ICICI Direct has reiterated a BUY recommendation on LTIMindtree Ltd, citing resilient revenue momentum, expanding AI-led deal wins, and a strategic reset that positions the company for higher-quality, sustainable growth. Despite a sharp headline margin contraction caused by a one-off labour code charge, underlying profitability remains intact, supported by operational discipline and an improving project mix. Strong traction in healthcare and manufacturing, a healthy deal pipeline, and deeper AI capabilities underpin management’s confidence of approaching double-digit growth by year-end. ICICI Direct has raised its target price to Rs 7,400, implying 24% upside over the next 12 months.

LTIMindtree at a Glance: A Scaled Digital Transformation Platform

LTIMindtree, the merged entity of LTI and Mindtree, has evolved into a diversified global IT services provider with exposure across BFSI, healthcare, manufacturing, retail, media, and hi-tech verticals. The company’s scale, combined with its growing AI and automation portfolio, has enabled it to compete for large, multi-year digital transformation mandates.

As enterprises increasingly prioritize cost optimization, AI Ops, and cloud-led modernization, LTIM’s breadth of services and domain depth are becoming a competitive differentiator.

Q3FY26 Performance: Growth Steady, Margins Masked by One-Off Impact

Revenue momentum remained resilient, with LTIM reporting Q3FY26 revenue of US$1,208 million, reflecting 2.4% QoQ and 6.1% YoY growth. In constant currency terms, growth stood at 2.4% QoQ and 5.2% YoY.

In rupee terms, quarterly revenue reached Rs 10,781 crore, up 3.7% sequentially and 11.6% year-on-year, supported by broad-based geographic and vertical recovery.

Profitability trends appeared weak at the headline level, with reported EBIT margin declining sharply to 10.6%, primarily due to a one-time labour code charge of approximately Rs 590 crore. Excluding this exceptional item, adjusted EBIT margin expanded 20 basis points QoQ to 16.1%, underscoring underlying operational strength.

Reported PAT stood at Rs 959.6 crore, down 31% QoQ, while adjusted PAT improved to Rs 1,401.3 crore, up 29% YoY.

Vertical Performance: Healthcare and Manufacturing Lead the Recovery

LTIM’s growth trajectory during the quarter was shaped by strong execution in select verticals:

Healthcare posted robust 9.9% QoQ growth, reflecting increased digital adoption and data-led transformation spending.

Manufacturing followed closely with 9.4% QoQ growth, driven by automation, supply-chain digitization, and AI-enabled analytics.

Retail delivered modest expansion, while Hi-Tech remained flat as earlier productivity-linked pricing headwinds tapered off.

BFSI declined marginally by 0.7% QoQ, though management expects pressure from a key client to bottom out by Q4FY26.

This uneven but improving mix signals a gradual normalization in discretionary technology spending.

Geographic Trends: Growth Broadens Beyond North America

Geographic diversification strengthened during the quarter:

Rest of the World delivered a sharp 14.1% QoQ growth

Europe expanded 3.4% QoQ

North America grew modestly by 0.4% QoQ, reflecting continued client caution

The widening growth base reduces LTIM’s reliance on any single geography and enhances earnings stability.

Deal Momentum: AI-Led Wins Strengthen Medium-Term Visibility

LTIM reported total contract value (TCV) wins of US$1.69 billion, marking a 6.3% QoQ increase. The highlight was a US$155 million multi-year AI-led BFSI deal, reinforcing the company’s positioning in advanced analytics and agentic AI deployments.

Deal ramp-ups from previously won contracts, combined with new AI-driven mandates, are expected to support revenue acceleration over the coming quarters. Management reiterated confidence in approaching double-digit revenue growth by the end of FY26.

ICICI Direct forecasts US dollar revenue CAGR of 9.9% over FY26–FY28.

Margins: Underlying Strength Despite Near-Term Headwinds

While reported margins were distorted by exceptional costs, the core margin story remains constructive:

Adjusted EBIT margin improved to 16.1% in Q3FY26

Productivity gains, improved project mix, and forex benefits supported profitability

Near-term headwinds include lower working days in Q4FY26 and phased wage hikes in Q1FY27, each potentially impacting margins by ~1%

Management expects these pressures to be offset through efficiency initiatives under its “Fit for Future” program, targeting higher exit margins in FY26 compared to FY25.

ICICI Direct estimates EBIT margins of 15.5% in FY26E, 16.1% in FY27E, and 16.3% in FY28E.

Strategic Reset: AI Ops and New Horizons Program Take Center Stage

LTIM’s New Horizons strategy marks a structural shift toward AI Ops, integrated enterprise transformation, and industry-aligned AI factories.

Key pillars include:

Expansion of AI-led platforms such as Blueverse

Launch of agent-driven IT operations

Strategic partnerships, including with Armada, to expand edge computing capabilities

Workforce transformation, with over 70% employees trained in domain-tech skills

This pivot strengthens LTIM’s ability to deliver higher-value, sticky engagements and positions it favorably for the next phase of enterprise technology adoption.

Financial Outlook: Strong Earnings Visibility Through FY28

ICICI Direct’s projections highlight consistent earnings growth:

Return ratios remain healthy, with RoE stabilizing above 22% and RoCE approaching 28%, supported by strong cash generation and limited balance sheet leverage.

Valuation and Target: Upside Intact

ICICI Direct values LTIM at 30x FY28E earnings, resulting in a target price of Rs 7,400, revised upward from Rs 7,350 earlier.

CMP: Rs 5,986

Target Price: Rs 7,400

Upside Potential: ~24%

Investment Horizon: 12 months

Rating: BUY

The valuation premium is justified by improving growth quality, AI-led differentiation, and rising medium-term visibility.

Key Risks to Monitor

Primary downside risks include:

Slower-than-expected ramp-up of large deal wins

Prolonged weakness in BFSI discretionary spending

Margin pressures from wage inflation exceeding productivity gains

Conclusion

LTIMindtree’s near-term numbers may appear volatile, but beneath the surface lies a company executing a disciplined transition toward higher-quality, AI-driven growth. With deal momentum improving, margins stabilizing post one-offs, and a credible long-term strategy in place, ICICI Direct believes LTIM remains well-positioned to deliver superior shareholder returns over the medium term.