The Quarter on the Wallboard

Firstsource delivered a clean second quarter. Revenue rose 2.8% sequentially and 11.7% year on year in dollar terms, or 2% and 12.3% in constant currency. In rupees, the top line expanded 22.2% to Rs 2,825.6 crore, helped by a weaker currency. Net profit jumped 40% sequentially, although that comparison flatters: excluding Rs 56.3 crore of post-tax exceptional items in the first quarter, normalised profit grew 4.8% sequentially and 29.7% year on year.

Source: company data via ICICI Direct Research. Q1FY27 profit includes Rs 56.3 crore of post-tax exceptional items.

Press 1 for Banking: Where the Growth Came From

The quarter belonged to banking and financial services. That vertical grew 9% sequentially and 19% year on year in constant currency, adding nine clients and benefiting from strong execution on a large banking engagement won earlier. Healthcare slipped 2% sequentially, but still grew 5% year on year, as payer-programme ramps and the earlier wind-down of an outsourced platform contract weighed on it. Management says those headwinds are largely behind it.

Call routing by geography (share of revenue)

North America grew 1.5% and Europe, Middle East and Africa 6% sequentially; the small remainder includes Australia, up 50% year on year.

A Full Queue: Deals, Logos and the Strongest-Ever Pipeline

Commercial momentum is the bedrock of the thesis. Firstsource signed four large deals, each with annual contract value above roughly Rs 48 crore, two of them with new clients. It added 17 logos, six of them strategic, meaning each could grow to an annual run rate of about Rs 48 crore or more. Clients of that size rose by six to 51. Headcount swelled by 3,062, chiefly from associates transferring in from a major banking client, with India and the Philippines supplying over 85% of the additions.

Service-Level Targets: Guidance, Old and New

Management nudged the floor of its FY27 constant-currency revenue guidance up by 50 bps to 10.5-13% and expects the second half to outpace the first as large deals ramp. It held FY27 EBIT margin guidance at 12.25-12.75% and reiterated a medium-term goal of 14-15%, implying 50-75 bps of annual improvement. The margin climb has been notable: eight consecutive quarters of sequential expansion, achieved despite wage increments and hiring over 3,000 people ahead of revenue.

From Headsets to Platforms: The Kairos Bet

The longer-term case rests on Firstsource shifting from staffing-led outsourcing to productised, AI-enabled services through Kairos, its AI-native operating system. Management says more than 50% of revenue is already non-linear, meaning it is not tied to headcount, giving a base for outcome-linked and value-based pricing. Demand for AI-led transformation across banking, healthcare and customer experience, the brokerage argues, opens room to deepen relationships and win a larger share of client budgets.

Estimates Upgraded, Target Held

ICICI Direct raised FY28 earnings estimates by 6.2% and now builds in EBIT margins of 12.5% and 12.9% for FY27 and FY28. It expects revenue to compound at 15.2% and net profit at 33.1% a year over FY26-28, lifting return on equity to 21.5%.

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