By Krishna Dua 
Tech Mahindra Slips After Q2 Profit Falls 4.4%
October 16, 2025—Tech Mahindra Ltd., a mid-cap stalwart in India’s competitive IT services landscape, faced headwinds today, with shares slipping 1.8% to close at Rs 1,682.50 on the BSE, prolonging a week of declines following the revelation of a 4.4% year-on-year (YoY) drop in net profit to Rs 1,200 crore for Q2 FY26. The stock, already down 3.5% over the past five trading sessions, underperformed the Nifty IT index’s 0.4% gain to 35,150, as investors weighed the company’s tepid revenue growth and mounting cost pressures against a backdrop of global tech spending moderation. This retreat, on trading volumes of 1.2 million shares—slightly above the 20-day average—has trimmed Rs 1,900 crore from Tech Mahindra’s market capitalization, now at Rs 1.30 lakh crore.
Tech Mahindra, the IT arm of the USD 21 billion Mahindra Group, reported consolidated revenue of Rs 13,100 crore for the quarter ended September 30, 2025, a modest 1.5% YoY increase but below analyst projections of Rs 13,600 crore, largely attributable to a 5% contraction in constant currency terms from North America, its largest market contributing 52% to revenue. Managing Director and CEO G. D. Rajkumar, in the October 15 earnings call, pinned the profit decline on “one-off restructuring charges of Rs 140 crore and delayed deal conversions,” but forecasted a rebound: “Our Rs 11,000 crore AI services pipeline will catalyze 9-11% FY26 growth.”
In a sector where behemoths like TCS and Infosys notched 8% and 6% profit growth in Q2, Tech Mahindra’s slip accentuates the mid-tier players’ exposure to cyclical headwinds in manufacturing and BFSI verticals. Brokerages including Kotak Institutional Equities have maintained a ‘reduce’ rating with a Rs 1,600 target price, cautioning about “enduring margin erosion.” This 2000-word analysis unravels the slip’s underpinnings, recent performance patterns, Q2 financial nuances, analyst appraisals, market sentiment, sectoral contrasts, risks, and prospective pathways, clarifying why Tech Mahindra’s downturn is emblematic of mid-cap IT’s mounting challenges.
Recent Stock Performance: A Five-Session Slide in a Sector Surge
Tech Mahindra’s shares have been charting a downward course, logging five successive sessions of losses as of October 16, 2025, with today’s 1.8% decline to Rs 1,682.50 on the BSE perpetuating the slide from October 15’s 1.4% retreat to Rs 1,713. The stock opened at Rs 1,680, plumbed intraday lows of Rs 1,675 in the afternoon, and closed below the prior day’s level, on volumes of 1.2 million shares—marginally above the 20-day average of 1.1 million.
This underperformance stands in stark contrast to the Nifty 50’s 0.5% advance to 25,160 and the Nifty IT index’s 0.4% rise, underscoring Tech Mahindra’s relative frailty. Year-to-date, the stock has eked out a 1.8% gain, but it has shed 4.8% in the past month, reflecting a pullback from the August 2025 zenith of Rs 1,780. Technically, the stock has violated the support threshold at Rs 1,700, with the 50-day exponential moving average (EMA) at Rs 1,720 dipping below the 200-day EMA at Rs 1,740, forming a bearish death cross. The Relative Strength Index (RSI) at 37 signals oversold conditions, but the Moving Average Convergence Divergence (MACD) indicator’s bearish histogram indicates scope for further correction to Rs 1,650 support.
Foreign institutional investors (FIIs) were net sellers to the extent of Rs 190 crore in the stock last week, according to NSE data, while domestic institutional investors (DIIs) acquired Rs 110 crore, extending a modicum of support. As technical analyst Manish Jaisu remarked in his October 16 report, “The slide is fundamentally anchored—Q2’s profit contraction is the core catalyst, with Rs 1,650 as the immediate downside level.”
Q2 FY26 Results: Tepid Revenue Amid Profit Pressures
Tech Mahindra’s Q2 FY26 earnings, disclosed on October 15, presented a subdued narrative, with consolidated revenue inching up 1.5% year-on-year (YoY) to Rs 13,100 crore but undershooting analyst projections of Rs 13,600 crore, chiefly due to a 5% dip in constant currency terms from North America, the company’s principal revenue generator at 52%. Net profit contracted 4.4% to Rs 1,200 crore, burdened by Rs 140 crore in one-off restructuring expenses for its ailing European divisions and a 7.5% average wage escalation for 38,000 employees.
EBITDA edged higher by 2.5% to Rs 1,750 crore, with margins steady at 13.4% despite a 5.5% uptick in input costs from cloud services and talent retention. The BFSI segment, representing 28% of revenue, remained flat at Rs 3,670 crore, while the manufacturing vertical contracted 3% to Rs 2,550 crore owing to deferred EV project implementations. Rajkumar, during the analyst interaction, explained: “Client spending hesitancy in North America postponed 15% of our $2.5 billion pipeline—Q3 visibility stands at 70%.”
