FY26 wrapped: -2.4% CC revenue but 4-year-high 25% margin, $40.7B TCV.

So apart from the BSNL deal, are there any other client -specific situations you might be going through in any vertical or geography?

No, there is no specific client situation now.

So, you mentioned that by July end, probably we'll see some clarity in pent-up demand. From the time that U.S. started announcing the trade deals with major trading partners like China, U.K., etcetera. Are you seeing that the peak of the uncertainty is already behind and there is some amount of improvement in the client decision making process?

We have not started seeing that so far, Sudheer. Because as we know, like even with China , unless they have framework deal like the actual deal and tariffs are not being announced. And my guess is that till almost all the trade deals are announced, there will be this lack of clarity.

My first question was it appears like decision-making, which you spoke about, deteriorated towards the end of the quarter. What are the risks to the September quarter? What I'm trying to understand is all the project delays and the pauses which happened during the quarter, is it fully reflected in the number which we have reported or there's more to come into the September quarter as well?

Whatever delays that we had have been to a great extent factored into our Q1 numbers. Of course, there will be some small residual effect in Q2 as well. And if there are no further delays, Q2 should be at least better than Q1, but we need to wait and watch based on what happens in the market.

My second question was on margins. So, before we entered with the BSNL deal, our margin was trending about 25% -26% at EBIT level. And understandably after that the margin came down. And now we have exited from the BSNL deal, but our margin is below the levels where it was prior to BSNL deal. Now between this period, you have lowered your SG&A expenses. I imagine that your employee pyramid also would have improved. You have spoken about how productivity has improved over the last 1 year and pricing also seems to be stable. So, what is pulling down your margin compared to where it was before the BSNL deal?

A good comparison would be the year-on-year margin. And yes, it's 20 basis points down on a year -on-year basis. Through the year, like we have called out on in our earlier quarterly earnings commentary also, we have continued to make investments in people . like we had called out in Q4. And overall, the investments which are required for long -term growth continue. I n this quarter as well, we have invested in capacity. We continued our investments and that is what is reflecting into our margins. Having said that, if you look at it, the capacity versus the demand contraction mismatch, leads to us carrying excess capacity or additional capacity, which should help us in our future demand. Going forward, we should be able to further tighten our operating leverage. And Kumar, if you remember last quarter, we said that if uncertainty continues, we might have impact or lower operating leverage.

Just one clarification on the international revenue to be similar to last year, which you have spoken about. Is that in USD terms you're talking about or constant currency, because on a full year basis, we'll have a sizable cross-currency impact?

Constant currency terms. Like -to-like the international revenue to international revenue, constant currency term.

My first question is in terms of the weakness you've seen across a range of industries, and you did highlight it's a little bit the trade affected sectors and geopolitics in general. Could you also mention if there's any kind of -- I wouldn't say pricing pressure, any kind of out-of-turn demand for productivity pass -through that you may be seeing in across industries, perhaps more because of the curr ent demand environment?

Ankur, pricing has been reasonably stable at an overall level. But if you ask like is there any demand on productivity, there are instances where large deals are coming up for re -negotiation, there is a demand for productivity, either -- we don't see much coming as a pure discount, but coming as AI -infused productivity or generic otherwise also a normal productivity. But it is not industry specific. I would say it's more based on the size of the deal or the tenure of the deal.

Will this impact the revenue conversion from the signings because we've had our book to bill at about 1.3 for a while, but our revenues haven't picked up. I understand some of it is more near term because of the recent trade uncertainties. But do you think AI-infused profit pass-through might impact the revenue conversion we might have in the medium term?

Revenue conversion from signing is not impacted because of productivity. Because usually the productivity is given up at the time of signing. So, once we sign, we don't see demands on productivity during the term of the deal, normally, if at all it happens to be very, very rare. We are giving as I said AI -increased productivity, but it's when we signed the deal itself.

Could you talk a bit about how the pipeline replenishment is going on? I understand in the near term, there's been some deferrals and delays, but in terms of overall pipeline formation, how is that progressing?

Ankur the overall pipeline has remained quite strong. We measured it in terms of pipeline from multiple industry verticals as well as geographies. On both dimensions, the pipeline has remained strong. We have been able to replenish all the deal closures that happened in Q1.

Just the last question on margins. You did highlight that you're investing in talent, which is why margins haven't picked up despite the BSNL ramp down. Now, you have a new BSNL contract that will be ramping up perhaps from the next quarter onwards. Isn't there going to be a significant headwind on margins? How should the margin trajectory be for the rest of the year? Are there any levers you might pull to hold your margins here?

