FY26 closed 3.9% / 17.2% EBIT vs raised mid-year 4-4.5%.

When you talk to clients right now versus exactly this time last year, what differences do you see in conversations? Are we moving towards more serious discussions around AI implementation? What is impeding clients from getting there? In which service lines do you think is the client coming in and saying that earlier, we were constrained by budgets, but now that AI is helping us immensely, we can really unlock and maybe do a lot more of something we weren't doing at all?

Thank you, Abhishek. So let me take the first couple of questions, then I'll hand it over to Shiv. On the AI conversations last year to this year, definitely, there is a lot more holistic conversation on how AI would change the entire organization. I think last year, we were still talking significantly about point solutions and trying to prove that AI can deliver some meaningful value. But then after that, the conversations changed to how clients should be focusing on some of the foundational elements like data and cloud migration. But this conversation has matured to an extent that clients realize that to get holistic benefit, they need to completely reimagine their business processes. Once that realization is there, then the deployment of AI also slows down a little bit because clients want to take a holistic approach. However, the biggest area where we are seeing good outcomes and good client interest is- delivering an accelerating software development, data life cycle management. That area is undisputedly the sweet spot for Generative AI to be most helpful for a lot of organizations. The real acceleration in what we are seeing is not necessarily in deploying AI within enterprises, but really “Day -1” services, which are foundational for enabling AI, like a lot of work in our engineering services. Like I mentioned about custom silicon for edge inferencing It is a big area w ith a lot of companies across multiple industry verticals. This is not restricted to semiconductor industry. Everybody who's got products and solutions, if they needed to use the regular GPU architecture for edge inferencing, it's going to be unviable. So, they're looking at custom chips to be a big spend area to get the best ROI out of the AI spend. And similarly, for a lot of technology companies, the AI factory, which is largely the AI data centres, the professional services around design, implementation, operations, support managed services. We talked about a large client who's a Top 10 technology company. They continue to expand as their capex spend is expanding. We have acquired another Top 10 technology company for the same AI Factory services. Those are the areas, which are “Day -1” of AI, where we are seeing very good traction, especially for Advanced AI services.

If you can part a brief update on how much more restructuring charges are pending? And update on the SG&A investments as well, whether they should continue into Q4, or how should we model that in?

Abhishek, if you recall, we have indicated that for the full year, we will have an impact of 50 basis points on our margins. This is a one -off restructuring cost this year. And we expect the similar kind of impact in Q4 also. Our endeavour is to finish this exercise by Q4 and start the new financial year on a clean state. So, I expect a similar kind of charge in the Q4 also. And, on the SG&A part, we will continue to invest on the AI solutions as well as on the GTM.

Just wondering about the Retail vertical performance. Seasonally, normally, Q3 is not great for Retail, but this quarter you showed really strong performance. And you also talked about a mega deal win there. Has that already started contributing this quarter?

No, there is no contribution from the mega deal this quarter. It will start ramping up in the current quarter. And retail is really coming from a number of wins. In a couple of large clients, where we have won business in the previous quarters, they are getting into execution.

You've also seen in Q3, there was good performance in the Software segment. Last year, we had a slight decline YoY for Software products. Is this a sign that customer spending is starting to pick up again on annual maintenance contracts? And they're starting to open up wallets again for IT spending?

I don't think this is reflective of broader IT spending. We have the seasonality, which has driven strong growth. There is a very strong demand for data intelligence portfolio. Zeenea, coupled with Actian's existing portfolio, is a very compelling offering, and we are able to replace several of the incumbents, and we have some good success stories. So that is scaling up. And overall, data portfolio continues to do very well. And very significant couple of wins w ere also on our marketing automation platform, especially with the clients who are looking at sovereign solutions rather than a public cloud solution. Those also contributed to some meaningful wins.

My question is the existing data centre infra has to be repurposed or upgraded for AI use cases like inferencing or model training because of the capacity constraints globally. How does that feed into demand for our IMS segment? And when you talk about “Day -1” kind of opportunity, is this already playing out in some form and fashion?

Yes, it's a very significant opportunity for our infrastructure business. We believe in the next five years, the entire installed base of private data centres will get technology refreshed. However, we haven't started seeing much of traction yet on that front. But this is something we expect will be a good growth driver. The “Day -1” on infrastructure business is largely with the technology companies who are building planet-scale data centre capacities to support their AI workloads. That's where we are seeing. That's why I call it a “Day -1”, which is infrastructure required to enable AI. There is some traction on the edge as well. So that is also an opportunity in the AI Factory offerings.

Just one question on margins to Shiv. ER&D has shown very good growth; the sequential margin drop seems to be a bit surprising. Is that largely because of the restructuring costs going into that head?

Yes, that's correct. If you take out the impact of restructuring costs, then the margins were 17.6% versus 18% last year . And this quarter, there's around 90 basis point impact of wage hike we had given and also another 30-40 basis point of furloughs. So that's what caused the slight dip in the margins.

And in the traditional engineering segment that you mentioned, the manufacturing part of it?

Yes, manufacturing, I think it is still a little bit muted, I would say.

In terms of TCV last quarter earnings, you said you target now $10 billion new business TCV, which could have some volatility on QoQ. And you have also closed $3 billion in this quarter, last quarter on $2.5 billion, so looking at the pipeline and the closure, you still believe plus or minus $2.5 billion could be a new normal going forward, at least in the near term per quarter?

See, I mean, as you called out, these bookings can be spiky. And if you take our last 4 quarters, we have delivered $10 .4 billion net new booking. Now I would not really call out that every quarter we are going to go above $2.5 billion. But if you take some kind of a moving average over 3 quarters, 2 quarters, then I think we should be hitting that number. That's what I expect.

Sir, just last thing on the press conference, we have said the incremental recurring impact because of the labor law could be now just 10 or 20 bps. So that means the further hit on a recurring basis may not be higher than 10 or 20 bps. Am I wrong in understanding this?

No, your understanding is correct. We have already taken the one -off charge in the P&L. And going forward, we don't expect this to be more than 10 to 20 basis points on a recurring basis.

I just wanted to pick your thoughts with regards to the demand around legacy modernization using AI. Are you seeing this segment is a significant interest from customers across verticals? And how do you think this contributes to growth over the foreseeable future?

Yes. As I said, in modernization and SDLC is where the biggest opportunity is in the enterprises. And we are seeing good demand. I mean, obviously, these projects also clients take one segment of modernization, see success of that, and then continue to scale. We think this will become a very big opportunity if you take a next 2 to 3 year window, legacy modernization using AI will be a very significant opportunity across most verticals. Some verticals have a lot more enterprise ERP and SaaS type of large footprint around. But there are certain verticals- financial services, telecom, healthcare who are all on mostly custom software- will be a significant opportunity.

I had a question related to the products business. This quarter, after many, many quarters, we have seen the perpetual license upfront sort of see significant revenue accretion. Usually, that's been on a downtrend as we shifted to subscription. I wanted your thoughts on how we should think about this, any change in strategy or this was opportunistic?

You should compare the perpetual license revenue in December last year to December this year. It's only a marginal uptick. Usually, seasonality is there and some incremental quantities. If some clients were a hell bent on continuing on the perpetual license, so we continue with that. And this time, we saw one client who really wanted it to be perpetual sovereign type of requirement, which helped this revenue go a little higher than what it was last year December. I think it was $49 million, which has become $55 million. Otherwise, our general approach is to minimize perpetual and convert as much possible to term and subscription.

And 1 last on the products / Will Actian be amongst your top three products right now by revenue?

Yes, of course.