Mphasis has raised its FY27 revenue growth outlook to the low double-digit range after reporting 9.2% year-on-year growth in dollar revenue for the second quarter. The Bengaluru-based IT services company reported revenue of $486.1 million for Q2 FY27, supported by demand for AI-led projects, business modernisation and technology transformation. Its new deal wins reached $466 million, with 66% classified as AI-led. The improved outlook reflects stronger demand visibility and a growing pipeline of enterprise technology projects.
The upgraded forecast comes despite challenges in the wider IT services industry, including cautious technology spending, pressure on traditional outsourcing contracts and uncertainty over how generative AI will affect conventional IT services revenue. Mphasis also reported weaker cash-flow performance and a decline in employee utilisation, showing that strong revenue growth does not automatically translate into improvements across every financial measure. The company’s next challenge will be converting its expanding AI-led pipeline into sustainable revenue while protecting operating margins.
Key Takeaways
- Mphasis raised its FY27 revenue growth guidance to the low double-digit range.
- Dollar revenue increased 9.2% year-on-year to $486.1 million in Q2 FY27.
- Constant-currency revenue growth reached 9.7% year-on-year.
- Revenue in Indian rupees increased 17.4% year-on-year to ₹4,580.9 crore.
- New total contract value (TCV) bookings reached $466 million.
- AI-led contracts accounted for 66% of quarterly deal wins.
- The company’s total sales pipeline increased 23% year-on-year.
- Net profit rose 19.6% year-on-year to approximately ₹561 crore.
- Operating margin remained at 14.8%, unchanged sequentially.
- Employee utilisation declined to 82% from 88% a year earlier.
- Operating cash flow turned negative at ₹54.8 crore during the quarter.
Mphasis Raises FY27 Revenue Growth Guidance
The most important development in Mphasis’ Q2 FY27 results is the improvement in its full-year growth outlook.
The company had previously expected FY27 revenue growth in the high single-digit to low double-digit range.
Following its second-quarter performance and stronger business pipeline, management raised its outlook to the low double-digit range.
This indicates greater confidence in the company’s ability to generate revenue during the remaining quarters of the financial year.
CEO and Managing Director Nitin Rakesh attributed the improved outlook to stronger business activity, particularly in shorter-duration contracts and enterprise modernisation projects.
According to management, customer spending is expanding beyond traditional IT departments as businesses explore AI applications across sales, operations, marketing, financial services and supply chains.
What does the upgraded guidance mean?
Revenue guidance represents management’s expectations for future business growth.
Moving towards low double-digit growth suggests Mphasis expects to generate stronger annual revenue expansion than it previously anticipated.
However, this remains a forward-looking expectation rather than a guaranteed result.
Actual performance will depend on contract execution, customer spending, currency movements, competition and the broader economic environment.
Mphasis Q2 FY27 Financial Results
Mphasis delivered growth across several important financial indicators during the September quarter.
Dollar revenue increased 9.2% year-on-year, while constant-currency revenue growth reached 9.7%.
Revenue measured in Indian rupees grew faster because currency movements also influenced the reported figures.
Mphasis Q2 FY27 performance
| Financial metric | Q2 FY27 performance |
|---|---|
| Dollar revenue | $486.1 million |
| Dollar revenue growth YoY | 9.2% |
| Constant-currency growth YoY | 9.7% |
| Revenue growth QoQ in dollars | 3.2% |
| Revenue in Indian rupees | ₹4,580.9 crore |
| Revenue growth YoY in rupees | 17.4% |
| Net profit | Approximately ₹561 crore |
| EPS | ₹29.40 |
| Operating margin | 14.8% |
The company also reported a 14.6% sequential increase in earnings per share to ₹29.40, while EPS grew 19.2% year-on-year.
Net profit increased approximately 19.6% year-on-year.
These results indicate that Mphasis continued to grow despite the difficult environment facing several traditional IT services providers.
AI-Led Contracts Drive a Larger Share of New Business
Artificial intelligence has become one of the biggest growth opportunities for Mphasis.
The company reported $466 million in new total contract value during Q2 FY27.
Approximately 66% of these new contract wins were classified as AI-led.
This compares with 42% in the same quarter of the previous financial year and 63% in Q1 FY27.
The increasing contribution of AI-related contracts suggests that customers are moving beyond small experimental projects towards broader enterprise implementation.
AI-led contract growth
| Period | Share of AI-led deal wins |
|---|---|
| Q2 FY26 | 42% |
| Q1 FY27 | 63% |
| Q2 FY27 | 66% |
The figures demonstrate a growing contribution from AI-related business.
However, AI-led contract value should not be confused with revenue already recognised. These contracts are generally delivered over time, meaning their financial contribution depends on implementation schedules and customer requirements.
What types of AI projects are customers buying?
Mphasis is seeing demand across several areas:
- Enterprise AI infrastructure and platforms.
- Business process automation.
- Application modernisation.
- AI-powered customer service.
- Financial services automation.
- Intelligent engineering and software development.
- Data and cloud transformation.
