Firstsource Solutions Q2 FY27 Earnings Call: Raises FY27 Growth Guidance to 10.5-13%, 10th Straight Quarter of Double-Digit Growth (FSL)

Firstsource Solutions Ltd held its Q2 FY27 earnings call on October 29, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Tenth Straight Quarter of Double-Digit CC Growth; Margins Keep Expanding

• Revenue of Rs.28.3 billion (US$296 million) — up 22.2% YoY / 3.7% QoQ in rupee terms; constant currency growth of 12.3% YoY / 2% QoQ marked the 10th straight quarter of double-digit YoY growth and 12th straight quarter of sequential growth.
• EBIT of Rs.3.5 billion (+32.2% YoY) — margin of 12.5%, up 100 bps YoY and 10 bps QoQ, the 8th consecutive quarter of sequential margin expansion; net profit was Rs.2.3 billion (8.2% of revenue) with diluted EPS of Rs.3.31.
• H1 FY 2026-2027 actuals — revenue Rs.55.5 billion (US$584 million, +12.3% CC YoY); EBIT Rs.6.9 billion (+33.4% YoY) at a 12.4% margin; adjusted PAT Rs.4.5 billion (+30.4% YoY).
• Balance sheet at 30 September 2026 — cash and bank balances of Rs.4.1 billion; net debt of Rs.15.3 billion, down from Rs.17.1 billion at end-Q1 FY 2026-2027; FCF-to-PAT at 150% for Q2 and 126% for H1 FY 2026-2027.
• 100th quarter milestone — the company has grown from a startup to over US$1 billion in revenue, compounding at a 23% CAGR since inception.
• Q1 FY 2026-2027 exceptional charge — management said relationships with both affected clients remain strong, recovery is being actively pursued, and it remains optimistic about the outcome.

7th Consecutive Quarter of 4+ Large Deals; Wallet Deepening Visible

• 4 large deals signed in Q2 FY 2026-2027 — the 7th consecutive quarter with four or more large deals (ACV over $5 million), of which 2 were with new logos; 17 new logos added, one of the highest quarterly additions, including 6 strategic logos (potential of at least $5 million annual revenue).
• 51 clients above $5 million revenue run rate — 6 more than last quarter, the largest sequential organic addition in this cohort over the past 5 quarters; 3 clients added to the $10 million-plus cohort, taking it to 23.
• Trailing 2-year cohort growth — $5 million-plus clients have almost doubled, $10 million-plus clients are up nearly 80%, and $1 million-plus clients are up 32%; management cited this as the strongest evidence of wallet deepening.
• Concentration declining — over the last 8 quarters, revenue share of top 5 and top 10 clients has come down by 6% and 10 percentage points respectively; management noted top 5 relationships (average tenure over 22 years) continue to grow at industry rate.
• Notable Q2 wins — expanded UK MVNO CX relationship; top-10 North America healthcare payer claims processing win; managed operations win with a leading UK and European bank (new logo); legal and third-party collections win with a US student loan provider (new logo); large CX deal with a leading US digital bank.
• Large-deal run-rate trajectory — CEO Ritesh Idnani said the run-rate progressed from ~2 to ~3 per quarter to the current 4, with the next leap aimed at 5-6 per quarter (period unspecified); management did not directly address whether ACVs on $5 million-plus deals are rising.

BFS Leads; Healthcare Pressured by Payer Timing; Europe and Australia Strong

• BFS +19% YoY / +9% QoQ in CC — with 9 new logos in Q2 FY 2026-2027; management expects BFS to remain "very strong and resilient" in H2 FY 2026-2027.
• Healthcare +5% YoY / -2% QoQ — down from 11% YoY in Q1 FY 2026-2027, pressured by payer-program timing as Medicare Advantage clients recalibrated scope after CMS rate adjustments, plus the previously flagged wind-down of the transformative payer BPAS engagement; management said these headwinds are "pretty much behind" the company.
• CMT +6% YoY / flat QoQ; Diversified +25% YoY — CMT with 2 new logos, with management flagging quarter-to-quarter revenue volatility from timing of work packets and program transitions in the consumer tech portfolio; Diversified (utilities + retail) flat QoQ with 2 new logos.
• Europe +27% YoY / +7% QoQ; Australia +50% YoY — Europe BFS-led with CMT momentum, two large wins and strong nearshore demand including from South Africa; North America grew 6% YoY / 1% QoQ, BFS-led.
• HR1 regulatory catalyst — management cited that under HR1, from January 2027, Medicaid renewals for expansion adults move from annual to six-monthly, phasing in through the year; Firstsource already runs Medicaid eligibility at scale and runs domain AI platforms for 10 of the top 15 US health plans.
• Provider-side consolidation opportunity — management described the US healthcare provider RCM market as highly fragmented, with many labor-intensive "mom and pop" shops typically generating $5-50 million in revenue, which Firstsource sees as potential takeout opportunities via its tech-led offering.

