LTTS Q2 FY27 Earnings Call: Hits 16.3% EBIT Margin Ahead of Schedule, Books $203 Mn TCV

LTTS held its Q2 FY27 earnings call on October 19, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Margin Beat Delivered Ahead of Schedule; Net Income Boosted by One-Time Gain

• Revenue of $317.1 mn (Rs.3,040 cr) — up 2.7% QoQ and 4.8% YoY in CC on a continuing operations basis; INR revenue up 3.4% QoQ and 12.1% YoY.
• EBIT margin of 16.3% — up 60 bps QoQ and 220 bps YoY, with expansion across all segments; management hit its committed mid-16% aspiration a couple of quarters ahead of time.
• Net income of Rs.548 cr — up 53.7% QoQ and 66.8% YoY (18% of revenue), including a one-time gain of Rs.165 cr from the completed SWC disinvestment; underlying profitability is flattered by this gain.
• EPS from continuing operations at Rs.35.78 — annualized EPS of Rs.143.12, up 23.5% vs reported FY 2025-2026 EPS of Rs.115.89.
• Board approved an interim dividend of Rs.20 per share — YTD free cash flow of Rs.790 cr (108% of net income); cash and investments at Rs.4,197 cr at end-Q2 FY 2026-2027 vs Rs.3,394 cr at end-Q1.
• Operational metrics — headcount 24,035 (vs 23,845 in Q1), attrition 14.7%, offshore mix 55.9%, fixed-price mix 35.6%, realized rupee at Rs.95.9/USD (1.09% QoQ depreciation).

$203 mn TCV Booked; Management Owes $100 mn from Prior Quarter

• Large deal TCV of $203 mn in Q2 FY 2026-2027 — over 50% AI-led; both order backlog and pipeline up YoY, with pipeline up more than 25% YoY.
• CEO Amit Chadha committed to delivering the $100 mn owed from the prior quarter — across Q3 and Q4 FY 2026-2027, to maintain the $200 mn per-quarter pace.
• Deal tenures have "increased a little" — typical norms: 5–7 years for a $100 mn deal, 4–5 years for $50 mn, ~3 years for $25 mn, 2–3 years for $10 mn; focus remains on bringing more ACV than TCV.
• AI-related deals accounted for over 50% of large deal TCV — COO Munje Singh said this will translate into revenue over the deals' tenure and cannot be broken down quarter-by-quarter; a significant part of newly won AI deals had not yet (or only marginally) operationalized in Q2 FY 2026-2027.
• Recent large deal consolidations in Europe — may contribute to Europe growth roughly a quarter out, per management.

$120 mn Annualized AI-Led Revenue; Data Center Buildout Spans 6–7 Layers

• AI-led revenue at 9.5% of revenue (~$120 mn annualized) — roughly $30 mn recognized in Q2 FY 2026-2027; COO Munje Singh defined it as deliverables where a significant part of output is created through leverage of the AI stack, not end-of-project reporting claims; quarterly disclosure to continue through FY 2026-2027.
• AI-led revenue seen as a margin lever — CFO Rajiv Gupta called it "a lever for margin improvement and will continue to be so"; CEO Amit Chadha said LTTS charges a premium on such projects, though profitability by service line was not quantified.
• Management believes it is 9 to 12 months ahead of competition in AI — and as a result is gaining market share (period unspecified).
• AI data center buildout offers 6–7 layers of opportunity — physical infrastructure (via electrical and HVAC OEMs, showing up in sustainability), GPU bring-up/validation (tech vertical), control plane/token metering, automated invoicing, anomaly guardrails, observability/AIOps, and agents on top; the physical infrastructure piece is the most developed so far, and a recently won deal with a tech infra major is to service a data center on communications.
• Strategic moves in Q2 FY 2026-2027 — completed SWC divestment on schedule; launched a new EI lab with NVIDIA for physical AI across manufacturing, robotics, and supply chain; expanded partnerships to Cognite, Anthropic, NVIDIA, and Databricks; conducted AI readiness workshops with MIT Media Labs; AI patent filings crossed 253 this quarter (total 1,808); more than 16,000 engineers (~67% of workforce) upskilled in AI.
• Demand confluence cited by CEO — AI has become a board-level question for LTTS's CXO client community creating top-down pressure, while everyday familiarity with AI tools (ChatGPT, Anthropic) among engineering teams adds bottom-up demand; legacy client spends are declining as money shifts toward AI, and COO Munje Singh noted a market shift away from POCs toward processes with P&L impact, with LTTS's context for training AI agents a key competitive moat.

