LTIMindtree’s (LTIM) Q4 FY25 earnings reveal a company caught between strategic recalibration and the weight of macroeconomic sluggishness. Prabhudas Lilladher has revised its recommendation from a 'Buy' to an 'Accumulate' on the stock, setting a reduced target price of Rs 4,980, down from Rs 5,790. With revenue missing estimates, EBIT margins staying flat, and order inflows softening, the near-term rerating potential appears limited. However, strategic restructuring, AI-led cost rationalization, and long-term productivity enhancements offer reasons for cautious optimism. Below is an in-depth analysis of LTIM’s current performance, challenges, and future outlook.

Revenue Miss Reflects Broader Demand Weakness

LTIMindtree reported a revenue decline of 0.6% quarter-on-quarter (QoQ) in constant currency (CC) and 0.7% in USD terms, falling short of both the brokerage and street estimates of 0.3% growth.

TMC, Consumer, and Healthcare verticals witnessed contraction of 1.5%, 2.4%, and 14% QoQ, respectively.

BFSI and Manufacturing bucked the trend, registering a modest sequential growth of 1.2% and 2.3%.

Revenue from North America and Europe declined by 0.9% and 2.0%, while Rest of the World (RoW) grew by 2.8%.

Despite this setback, LTIM closed FY25 with USD 4.5 billion in revenue, reflecting a 5% YoY growth. However, this growth was tempered by cautious enterprise spending and delays in deal ramp-ups.

Flat Margins: A Case of Cost Discipline Amid Revenue Decline

EBIT margin for Q4 FY25 came in at 13.8%, unchanged from the previous quarter and marginally below the street's estimate of 14.4%.

Lower SG&A expenses helped offset topline weakness.

FY25 EBIT margin declined to 14.5%, down 120 basis points (bps) YoY.

The management is now relying on the “Fit For Future” initiative to restore margin strength. This includes efforts like AI-driven automation, cost layer elimination, and sales revamp strategies.

Strategic Initiatives: The Three-Pillar Playbook

CEO-designate Venugopal Lambu has announced a trio of transformational efforts to arrest the decline and stimulate future growth:

Sales Transformation: Realignment of service-line sales, focusing on high-potential verticals with simplified leadership layers.

Large Deal Strategy Revamp: Building capabilities for complex, multi-delivery AI-enabled engagements.

Fit For Future: Structural cost optimization to drive agility, automation, and margin sustainability.

These changes are expected to manifest results starting Q1 FY26, with a stated ambition to create non-linearity between headcount and revenue.

Order Book and Deal Pipeline: Signs of Softness

Order inflows came in at USD 1.6 billion in Q4 FY25, down from USD 1.68 billion in the previous quarter. Full-year order bookings stood at USD 6.0 billion, up 6.8% YoY.

The book-to-bill ratio remained healthy at 1.4x, but the sequential dip in deal wins suggests caution among enterprise buyers.

Management cited macro volatility, discretionary spending pullbacks, and delayed decision-making as key impediments.

Client Metrics and Utilization Trends

LTIM’s revenue concentration declined across its top clients:

Top 5 clients: -1.4% QoQ

Top 10: -1.3%

Top 20: -2.2%

Meanwhile, utilization (excluding trainees) improved to 85.8%, up 40 bps QoQ. However, net headcount dropped by 2,500 in Q4, reversing the hiring spree of Q2 and Q3.

Attrition held steady at 14.4%, suggesting a more stable talent environment.

Dividend Payout: Stability Message to Shareholders

LTIM declared a final dividend of Rs 45 per share, bringing the FY25 total to Rs 65 per share. With a dividend yield of 1.4%, this marks a strong signal of financial prudence and investor-friendly capital allocation, even amid revenue and margin stress.

Valuation Rationale: Rich Multiples, Moderate Upside

Prabhudas Lilladher has reduced LTIM's FY27 EPS forecast from Rs 207.2 to Rs 191.9, and assigned a lower P/E multiple of 26x (earlier 28x), arriving at a revised target price of Rs 4,980.

Current market price: Rs 4,537
Implied upside: ~10%, justifying the 'Accumulate' stance instead of a renewed 'Buy'.

Stock Outlook and Investment Levels

Support Zone: Rs 4,380–4,420

Short-Term Resistance: Rs 4,720

Investor Target: Rs 4,980

Aggressive Upside (if macro turns): Rs 5,300

Investors should look to accumulate between Rs 4,400–4,500, with a long-term view toward Q2/Q3 FY26, where the effects of LTIM’s cost transformation and AI-led efficiency may begin to show on margins and deal flow.

Conclusion: Wait, Watch, and Accumulate

LTIMindtree's FY25 close is a mirror to its strategic transition—caught in the turbulence of macro headwinds but firmly laying groundwork for future resilience. The company's three-pronged strategy, reliance on automation, and strong client retention underscore long-term value. Yet, weak deal momentum, soft vertical demand, and flat margins justify investor caution.

Prabhudas Lilladher’s 'Accumulate' call is not a rejection of LTIM’s story—it’s a tempering of expectations. Investors would do well to watch Q1 FY26 results closely for signs that the restructuring is delivering—not just in narrative, but in numbers.