Tata Elxsi Limited delivered impressive sequential performance for Q2 FY27, with net profit rising 7.2% to ₹154.81 crore from ₹144.4 crore in the previous quarter, meeting analyst estimates of ₹154.48 crore. According to the latest financial results, revenue grew 2.9% sequentially to ₹918 crore from ₹892 crore, surpassing the consensus estimate of ₹914.98 crore. The company demonstrated strong operational efficiency with EBIT advancing 4.6% to ₹170 crore from ₹162 crore in the preceding quarter, while EBIT margin expanded to 18.5% from 18.2% in the previous quarter. Shares of Tata Elxsi jumped as high as 7.5% during early trade on Wednesday, climbing to a high of ₹3,685 apiece on NSE before paring some gains to trade 7% higher at ₹3,668 as of 9:26 a.m., significantly outperforming the 0.12% decline in the Nifty index. The rally extended the stock's recent recovery, with shares gaining 19% over the past week and 8.5% over the past month, though it remains down 1% over three months, 17% over six months, and 31% over the past year.
The company's transportation segment, its largest revenue contributor, grew 7.9% sequentially in constant-currency terms, demonstrating strong momentum in this key vertical, largely aided by growth in the US market. According to Nirmal Bang, the company secured multiple strategic deals during the quarter, including a GenAI-powered multilingual virtual assistant for a global technology leader and an AI-powered enterprise knowledge graph platform for a global media and entertainment company. The media and communications segment delivered exceptional growth of 3.4% year-on-year, supported by deal ramp-ups and new GenAI-powered engagements, contributing 33.6% of the SDS segment and benefiting from deal ramp-ups and new wins. The healthcare and life sciences vertical also demonstrated 3.5% QoQ growth, supported by new deal wins in turnkey product engineering and digital health, with management remaining optimistic about the long-term prospects of this vertical. As per Tata Elxsi CEO and Managing Director Manoj Raghavan, "Amidst dynamic market conditions and geopolitical uncertainties, we delivered strong QoQ growth across overseas markets led by US which grew at 7.9% QoQ. We continue to win new customers in our core verticals and adjacent markets in the US region, which is expected to add to the growth momentum of the company, backed by differentiated technology capabilities and offshore execution excellence."
The company's operating profit margin expanded by 70 basis points sequentially to 21.9% in the September quarter, significantly outperforming expectations. The better-than-expected margin performance was aided by operating leverage, favourable currency gains of 60-70 basis points and the reversal of most one-offs seen in Q1FY27. In the June quarter, the company had taken a 150 basis point hit to margins due to temporary one-off and short-term operational expenses. The margin gains came despite wage hikes across the employee base, demonstrating the company's ability to optimize costs while maintaining growth momentum. The transportation vertical, which accounts for about 55% of revenue, benefited from deal wins in the automotive space in the US and India even as the European auto market remained sluggish, with the vertical securing a multi-year connected-vehicle programme with a leading automaker.
While the management expects H2 FY27 to be better than H1, brokerages remain cautious about the sustainability of growth, given continued softness in European automotive demand and delays in deal closures. Choice Equity Broking expects weak automotive demand in Europe and delayed deal conversions to constrain near-term growth, while aerospace and defence programmes remain two-three quarters away from making a meaningful contribution. Motilal Oswal Research has maintained a 'sell' rating with a target price of ₹2,970, having lowered their FY27 and FY28 earnings estimates by 3% and 1% respectively, reflecting a gradual margin recovery amid continued investments and uneven demand environment. The brokerage believes meaningful margin expansion is likely to depend on revenue growth, utilisation gains and employee-pyramid correction. JM Financial Research has maintained its 'reduce' rating with a target price of ₹3,358, noting that while broad-based sequential growth and better-than-expected margins are encouraging, higher investments could weigh on near-term profitability.
