KPITTECH Q2 FY27 Earnings Call: Targets 20-21% EBITDA by Early FY28, Two OEM Drags to Bottom Out

KPITTECH held its Q2 FY27 earnings call on October 28, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

In-Line but Muted Quarter; Mix Lifts Margin

• Revenue grew 6.5% YoY and 1% QoQ in rupee terms — beating management's expectation of a flattish sequential quarter; in CC terms growth was 0.5% QoQ and 0.2% YoY.
• EBITDA margin improved from 17.2% to 17.8% — driven by business mix (higher products contribution vs. services/solutions); R&D investment rose by a couple of million during the quarter.
• Products revenue grew 5% QoQ and 25% YoY while services revenue was flattish; management plans to share more detail on the products strategy later in FY 2026-2027 or early FY 2027-2028.
• Cash stood at ~Rs.6.2 billion — down due to a Rs.1.4 billion dividend payment, ~Rs.1 billion initial payment for the Simotiv acquisition, and DSO rising from 51 to 53 days.
• Fixed-price projects moved to ~70% of the mix (71% cited in a later query) — viewed as critical for capturing AI-led productivity and differentiation.
• Attrition was mid-teens in Q2 FY 2026-2027 — expected to come down substantially in Q3 FY 2026-2027; increments for grades A-D/A-E were completed in Q2, with the balance due in Q3 and Q4 FY 2026-2027.
• Management characterized the quarter as in line but "muted to some extent," while remaining confident about medium-term growth.

Two OEM Drag Accounts Weigh on Europe; US and CEMA Offset

• Two OEM wind-downs equal 13% of total revenue — sharp declines at two top accounts (one in Japan, part of JKC, and one in Europe) from program cancellations and expense cuts; revenue from these two OEMs is down more than 30%.
• Drag accounts to bottom out over Q3–Q4 FY 2026-2027 — substantial decline over H2 FY 2026-2027 before flattening, with growth returning gradually in early FY 2027-2028; KPIT is expanding its footprint at both clients beyond one or two offerings.
• Europe declined sequentially on the two declining clients, while Asia's QoQ pickup came from CEMA (Southeast Asia, India, Middle East), primarily India; the US grew both QoQ and YoY.
• US growth was broad-based across all three verticals — passenger cars and off-highway growing, trucks expected to grow, plus product sales; US margins rose across existing and newer engagements. Kishor Patil added the passenger car market has not been significantly impacted as it remains a protected market.
• European passenger car OEMs face a "very long drawn" recovery — trucks coming back slowly, off-highway doing reasonably well; KPIT has taken a big haircut in Europe recently, especially for one client.
• "Defend and grow" strategy for other European OEMs — ring-fencing the business by disrupting KPIT's own model to create more value, and increasing wallet share; actual impact expected in H1 FY 2027-2028.
• European OEM vendor consolidation — Kishor Patil expects the process to be meaningfully concluded by end of Q1 FY 2027-2028, with consolidation impact visible in FY 2027-2028.

Commercial & Off-Highway Emerge as Key Growth Drivers

• Commercial & off-highway vertical grew 27% YoY and 17.6% QoQ — flagged by management as a key growth driver "for now and future."
• Off-highway is a new vertical with 3 clients and 2 more being added — after one software-defined machine (SDM) engagement announced in Q1 FY 2026-2027, two additional SDM consulting engagements were added as of Q2 FY 2026-2026; consulting engagements typically convert into full SDM programs if all goes well.
• Off-highway transformation mirrors the passenger-car SDV shift — COO Anup Sabde termed it "software-defined machines" rather than "software-defined vehicles," with the same fundamental technology; growth expected across all three service segments: architecture, feature development, and integration & aftermarket.
• US truck market showing signs of growth after several sluggish quarters — CV has grown strongly for the last 4-5 quarters through Q2 FY 2026-2027; business expected to pick up in H2 FY 2026-2027. Management did not commit to double-digit growth for the rest of FY 2026-2027, saying growth will be "healthier."
• CV clients are undergoing a transformation similar to passenger cars ~4 years ago — Kishor Patil noted their spend is expected to go up, with KPIT's experience (SBB) plus the AIDB transition positioning it well.
• Two new adjacencies: energy tech and deep tech — Cummins already engages KPIT in energy tech, with potential to extend to another 15-20 clients; early successes expected within 2-3 quarters, though meaningful impact will take longer.

