In terms of verticals, BFS was down 1.1% QoQ, Insurance up by 1.0% QoQ, and Transportation was up 31.2% QoQ, led by ramping up of Sabre deal. In terms of horizontal offerings, Engineering grew by 13.5% QoQ, Cloud and Infrastructure Management grew by 17.4% QoQ, BPM grew by 5.8% QoQ, Intelligent Automation grew by 3.9% QoQ; Data and Integration was down 0.3% QoQ. Geographically, Americas grew by 13.7% QoQ, EMEA grew by 1.5% QoQ; while RoW grew by 12.6% QoQ. EBIT Margin remained flat QoQ at 13.2%, dragged by higher D&A (up 32.4% QoQ). Margin impacted due to higher amortization from acquisitions, higher sub-contracting costs, increased visa costs, and ramp-up costs from the Sabre deal. The margins also further impacted by 130 bps, as there was a one-time broad-based bonus provision for employees amounting INR458 mn. Deal TCV was at $ 507 Mn vs $ 314 Mn in Q1FY25. The 12-month executable order book stood at $1.54bn, up 46.9% YoY with a high degree of repeat business. Headcount grew by 1,164 QoQ to 34,187 Employees. Attrition increased by 40 bps QoQ to 11.3%. Utilization was up by 10 bps to 82.1%. Added 6 New Clients in Q1FY26 vs 10 New Clients in Q4FY25. Repeat Business was at 94.5% vs 93.5% in Q4FY25. Robust demand in travel, healthcare, and retail segments, coupled with deeper client penetration, is driving sequential improvement in revenues.

Key Conference call takeaways

• Sequential revenue growth of 9.6% in USD and 8% in CC terms; organic growth was 6% QoQ
• Demand remains strong in TTH, BFSI, and emerging verticals, with AI and cloud modernization driving horizontal adoption.
• Signed 5 large deals in Q1; total order intake stood at $507mn
• Q1 EBIT margin at 13.2%, flat QoQ despite cost pressures from ramp-up of largest deal, higher amortization, and visa costs.
• Capex of $65mn in Q1, of which $58mn spent on AI data centre; FY26 capex expected to taper down to historical levels (2–3% of revenue)
• Ramp-up of large Sabre deal to continue in Q2; expected to stabilize in Q3
• BFSI outlook strong across commercial banking, lending, wealth, and compliance; banks shifting to cloud-native, modern architectures for efficiency.
• FY26 EBIT margin guidance reiterated at 14%; Q2 expected to see margin improvement from operating leverage; Q3 margin lift aided by ESOP cost reduction
• 65–70% OCF to EBITDA conversion expected in steady state; Q1 impacted due to high capex
• Merger with Cigniti progressing as per plan; effective date expected to be April 1, 2025; final approvals expected by Dec–Jan timeframe
• Despite macro uncertainty and tariff-related volatility, management confident of delivering 9th consecutive year of strong growth in FY26.

Outlook & valuation

We believe that the company is well placed to see robust and sustained growth in the coming quarters given healthy order book, strong deal pipeline, and consecutive quarters of significant net headcount additions and synergies with Cigniti picking up momentum. Further, strategic focus on diversifying the business into emerging verticals, improvement in client metrics, strong executable orders, and sharp recovery in the travel segment would aid growth. The 12 month executable order book and fresh order intake witnessed a sharp jump during the quarter and provides strong visibility for the quarters ahead. Strong leadership, deep domain capability in select verticals, improved capability, and a marquee client base would help the company sustain growth momentum.

Strong growth, better digital mix, and operating efficiencies should drive margin expansion in the next two years. We believe the organic business is robust and is likely to regain its strong growth trajectory in coming quarters driven by recovery in key verticals especially BFS, ramp up of deal wins, and recovery of pent-up demand triggered by a better macro environment.

Momentum in discretionary technology spending remains strong, especially in AI-driven transformation and platform modernization. We believe cloud driven growth will continue. Coforge’s scalable delivery architecture and proactive deal conversion engine support visibility into multi-quarter growth. Despite the macro uncertainties, the company remains confident of its FY26 growth trajectory with the 2HFY26 likely to be stronger than 1H, this is despite reporting strong organic growth expectations in 1H. The firm remains well positioned to deliver industry-leading growth in both revenues and margins, underpinned by a record executable order book and improving margin profile. At CMP of Rs.1688, the stock is trading at 40x FY27E. We maintain HOLD rating on the stock.