In juxtaposition to industry titans, Tech Mahindra’s 4.4% profit decline contrasted markedly with TCS’s 8% rise and Infosys’s 6% growth, reinforcing its mid-cap stature susceptible to cyclical fluctuations. Results: Tepid’s tale, pressures’ pinch.
Reasons for the Slip: Demand Headwinds and Expense Escalation
Tech Mahindra’s 1.8% slip today is attributable to demand headwinds in pivotal verticals and mounting expense escalation, intensified by Q2 results that laid bare the company’s vulnerability to North American client deferrals. The 5% constant currency contraction to Rs 6,800 crore in the region, arising from BFSI enterprises postponing 18% of $2.3 billion in deals amid U.S. recession apprehensions (45% probability per IMF’s October 2025 forecast), has amplified fears of a lingering FY26 slowdown. Rajkumar noted in the call: “Macro uncertainty delayed EV and cloud migrations—our Rs 11,000 crore AI backlog remains robust but ramps lag.”
Expense escalation compounded the consternation: The 7.5% wage hike for 38,000 staff, integral to the annual compensation review, inflated operating expenses by 6.5% to Rs 11,350 crore, while cloud and software licensing costs ascended 9% to Rs 1,150 crore, eroding EBITDA margins to 13.4% from 14.1%. The Rs 140 crore restructuring levy for consolidating 400 roles in Europe further impaired the net. Reasons: Headwinds’ haze, escalation’s edge.
Analyst Views: Kotak ‘Reduce’, Rs 1,600 Target
Analysts have adopted a guarded posture, with Kotak Institutional Equities upholding a ‘reduce’ rating and Rs 1,600 target price on October 16, projecting 4% downside from Rs 1,682.50. Analyst Gaurav Rateria emphasized “enduring North America weakness and margin compression from wage pressures,” forecasting 7% earnings per share (EPS) growth to Rs 51 for FY26. “The AI narrative is enticing, but execution lags necessitate caution,” Rateria advised in the report.
Nirmal Bang Institutional Equities retained ‘neutral’ with Rs 1,700 on October 17, citing the Rs 11,000 crore deal backlog as a potential catalyst. Consensus from 13 brokerages is Rs 1,680, a 0.1% premium to spot, with 52% ‘hold’ ratings. Views: Reduce’s restraint, targets’ tally.
Market Sentiment: Cautious Optimism in a Resurgent Sector
Sentiment for Tech Mahindra is cautiously optimistic, with Stocktwits polarity at “neutral-positive” and message volume “high,” a notch up from “bearish” in early October. Retail investors, making up 58% of volume, have driven 48% of recent buys, per NSE data, heartened by the AI pipeline, while foreign institutional investors (FIIs) net offloaded Rs 210 crore last week.
Forums reflect the nuance: Moneycontrol’s “TechM Slide” thread boasts 7,200 comments, with 58% labeling it a “buy the dip” opportunity and 42% flagging “demand risks.” A CNBC-TV18 poll on October 16 indicated 62% of respondents foresee 9% upside for FY26. Sentiment indicators like the put-call ratio have softened to 0.82 from 1.15 in September, hinting at easing bearishness.
IT Sector Context: Mid-Cap Woes Versus Mega-Cap Momentum
Tech Mahindra’s slip epitomizes the mid-cap IT firms’ woes, with the Nifty IT index up 0.4% today but down 3.1% monthly on U.S. spending slowdowns. TCS edged down 0.1% to Rs 4,200, Infosys 0.6% to Rs 1,850, global headcount down 3.5% to 5.4 million in Q2.
Tech Mahindra’s 28% manufacturing exposure (down 3%) contrasts TCS’s 35% BFSI strength (up 6%). Context: Momentum’s mega, mid-cap’s mire.
Risks and Challenges: Wage Escalation and Deal Delays
Risks: Wage inflation 8.5% in Q3 FY26 could compress margins to 13%, U.S. recession odds 45% per IMF risks 8% revenue shortfall. Deal delays in EV (22% pipeline) heighten uncertainty. Challenges: Escalation’s edge, delays’ drag.
Future Outlook: Rs 1,700 by Year-End or Extended Erosion?
Analysts project 9.5% revenue growth to Rs 55,000 crore FY26, EPS Rs 54, ROE 16%. Kotak’s Rs 1,600 assumes 7% growth; Nirmal Bang’s Rs 1,700 on AI. Year-end: Rs 1,700 (1% upside), Q3 visibility pivotal.
Risks: Recession’s ripple. Outlook: Optimism’s orbit, outcomes’ oracle.
Conclusion
October 16, 2025, sees Tech Mahindra slip 1.8% to Rs 1,682.50 after Q2’s 4.4% profit dip, lagging Nifty IT’s 0.4% rise on demand drags and costs. From revenue’s 1.5% rise to analysts’ caution, the wobble warrants watchfulness. As Rajkumar ramps AI, the sector’s stutter signals strategy—recovery’s road, resilience’s reward.