AI-First Revenue at ~9%; Beacon and QORIX Timelines

• ~9% of revenue came from AI-first projects in Q2 FY 2026-2027 — management expects this to rise significantly (period unspecified).
• AI platform traction: 9,000+ users, 5 million+ transactions, 12,000 engineering agents built — Beacon was well received and will be taken to market in due course.
• Autonomous driving spend has rebounded substantially — Sachin Tikekar noted it was on the back burner for 2-3 years post-COVID; NOA (navigation on autonomy) has become a standard in China and is expected to become somewhat of a standard in Europe and the US, with new companies also investing in robotaxis.
• QORIX programs pushed out by a couple of years — Anup Sabde noted Gen 4 programs for most OEMs, originally slated for 2028, are now mostly scheduled for 2029-30; KPIT is exploring adjacencies and smaller products for interim revenue while continuing to invest.
• China three-lever strategy — China-for-China (one Chinese OEM, two Chinese tier-1s, Technica products footprint); Chinese OEMs outside China (Vietnam center, initial conversations with three Chinese OEMs in Europe, Endream in-car gaming win at Zicker, part of Geely group); and applying China learnings to CEMA, Southeast Asia, India, and Middle East markets.
• Vietnam is being scaled as the Southeast Asia hub — doubling down for two reasons: growing footprint with an existing OEM in Vietnam, and building a center with a large Chinese tier-1 (a subsidiary of one of the largest OEMs in China) to deliver Chinese OEMs' global programs outside China.

OCF Conversion Slips; 20-21% EBITDA Targeted for Early FY 2027-2028

• H1 FY 2026-2027 pre-tax OCF-to-EBITDA conversion at ~57% — down from ~75-80% in H1 FY 2025-2026 (figures cited by Ravi, Axis Capital); CFO Priyamvada Hardikar confirmed the fundamental reason is the working capital cycle increase driven by higher DSOs, not dividend or acquisition outflows.
• 20-21% EBITDA range expected in early FY 2027-2028 — Kishor Patil said margins will improve to some extent every quarter as growth accelerates in H2 FY 2026-2027; specific headwinds/tailwinds were not enumerated.
• Cost base optimization has started and will continue — driven by AI/products adoption and European clients' shift toward more remote vs. on-site work; capacity mix may move from high-cost to low-cost centers.
• Management committed it will never optimize technology investments and existing teams — only the client engagement team mix may change; the cost base was noted by the analyst as designed for much higher growth.
• Three levers for increasing revenue per person — operating leverage in products and solutions, AI leverage on fixed-price projects, and mix; Kishor Patil said it will not apply to all customers, depending on client adaptability to technology (no specific timeframe given).
• Forex business losses: stabilization will take time and is not something the company can fix — KPIT is exploring two options: adjacencies such as robotics where the operating system may be adopted, and adding more partners to drive growth more strategically, with clarity expected in due course.

H2 Better Than H1; Q4 Rebound Intact but Unquantified

• H2 FY 2026-2027 will be better than H1 FY 2026-2027 — Kishor Patil expressed confidence the broad-based growth strategy will more than make up for the revenue drop from the two large clients; no numeric guidance was given.
• Q4 FY 2026-2027 rebound intact — management expects growth in Q4 FY 2026-2027 but declined to quantify: "we will not be in a position to put any numbers now."
• European OEM consolidation expected to kick in towards the end of FY 2026-2027 and materialize in H1 FY 2027-2028 — creating growth opportunities for KPIT in the European passenger car market as clients are forced to do everything "cheaper, better, faster."
• Technology spend is not discretionary for European OEMs beyond a point — Kishor Patil said OEMs are looking to move towards India (almost all of them), and KPIT's differentiation rests on its technology, solutions, and AI-native nature; while OEMs' overall spend will go down, it could substantially increase KPIT's footprint.
• European client budgets prioritized toward digital cockpit, diagnostics/updates/after-sales transformation, and cybersecurity — per Sachin Tikekar, overall European client spend will continue to decline as OEMs work through their costing.
• Internally-tracked strategy-transition parameters to be shared by Q4 FY 2026-2027 — when discussing FY 2027-2028, requiring 2-3 quarters of tracking; critical metrics flagged include vertical-wise growth (passenger cars, trucks, off-highway), product and solution revenues, and the AI-led transformation program.
• Product revenue disclosure may come in FY 2027-2028 — Kishor Patil said KPIT will share product revenues going forward and may come out with more detailed product revenue reporting in FY 2027-2028.
• Medium-term outlook: software content per vehicle rising and SDV transitioning to AI-defined vehicles (AIDV) — management believes KPIT, with Beacon and other products, is well positioned, including in passenger cars and certain segments.