The company is also targeting business functions beyond traditional technology departments.
For example, banks may use AI to improve customer onboarding, loan underwriting and vehicle financing processes.
These projects could create opportunities for IT service providers because they involve both technology implementation and business-process transformation.
Mphasis Pipeline Reaches a New High
Another important indicator is the company’s growing sales pipeline.
Mphasis reported that its total pipeline increased 4.4% sequentially and 23% year-on-year.
A pipeline represents potential business opportunities that a company is pursuing but has not necessarily converted into signed contracts.
The expansion suggests that Mphasis is seeing more opportunities across its customer base.
Management identified three major areas supporting demand:
- Companies building infrastructure and systems for enterprise AI adoption.
- Businesses automating existing operations using artificial intelligence.
- Departments outside traditional IT functions investing in technology-driven transformation.
The third category is particularly important.
AI adoption is increasingly involving chief operating officers, marketing leaders, revenue teams and supply-chain executives.
This expands the potential market for IT service providers beyond conventional technology budgets.
Major contract wins during Q2
Mphasis reported new engagements across several industries.
| Industry | Nature of engagement |
|---|---|
| Financial services | Expanding advisor administration and front-office services |
| Technology | Enterprise services across SAP, Oracle, Azure monitoring and testing |
| Telecommunications | Modernising digital commerce platforms |
| Healthcare | Improving enrolment, billing and contact-centre operations |
These engagements involve a combination of technology modernisation, managed services and AI-enabled operations.
The company also secured five large deals during the quarter, across banking, healthcare and technology, media and telecommunications.
The diversity of these contracts could help Mphasis reduce dependence on individual industries.
Direct Revenue Growth Shows Strength in Core Business
Mphasis also reported healthy growth in direct revenue, which represents business generated through its direct client relationships.
Direct revenue increased 10.7% year-on-year in dollar terms and 11.3% in constant currency.
Sequentially, direct revenue grew 3.4% in dollar terms.
This is important because direct customer relationships can provide opportunities for larger engagements, additional services and long-term partnerships.
Sector-wise performance
The company’s results showed different growth patterns across industries.
Banking and financial services remained an important contributor, supported by continued customer spending and wallet-share gains.
Technology, media and telecommunications also recorded strong sequential growth.
However, the logistics and transportation business faced weaker performance.
The differences show that technology spending remains uneven across customer industries.
Mphasis will need to maintain growth in stronger segments while improving performance in businesses facing weaker demand.
Operating Margins Remain Under Pressure
Although revenue and profit increased, Mphasis did not report a corresponding improvement in operating margins.
The company’s operating margin stood at 14.8% in Q2 FY27.
It remained unchanged from the previous quarter but declined 50 basis points year-on-year.
Gross margin was 27.1%, increasing 20 basis points sequentially but declining 100 basis points year-on-year.
This suggests that revenue growth is occurring alongside continued cost and delivery pressures.
Why margins matter
Operating margin measures how much operating profit a company generates from its revenue.
A higher margin generally indicates better operating profitability.
For IT services companies, margins can be affected by:
- Employee salary increases.
- Hiring and training expenses.
- Subcontracting costs.
- Project delivery expenses.
- Onsite and offshore employee mix.
- Investments in AI platforms and infrastructure.
Mphasis will need to balance investment in AI capabilities with the requirement to maintain profitability.
The company has retained its operating margin guidance range of 14.75% to 15.75% for FY27, according to its investor presentation.
Employee Utilisation and Cash Flow Raise Questions
Not every part of Mphasis’ quarterly performance was positive.
Two areas require attention: employee utilisation and operating cash flow.
Employee utilisation declines
Mphasis reported a total workforce of 32,920 employees, representing approximately 6.9% year-on-year growth.
Its billable workforce increased to 28,755 from 26,440 a year earlier.
However, employee utilisation declined to 82% from 88% in Q2 FY26.
Utilisation measures the proportion of available employee working capacity spent on billable client projects.
A decline can indicate that a company has more available employees than its current project demand requires.
This can put pressure on operating efficiency if new contracts do not convert into work quickly enough.
Operating cash flow turns negative
The company also reported negative operating cash flow of ₹54.8 crore during the quarter.
Free cash flow was negative ₹62 crore.
This compared with positive operating cash flow of ₹366.3 crore in Q2 FY26.
Mphasis attributed part of the decline to $39.5 million in remittances initiated on September 30 but received in October.
After adjusting for these payments, the company reported normalised operating cash flow of ₹322.9 crore.
The adjustment is important because the reported cash-flow position was affected by the timing of incoming payments.
Nevertheless, investors will continue monitoring cash conversion and working-capital efficiency.
| Metric | Q2 FY27 |
|---|---|
| Operating cash flow | -₹54.8 crore |
| Free cash flow | -₹62 crore |
| Normalised operating cash flow | ₹322.9 crore |
| Reported days sales outstanding | 113 days |
| Normalised days sales outstanding | 105 days |
Days sales outstanding (DSO) measures how long a company takes, on average, to collect payments from customers.