Kairos OS and "Governed Autonomy" Anchor the Shift to Productized Services

• Strategic shift to productized services — packaging 25 years of domain expertise into repeatable workflows with embedded AI and human judgment; Kairos, the AI-native operating system, is the delivery engine, with "governed autonomy" keeping every decision explainable and within compliance boundaries that no agent can override in regulated industries.
• More than 50% of revenues already non-linear — which management understands to be an industry-leading metric, with an objective to further increase the share of non-linear, outcome-based, platform-led and value-linked revenues over time.
• Kairos capitalization — CFO Dinesh Jain said costs directly attached to the Kairos platform are being capitalized and remain work-in-progress; he declined to disclose the capitalized balance, offering to share it offline, and confirmed the ~232 million intangible assets under development on the Q2 FY 2026-2027 balance sheet includes this item.
• AI-native startups as partners, not just competitors — Idnani said AI-native startups often have technology relevance but lack domain depth; partnerships formed in Q1 FY 2026-2027 produced client referrals, and one large new-logo deal won in Q2 FY 2026-2027 came after an AI-native startup partner named Firstsource its preferred partner in a competitive process.
• BFS conversations now start with AI trust — management said nearly every BFS conversation begins with whether AI can be trusted inside regulated processes, addressed via the intelligent context framework within Kairos; healthcare is shifting from labor-led outsourcing to AI-enabled outcome-driven models.
• Repeatability economics — Idnani said productized services should make the second implementation cheaper than the first and the third cheaper than the second, correcting the traditional services fallacy where the second implementation costs nearly as much as the first.

Margin Expansion Absorbed Wage Hikes and a 3,000-Person Ramp

• 12.5% EBIT margin despite headwinds — Q2 FY 2026-2027 absorbed the first phase of annual wage increments and the cost of onboarding ~3,000 people largely ahead of revenue; headcount closed at 39,937, a net increase of 3,062, with India and Philippines accounting for more than 85% of the increase.
• Employee cost rose only 3% QoQ — despite ~3,000 additions and a wage hike for junior-to-mid-level employees; management did not provide a specific reconciliation and cautioned against interpreting headcount-to-cost linearly on a single-quarter basis, citing simultaneous investment in talent and optimization of headcount inefficiencies.
• Margin framework on track — FY 2024-2025 margins were held flat as guided; FY 2025-2026 delivered ~74 bps of expansion under the 50-75 bps/year framework set when MD & CEO Ritesh Idnani joined (FY26-FY28); management expects the 50-75 bps annual improvement to continue over FY 2027-2028 and FY 2028-2029.
• Structural, broad-based improvement — ~80% of gross hiring is currently offshore/nearshore; AI/automation productivity in existing accounts alongside non-linear pricing; levers toward 14-15% include right-shoring, automation, reducing dependence on low-margin/loss-making accounts, and facility optimization.
• Wage hike phasing — frontline and mid-level associates received hikes in Q2 FY 2026-2027; senior staff to receive hikes in Q3 FY 2026-2027; management said FY 2026-2027 EBIT forecasts already adjust for the increments and it expects to stay within guidance.
• Attrition and furloughs — voluntary attrition for associates with more than 180 days tenure was steady at 28.4% on a trailing 12-month basis; management said attrition is in line with BPO industry averages, and it does not anticipate the kind of Q3 FY 2026-2027 furloughs typically seen on the IT services side as it runs mission-critical operations.
• BFSI margin dip — management advised against reading anything into quarter-by-quarter aberrations, saying these should be viewed on a more secular, annualized basis, with nothing a cause for concern.

FY27 Guidance Floor Raised; H2 Expected Stronger Than H1

• FY 2026-2027 CC revenue growth guidance raised to 10.5%-13% — from 10%-13% earlier, based on H1 FY 2026-2027 performance and second-half visibility; the 13% upper end "remains very much in play" but depends on phased transformation programs reaching milestones and pipeline conversion over the next 2-3 months of FY 2026-2027.
• H2 FY 2026-2027 expected stronger than H1 — reaffirmed as first stated at Q1 FY 2026-2027; guidance implies a 2%-5% CQGR for H2 FY 2026-2027 versus ~2% growth in each of the last two quarters of H1 (analyst's framing); pipeline described as best-ever.
• FY 2026-2027 EBIT margin guidance reaffirmed at 12.25%-12.75% — the 12.25% floor was set above the Q4 FY26 exit run-rate margin; FY27 effective tax rate expected between 22% and 24% (H1 FY 2026-2027 actual tax rate was 23.2%).
• Long-term margin aspiration — management remains focused on taking EBIT margin to the 14%-15% band over the next 2 to 3 years (through roughly FY 2028-2029 to FY 2029-2030); responding to Girish Pal (BOB Capital), who called the mid-teens aspiration unambitious versus a peer at high-teens margins, Idnani said efficiency gains are partly reinvested in capabilities and talent, with the objective to first hit the guided 14-15% "and then go from there."
• H2 growth expected broad-based — retail seasonal ramps expected to benefit Q3 FY 2026-2027 and part of Q4 FY 2026-2027; ramp benefits also anticipated in telco, media and tech; healthcare expected to contribute via 4 new logos, existing account expansions, and the HRO opportunity on the provider side.
• M&A stance unchanged — management did not signal vertical-specific aggression, reiterating a capital-allocation philosophy of deals that plug capability gaps (e.g., QBSS acquired ~3 years ago, ≈FY 2023-2024; Ascensos ~2 years back, ≈FY 2024-2025) and deals that add distribution access; Telemedic, acquired earlier in FY 2026-2027, added a Puerto Rico footprint plus clinical operations capabilities.
• Reporting clarification — on a request to report EBIT margins ex-other income from FY 2027-2028, CFO Dinesh Jain clarified EBIT already excludes below-the-line other income; other operating income (above the line) will continue to be included per accounting requirements.