Mphasis expects low double-digit growth in FY27, backed by a strong deal pipeline and AI demand. CEO Nitin Rakesh said, "The guidance is based more on what we are seeing in the business in accounts." The company reported 9.7 per cent growth for the second quarter ended September 30.
Mphasis expects low double-digit growth in FY27, supported by a strong deal pipeline and AI-led opportunities, even as macroeconomic uncertainty weighs on traditional IT spending
Mid-tier IT services company Mphasis expects to grow in low double digits this financial year, helped by a strong deal book, despite an uncertain macroeconomic environment and AI-driven deflationary pressure, which has squeezed traditional deal revenue and margins for most industry players.
For the second quarter ended September 30, Mphasis reported 9.7 per cent growth in constant currency, while in dollar terms, revenue was up 9.2 per cent. The numbers are among the highest in the sector and reflect how smaller companies have been able to grow faster than larger peers.
"We've seen good activity in the short-cycle deals. And of course, there are large deals in the mix that are visible in the pipeline, which was up 23 per cent year-on-year. So, I think the guidance is based more on what we are seeing in the business in accounts. It's more focused on the micro versus the macro," Nitin Rakesh, chief executive officer (CEO) and managing director (MD), told Business Standard.
Deals are shaping up across three fronts: clients building the AI harness, for which a lot of engineering work is in progress; automation for adoption at scale; and pockets of spending outside the chief information officer's (CIO's) ambit, which are showing rapid traction.
"Businesses of the chief operating officers (COO), chief marketing officer (CMO), chief revenue officer (CRO), and head of supply chain; all of these pockets are now opening up because adoption of AI is not just in IT. IT is the enabler. Adoption is happening across other parts of the enterprises," he explained.
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For example, in banks, client onboarding, loan underwriting and auto financing are all becoming pockets of opportunity because they are not only looking for savings from operations but also reimagining how underwriting is done to improve market share.
"This becomes an opportunity for us to look at using those opportunities to drive our revenue. So each and every business head becomes a target from a market standpoint."
Such deals are mainly short-tenure AI deals, which are small in size but provide recurring revenue to keep the machine running. IT services companies have been struggling to get that slice as discretionary spending has been muted, putting pressure on them from all fronts. Smaller deals, which are less than $20 million in total contract value (TCV), were up 26 per cent on a trailing 12-month basis.
Quarterly TCV was $466 million, flat sequentially but down from $528 million a year ago. Almost 66 per cent of those deals were AI-led. The company signed five large deals in the quarter across banking, healthcare and TMT.