Ankur, like I said, we invested into capacity, anticipating growth this quarter. While we saw a demand contraction in the later half of the quarter, we continued carrying a larger capacity. In terms of levers, we will focus on improving our operating leverage in Q2. And the key levers would be on improving our utilization, which took a hit this quarter, improving our productivity and focus on pyramid. These would be the levers. As you rightly called out, from a headwind perspective as we start delivering the second phase of the BSNL order, the revenue mix might get slightly impacted. But overall, at a portfolio level, we'll look towards improving margins from here.

Samir, looks like there has been significant hiring, probably at the mid and senior levels , because I see that despite the BSNL contract pass -through costs going down, direct costs have not gone down as much. Would that interpretation be right?

So Ravi, so you would see a 70 basis points decline on positive impact because of lower third-party expenses and a similar like-to-like increase in employee costs. And this includes, as you rightly called out, not just the hiring, we have given additional QVA.

BFSI has seen a slight decline Q -o-Q. This is I'd say, kind of resets the momentum that we had seen beginning of last year. But BaNCS have actually been reporting good results. Any positive signs that you're seeing from BaNCS customers now? Or this is expected to continue?

No. Actually Ravi, positive side of it is that BFSI North America and BFSI UK have a marginal growth. The decline came from BFSI Europe, driven by the completion of a large engagement that we had taken. But otherwise, structurally, yes, there is some amount of delay , however North America and UK, particularly in BFSI, are continuing their growth path.

On the high-tech side, that's where we had seen the spending cut start. Now that seems to be trending up. And this is where we've also seen some of your peers have to pass on significant productivity improvements. Looks like you're not s eeing any such demands, right?

By and large, we are seeing a growth, with the exception of one or two clients, we're seeing strong growth in the high-tech segment.

The first question was around the new BSNL order we received in May. When do we expect this to ramp up? I mean, is this going to be a one-shot ramp up in 2Q and then ramp down in the next quarter? That's the first question. And the second question is around margins , again. I understand that you are carrying excess capacity. But considering we have attrition trending upwards of 13%, why would we carry this capacity? I mean, do we expect a materially better H2 with regards to growth in anticipation of which we are holding this capacity? Because our cost of revenues, the employee cost at 47.6% is probably at an all -time high. And considering we will have BSNL headwinds coming in 2Q as well as the potential wage hikes, just trying to understand how much of this will be offset by the operati ng leverage that we are expecting?

Abhishek, first, on the BSNL deal, we just received an advance Purchase Order. So this is not in the TCV yet. We are awaiting circle -wise POs. Once we get it, then the execution starts. Once the circle -wise POs are available, you can expect execution on a similar trajectory to the one we delivered on the 100,000 sites. Coming to margins. Your question was in terms of , is it in anticipation of our demand. We added people in Q1 in anticipation of what we want to service in Q1 and what happened through Q1 was a reduction , or contraction in demand. That's where we carried that excess capacity. So, we pre-planned it, but Q1 did not align with our initial expectations.

Our employee costs are, as I mentioned, almost at an all-time high. So, as growth picks up, we expect that to materially trend downwards towards the 45% range, let's say, over the next two, three quarters. That's where we should be expecting those gains to come from.

So, two clarifications, Abhishek. One is, if you're comparing sequentially Q4 versus Q1, the employee cost as a percentage of revenue might not be directly comparable, because the revenue mix is different. There was a significant third-party component sitting in the revenue till last quarter. Having said that, your question in terms of current revenues or employee costs at 47%, should we be trying to optimize it? Yes, we'll look towards optimizing that and bringing that as a percentage of revenue downwards.

You sounded pretty cautious on BFSI overall in the commentary. But if I look at the deal wins, on a trailing 12 months, BFSI deal wins seem to be up 12%. So, if you could just help contextualize, are you s eeing any re-scoping downwards or any such thing? Or was it just a broader comment?

Like every other industry, Nitin, there are some places where there is a project pause or scope reduction. But otherwise, as we said, we are continuing to be quite positive in the medium-to-long-term on the BFSI based on, as you rightly pointed out, the order book closures in the last year. But there are instances of delays or scope reductions that have come up.

Just to understand, on a sequential basis, last quarter versus this quarter, would you characterize that the demand is actually, at least from an environment perspective, has got worse or it's the same for BFSI specifically and across the board as well?

