KPIT Technologies reported a 4.4% year-on-year dollar revenue growth and 0.4% constant currency revenue growth for Q2 FY’26. The company experienced a $65 million reduction in revenue due to customer spend deprioritization and solution cannibalization, which was offset by wins in digital cockpit and validation areas. EBITDA margin stood at 21.1%, with expectations to maintain this level for the full year. Outlook for Q3 is flattish to positive organic constant currency growth.
Financial Performance
KPIT Technologies announced its Q2 FY’26 results, showcasing a 4.4% year-on-year growth in dollar revenue. Constant currency revenue grew by 0.4%. The EBITDA margin for the quarter was reported at 21.1%, a level the company aims to sustain for the entire fiscal year. Organic growth faced a degrowth of 0.8% in dollar terms and -2.3% in constant currency.
Revenue Dynamics
The company addressed a $65 million reduction in revenue. Approximately $45 million resulted from customers deprioritizing spend or shifting to existing products, mainly impacting electrical and middleware segments, with a geographic concentration in the USA and Asia. Another $20 million was due to solution cannibalization.
Strategic Shifts
KPIT is shifting its service offerings towards solutions, with a focus on end-to-end ownership. Revenue from solutions has more than doubled, now accounting for 18% of overall revenues, contributing to improved profitability. Client choices are evolving, prompting KPIT to enhance its value proposition and client engagement.
Workforce and Investments
There was a net addition of around 300 employees. This includes the addition of 800 employees from the Caresoft acquisition, alongside a reduction of approximately 500 employees in the existing business due to talent realignment. The company continues to invest in Al and relevant technologies to maintain its competitive edge.
Future Outlook
KPIT anticipates a flattish to positive organic constant currency growth in Q3 FY’26, with meaningful growth expected in Q4 FY’26. Growth will be driven by autonomous driving, connected car solutions, after-sales diagnostics, cybersecurity, and commercial vehicles. Europe shows good traction, while the U.S. commercial vehicle segment is expected to have positive growth.
Key Deals and Partnerships
The company secured a significant multi-year deal with a European OEM, expected to accelerate revenues over three years. Discussions with clients are increasingly positive, reflecting greater stability in the market. There are ongoing explorations of opportunities in industrial/manufacturing verticals and micromobility.
Source: BSE