Higher DSO can indicate slower collections and increased working-capital requirements.
How AI Is Changing the Indian IT Services Industry
Mphasis’ results reflect a wider transformation taking place across India’s technology services industry.
For many years, IT services companies generated a significant portion of their revenue through application maintenance, infrastructure management, outsourcing and large technology implementation contracts.
Generative AI is changing the economics of these services.
AI tools can automate certain coding, testing, documentation and support activities.
This creates opportunities for companies to offer new services, but it can also put pressure on traditional revenue models based on employee hours and project staffing.
Mphasis is responding by focusing on AI-led modernisation and business transformation.
Its strategy is to help customers redesign business processes rather than simply reduce the cost of existing IT operations.
This approach could help service providers capture new budgets as businesses deploy AI across different departments.
However, companies will need to demonstrate measurable business outcomes to sustain customer spending.
What Investors Should Watch in the Coming Quarters
Mphasis’ upgraded growth guidance is encouraging, but several indicators will determine whether the company can maintain its momentum.
1. AI-led revenue conversion
The company must convert its growing AI-led deal bookings into recognised revenue.
2. Pipeline conversion
A larger pipeline provides potential opportunities, but investors will need to see those opportunities become signed contracts.
3. Operating margins
Maintaining margins within the FY27 target range will remain important as the company invests in AI capabilities.
4. Employee utilisation
An improvement from 82% would indicate better alignment between workforce capacity and customer demand.
5. Cash flow
Investors will monitor whether operating cash flow returns to consistently positive levels.
6. Traditional IT spending
The broader technology spending environment could influence demand for conventional outsourcing and modernisation services.
The Bigger Picture
Mphasis’ upgraded FY27 outlook reflects a growing opportunity for Indian IT services companies as businesses move from AI experimentation towards enterprise implementation. The fact that 66% of its quarterly deal wins were AI-led indicates that artificial intelligence is becoming a more important part of its business pipeline. Its expanding customer opportunities across banking, healthcare, telecommunications and technology also suggest that AI-related spending is reaching beyond traditional IT departments.
However, the company’s performance also highlights the difference between winning contracts and generating profitable, cash-backed growth. Lower employee utilisation, operating margin pressure and negative reported operating cash flow remain important issues. Mphasis must convert its strong pipeline into sustainable revenue while improving workforce efficiency and cash collection. Its ability to balance AI-led expansion with financial discipline will determine whether the upgraded growth outlook translates into stronger long-term performance.
Frequently Asked Questions
1. What is Mphasis’ FY27 revenue growth outlook?
Mphasis has raised its FY27 revenue growth guidance to the low double-digit range following its Q2 FY27 performance and stronger business pipeline.
2. How much did Mphasis’ revenue grow in Q2 FY27?
Dollar revenue increased 9.2% year-on-year to $486.1 million. Constant-currency growth was 9.7%.
3. What was Mphasis’ Q2 FY27 net profit?
Mphasis reported net profit of approximately ₹561 crore for Q2 FY27, representing around 19.6% year-on-year growth.
4. How much AI-led business did Mphasis win?
Mphasis secured $466 million in new total contract value during the quarter, of which 66% was classified as AI-led.
5. Why did Mphasis raise its growth guidance?
The company cited stronger business activity, a growing deal pipeline, AI-led projects and increasing demand for enterprise modernisation.
6. What is Mphasis’ operating margin?
Mphasis reported an operating margin of 14.8% in Q2 FY27, unchanged sequentially but down 50 basis points year-on-year.
7. Why did Mphasis report negative operating cash flow?
The company attributed part of the decline to $39.5 million in customer remittances initiated on September 30 but received in October. After adjusting for these payments, it reported normalised operating cash flow of ₹322.9 crore.
8. What is employee utilisation in IT companies?
Employee utilisation measures the proportion of available employee working capacity spent on billable client projects. Mphasis reported utilisation of 82% in Q2 FY27, compared with 88% a year earlier.
9. How is AI affecting Mphasis’ business?
AI is creating opportunities in enterprise modernisation, automation, software engineering, customer operations and business-process transformation. AI-led contracts accounted for 66% of Mphasis’ new deal wins in Q2 FY27.
10. What should investors monitor after Mphasis’ Q2 results?
Investors should monitor revenue growth, new deal bookings, AI-led revenue conversion, operating margins, employee utilisation and cash-flow performance.
Looking Ahead
Mphasis enters the second half of FY27 with stronger revenue momentum and an expanded growth outlook. Its increasing exposure to AI-led contracts and enterprise modernisation could support demand across financial services, healthcare, telecommunications and other industries. The company’s expanding pipeline also provides visibility into potential future business, although the timing of contract conversion will remain important.
The next challenge is turning that demand into profitable growth. Mphasis will need to improve employee utilisation, maintain operating margins and strengthen cash-flow performance while continuing to invest in AI capabilities. If it can execute on these priorities, the company could strengthen its position in India’s competitive IT services market and benefit from the next phase of enterprise AI adoption.
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