If you look at a revenue basis, you can see that the revenue has an overall drop, but there is a very minor growth in North America and UK So, it is, to some extent, geography specific . North America and UK demand in BFSI has remained stable and Europe has seen a contraction. But if you take it from a TCV perspective, we don't want to get a quarter-on-quarter comparison on TCV because it tends to be lumpy, like some quarters you sign very big deal and some deal closures also happen towards the end of the quarter. So, we don't want to go by a quarter-on-quarter TCV comparison.

But just from a pure -- because there is a dichotomy, our deal wins over the last three quarters, including this one, ha ve been pretty decent, actually. On the one hand, the deal wins are decent. You seem to have a good pipeline. But on the other hand, we seem to be seeing maybe the re-scoping and the negative surprises on demand, like we saw this quarter. So, from that perspective, now what exactly, how would you sort of explain this? Because people seem to be signing, but they don' t seem to be executing.

What's happening in some of the deals, where the clients decide that they can reprioritize, or de-scope, I was explaining in the earlier question, there was one particular large client, where they decided that maybe the particular work can be done, they can delay the work or extend the period over which the work can be done, and they ramped down the number of people that were engaged. So, here the deal was neither cancelled nor paused, but the duration of the deal was increased to give them more time to manage their spend. There are some places where we find the projects are started but started at a slower pace. And there are some places where the projects are paused for a duration. So, you see a combination of all these things, which together bring this scenario of overall deal signings are okay, pipeline is okay, but the immediate quarter revenue numbers are not in sync with what we should be expecting.

Sir, mostly the question is like on the North America side, if I take the last 12 quarter CQGR, it seems to be kind of flat to slightly negative. So North America being one of the biggest markets, like where are we losing in this market? And why -- is it not growing on an absolute basis for us?

Abhishek, I will not characterize it as losing any market share in North America. For starters, we are participating in almost all major engagements. And we are also winning our fair share and that is consistent or improving. But overall, as we explained, like, wh ile we are winning, there are instances where you have project delays or ramp down, which is causing the growth to be offset. So that is what the end result you see. So, I do not think that we are actually losing anything in North America, Abhishek.

And sir, lastly, from my side, if I look at your client's metrics, there seems to be two clients -- in size have gone down from US$100 million buckets. Is it a concerning point for as an investor or how do you look at the metrics?

So, Abhishek, whenever there is a revenue reduction, it's concerning. So, we are worried. Our client metrics a re based on last 12 months' revenue in dollar terms. So, if a particular client is on the borderline or let us say $101 million and because of this overall reduction in revenue, the client moves from 101 to even 99.5, we will no longer count that particular customer as a $100 million client. So, it is a concern. Is it something that we should worry about? I will not because once the growth returns, these customers will be back onto the 100 million plus range. And there are some cases, even because of the cross -currency movement also, where customers move back and forth. And if they are in the borderline case, they may move back and forth between 100 million above or below.

My first question , I am trying to understand the investments that we talked about in creating capacity as well as on building talent pool. Is there some specific hiring going on that is upfronted in the cost? And that is why the employee cost in absolute terms is up by $150 million, while the number of employees has not increased significantly. Just trying to understand why there is a big jump in employee costs in the last 2 quarters, whereas our international revenues have largely remained flat?

As I clarified, it is not just adding people. We have given a higher QVA as well this quarter. Last quarter, we had called out about tactical interventions, which were by way of promotions.

My second question is on the conversation that we are having at the time of renewals. Have you seen more conversations around infusing Generative AI technology on the renewals? And where would we be in our journey of taking this technology to our top 100 clients? Let's say, have we already reached out to our top 100 clients and are trying to proactively use this technology and infuse that in all our existing work packages? Just trying to understand where are we in the journey?

Gaurav, you are right. Whenever there is a renewal, we go back to our clients with an AI infused solution. But to be honest, we don't wait to infuse AI for the renewal in most of our clients. Whenever we see an opportunity, where an AI-infused solution can give better productivity and a better outcome for our customers , we proactively do that. And we do it in almost all kinds of projects, whether it's a cost optimization program or it is a transformation program. Whenever we look for the opportunity, we look for it in every phase of the project and every type of project.

Last question, Krithi, on Agentic AI solution. How are the contracts structured with the clients? Is it largely in the form of fixed -price projects or is it also being sold as some license fee? Just trying to understand, how are we trying to monetize our solutions around Agentic AI?

Gaurav, this is an evolving space. You will see multiple opportunities. There are some where we do based on the outcome. There are some customers that expect that this is better to do it on T&M. Because as it is evolving, they also want to see how they are able to benefit from the results. So, they want to do it on T&M. And then after a period of time, move towards the fixed -price model. So, we are seeing both options here.