The performance of Indian mid-tier outsourcing companies appears to mirror those of their larger peers, albeit with instances of individual deviation, as a seasonally weak quarter and changes to the labour codes dented service providers irrespective of balance sheet size.
Mphasis on Thursday posted a 3.3% gain year-on-year in net profit for the third quarter of FY26 at Rs. 442 crore, despite taking a one-time charge on account of labour code changes.
Sequentially, however, profit fell 5.7%, from Rs. 469 crore in the previous quarter. Its operating margin slipped 10 basis points YoY to 15.2%.
One basis point is a hundredth of a percentage point.
Meanwhile, Cyient reported a 25% year-on-year profit shrinkage due to one-time charges on labour code changes and amortization costs linked to acquisitions. Persistent Systems, however, fared better, despite the seasonal challenges.
These results follow the earnings of industry leaders Tata Consultancy Services, Infosys and HCLTech that earlier reported weaker-than-expected third quarter numbers due to similar handicaps dogging the mid-tier firms.
BFSI boost
Mphasis reported a revenue of Rs. 4,002.5 crore, up 12.3% from a year ago, and gained nearly 2.6% sequentially. An 8% quarter-on-quarter climb in the insurance sector and 2.5% QoQ growth in its largest sector, banking and financial services (BFSI), boosted revenue.
In constant currency terms, its revenue grew 1.5% sequentially and 7.4% from a year earlier.
“Our artificial intelligence (AI) platform is supersizing our pipeline and deals, paving the way for faster revenue growth and continued gains in wallet share-driven wins.” said chief executive Nitin Rakesh in a press statement.
Mphasis reported a total contract value (TCV) of $428 million in the December quarter, up from $351 million a year ago, with nearly 62% of its deals being AI-led. Sequentially, however, it edged down from $528 million in the September quarter.
Cyient reported a net profit of Rs. 91.8 crore, down from Rs 122.3 crore in the same period a year earlier, hit by Rs. 42 crore charge taken on account of labour-code charges and Rs. 8 crore on account of mergers and acquisitions expenses related to the spun-off semiconductor unit.
The company’s revenue also fell 1.6% on-year to Rs. 1879 crore, from Rs. 1909 crore a year ago. In constant currency terms, revenue stood at $207.3 million.
However, the $283 billion sector is anticipating a pick-up in client spending and a potential demand recovery as the AI-led services and deals gain traction.
The digital, engineering and technology (DET) segment of Cyient, which forms around three-fourths of the company’s revenue, posted a revenue of Rs. 1488 crore, up 3.5% sequentially and 6.5% year-on-year. In constant currency terms, however, it edged 0.7% down on-year to $167 million.
“Customer-specific pushouts due to year-end holidays and tariff-related uncertainty resulted in soft revenue performance,” the company noted in its investor presentation.
While Cyient did not disclose its TCV, the company acquired eight clients in the third quarter. The weak quarter also saw its operating margins dip over 190 basis points to 9.5%.
Mphasis on Thursday posted a 3.3% gain year-on-year in net profit for the third quarter of FY26 at Rs. 442 crore, despite taking a one-time charge on account of labour code changes.
Sequentially, however, profit fell 5.7%, from Rs. 469 crore in the previous quarter. Its operating margin slipped 10 basis points YoY to 15.2%.
One basis point is a hundredth of a percentage point.
Meanwhile, Cyient reported a 25% year-on-year profit shrinkage due to one-time charges on labour code changes and amortization costs linked to acquisitions. Persistent Systems, however, fared better, despite the seasonal challenges.
These results follow the earnings of industry leaders Tata Consultancy Services, Infosys and HCLTech that earlier reported weaker-than-expected third quarter numbers due to similar handicaps dogging the mid-tier firms.
BFSI boost
Mphasis reported a revenue of Rs. 4,002.5 crore, up 12.3% from a year ago, and gained nearly 2.6% sequentially. An 8% quarter-on-quarter climb in the insurance sector and 2.5% QoQ growth in its largest sector, banking and financial services (BFSI), boosted revenue.
In constant currency terms, its revenue grew 1.5% sequentially and 7.4% from a year earlier.
“Our artificial intelligence (AI) platform is supersizing our pipeline and deals, paving the way for faster revenue growth and continued gains in wallet share-driven wins.” said chief executive Nitin Rakesh in a press statement.
Mphasis reported a total contract value (TCV) of $428 million in the December quarter, up from $351 million a year ago, with nearly 62% of its deals being AI-led. Sequentially, however, it edged down from $528 million in the September quarter.
Cyient reported a net profit of Rs. 91.8 crore, down from Rs 122.3 crore in the same period a year earlier, hit by Rs. 42 crore charge taken on account of labour-code charges and Rs. 8 crore on account of mergers and acquisitions expenses related to the spun-off semiconductor unit.
The company’s revenue also fell 1.6% on-year to Rs. 1879 crore, from Rs. 1909 crore a year ago. In constant currency terms, revenue stood at $207.3 million.
However, the $283 billion sector is anticipating a pick-up in client spending and a potential demand recovery as the AI-led services and deals gain traction.
The digital, engineering and technology (DET) segment of Cyient, which forms around three-fourths of the company’s revenue, posted a revenue of Rs. 1488 crore, up 3.5% sequentially and 6.5% year-on-year. In constant currency terms, however, it edged 0.7% down on-year to $167 million.
“Customer-specific pushouts due to year-end holidays and tariff-related uncertainty resulted in soft revenue performance,” the company noted in its investor presentation.
While Cyient did not disclose its TCV, the company acquired eight clients in the third quarter. The weak quarter also saw its operating margins dip over 190 basis points to 9.5%.
