Motilal Oswal Financial Services met with Hexaware Technologies Ltd.'s CEO R. Srikrishna and CFO Vikash Kumar Jain following the company's second-quarter CY26 results to dig into a recent guidance revision, the underlying demand environment, AI monetization efforts, and the medium-term growth outlook. The brokerage's takeaway: while Hexaware has lowered its CY26 revenue guidance, the change appears driven largely by a delayed ramp-up of already-won deals rather than any genuine softening in client demand. Motilal Oswal has reiterated its Buy rating with an unchanged target price of Rs 720, implying roughly 26% upside from the current market price of Rs 570.

Reading The Guidance Cut Correctly

Hexaware trimmed its CY26 revenue growth guidance to 6-7% year-on-year (including roughly 50 basis points of contribution from the CPS rebadging deal). Management's explanation, corroborated by the brokerage's own discussions, points to a specific and identifiable cause: deals won earlier in the year have seen their revenue recognition pushed to late third quarter and fourth quarter of CY26, compounded by continued softness in the Travel & Transportation vertical. Crucially, the underlying sales pipeline remains healthy, with continued traction in modernization, consolidation, and AI-led transformation programmes.

Motilal Oswal models 6.6% USD revenue growth for CY26, with sequential growth expected to improve over the remaining two quarters as delayed projects begin ramping up. The brokerage's view is that a stronger exit to CY26 — despite the seasonally weaker fourth quarter — should provide a considerably better starting point heading into CY27, where it models an acceleration to 9.7% constant-currency revenue growth.

Large-Account Expansion: The Core Growth Engine

Vendor consolidation continues to work decisively in Hexaware's favour. Roughly 13 of the company's top 20 clients have undergone some form of vendor consolidation over the past five quarters, allowing Hexaware to strengthen its positioning and expand wallet share across several strategic accounts.

Management indicated that several USD 20-30 million relationships have the potential to scale toward USD 50-100 million over the next 2-3 years, supported by continued vendor consolidation, preferred-partner positioning, and expansion into higher-value consulting and AI-led engagements. Notably, the company's revenue mix has been steadily diversifying away from its largest clients: contribution from the top 5 customers has fallen from 36% in CY19 to roughly 26% in CY25, while non-top-10 accounts now contribute about 64% of revenue. The non-top-10 cohort delivered a 15% USD revenue CAGR over CY19-25, more than double the 6% CAGR from the top 5 accounts over the same period.

How Hexaware Stacks Up Against Peers

Hexaware's customer concentration — 25% of revenue from its top 5 clients and 36% from its top 10 — is meaningfully lower than that of Mphasis and Persistent Systems, pointing to a comparatively more diversified revenue base. Where Hexaware trails peers is in the pace at which mid-sized relationships mature into very large ones: its USD 10 million-plus client count has grown only modestly, from 29 in Q4CY23 to 34 in Q2CY26, a slower cadence of "client mining" than Coforge or Persistent Systems have managed over the same period.

AI Strategy: Betting Early On Token Economics

Perhaps the most forward-looking section of Motilal Oswal's note concerns how AI is reshaping commercial models in IT services. Client conversations are gradually shifting away from pure productivity gains and toward token economics — enterprises are increasingly evaluating AI deployments by balancing labour costs against token consumption, effectively making AI infrastructure cost a core part of outsourcing negotiations rather than a separate line item.

Hexaware also highlighted a new category of "strategic AI partner" engagements, where enterprises select a vendor through an initial, narrowly scoped AI use case before scaling that relationship organization-wide — effectively a land-and-expand motion built specifically around AI pilots. Motilal Oswal frames the central monitorable over the next few years as simply the pace at which these early AI engagements convert into larger enterprise contracts with meaningful revenue contribution.

Margins: Stable Guidance Despite Continued Investment

Management maintained its CY26 EBIT margin guidance of 13-14%, despite ongoing investments in hiring and AI capabilities. Margin performance in the most recent quarter was supported by better utilization (which rose 220 basis points sequentially to 84.8%) and favourable calendar effects, though partly offset by seasonal expenses and talent investments. Motilal Oswal expects operating leverage from the delayed deal ramp-ups to help absorb continued investment spending going forward, with margins remaining broadly range-bound near-term before gradually improving as revenue growth accelerates. The brokerage models EBIT margins of 13.7% for CY26 and 13.9% for CY27.

Operating Metrics Snapshot: Q2CY26

Sequential USD revenue growth of 4.4% (constant currency) in Q2CY26 was driven by underlying volume growth of roughly $9 million alongside a calendar/billing-day benefit of around $5 million. Financial Services remains the largest vertical at 28.7% of revenue, followed by Healthcare and Insurance at 23.1%; geographically, the Americas continue to dominate at 73.6% of revenue, with Europe at 19.9% and APAC at 6.5%.

Financial Trajectory: CY25 to CY27E

Motilal Oswal's Rs 720 target price is based on 25x CY27E EPS, unchanged from the brokerage's prior published estimate on the stock.

Bottom Line

The core argument underpinning Motilal Oswal's continued Buy rating is a distinction between deferred growth and lost growth. Management's own commentary, combined with the brokerage's independent read on the pipeline, points to revenue that has been pushed later in the year rather than revenue that has disappeared — a materially different scenario for long-term earnings quality. With large-account mining continuing steadily (even if at a slower pace than some peers), a diversifying revenue base, and an AI strategy that is still early-stage but methodically built out across pricing, partnerships and product launches, the brokerage believes Hexaware remains well positioned heading into CY27, even as the current quarter's guidance cut takes some of the shine off the near-term numbers.