Sustainability Strongest in Six Quarters; Auto Europe Still a Headwind

• Sustainability up 4.9% QoQ and 13.4% YoY — strongest growth in six quarters, on track for another double-digit growth year in FY 2026-2027; margin at 29.5% (+40 bps QoQ); now contributes 38% of revenue; more than 50% of Q2 deal wins were in sustainability, and the business has been reorganized into four categories (oil & gas chemicals, FMCG, energy automation, industrial machinery & building technologies).
• Mobility up 2.3% QoQ — margin at 16.9% (+130 bps QoQ); auto contributes about 50% of mobility revenues, so the company is not overtly dependent on Auto Europe; Auto Europe created headwinds in Q2 FY 2026-2027.
• Tech stable, margin at 12% (+50 bps QoQ) — aided by ramp-up of a recently won AI-led engagement with a global telecom equipment provider; tech infra and semicon strong, media steady.
• High-Tech to be muted in Q3 FY 2026-2027 — med tech recovery guided for Q4 FY 2026-2027 (management deliberately conservative vs Q3 to allow teams to regroup); one significant medtech program ramped down as scheduled with no follow-on yet; Intelliswiff's systems & platform piece expected to accelerate in Q4 FY 2026-2027 and beyond.
• Oil & gas work concentrated in the US and Europe — very little business in the Middle East; no significant impact from the Middle East situation yet, though management noted uncertainty if it drags on; medium-sized digital and AI projects are getting kicked off in the US and Europe.
• Europe grew QoQ and YoY in Q2 FY 2026-2027 — management pushed back on the premise of Europe declining, citing AI infrastructure-led spend, sustainability, and expected growth in industrial and plant businesses; Europe will stay cautious on automotive.

Q3 Wage Hike to Cost 50–80 bps; Mid-16% Guidance Intact

• Wage hikes for all employees effective Q3 FY 2026-2027 — expected impact of 50–80 bps; modalities still being worked out, with clarity to come alongside Q3 FY 2026-2027 commentary.
• Mid-16% EBIT margin guidance for FY 2026-2027 remains intact — after factoring in the wage hikes; margin levers cited are revenue growth and healthy segment mix, AI-led productivity gains across delivery and functions, and disciplined SG&A management.
• Effective tax rate of 26% in Q2 FY 2026-2027 — expected to remain at 26–26.5% (period unspecified).
• DSO at 78 days (billed 60, unbilled 18) — vs 77 days in Q1 FY 2026-2027, well below the guided 80–85-day range; CFO Rajiv Gupta said no further improvement is expected post the SWC development completion — this is where the company will likely operate; post-divestment, only overall DSO will be reported.

H2 FY27 Better Than H1; 13–15% CAGR Aspiration Reiterated

• H2 FY 2026-2027 to be better than H1 FY 2026-2027 — both sequentially and YoY, per CEO Amit Chadha, who declined quarter-specific guidance citing the upcoming muted season; regular furloughs expected in Q3 FY 2026-2027.
• Long-term aspiration reiterated — 13–15% revenue CAGR with EBIT margins in the 16–17% range over the next 3 to 5 years (period unspecified beyond that horizon).
• Auto Europe recovery anchored to FY 2027-2028 — Alind Saxena said European auto is expected to remain steady over the next 6 to 9 months (into FY 2027-2028) with no further decline foreseen, and previously discussed growth should start coming back in the next 9 to 12 months (into FY 2027-2028); Amit Chadha expects a potential re-baseline (write-offs, hybrid shift, SDV, AI-native solutions) to clear up "in the next 6, 9, 12 months".
• OEM strategy timing — North American OEMs have clearly articulated their car/technology strategies and are in execution mode; Japanese OEMs have recently declared their positioning; European OEMs have yet to do so, which management expects around early next quarter, after which execution and ramp-up should resume.
• FY 2027-2028 conversions expected — sustainability deals signed in the prior year and again in Q2 FY 2026-2027 are converting to revenue, with similar conversions expected next year; on Airbus talk of a possible new single-aisle program, the CEO said "a little more to be done in that area" — no timeline or quantified benefit provided.
• Management is cautiously optimistic on client investment plans — clients are doubling down on growth rather than cost cutting despite the unstable macro environment, with technology spending shifting toward AI infrastructure, silicon, cloud platforms, data centers, and time to market.