Hexaware Tech. Q2 FY26 Results (NSE: HEXT)
Signal: Margin pressure
The read
Revenue growth (+18% YoY) remained healthy, but EBIT margin contracted sharply by 500bps to 11.5% as employee costs surged (+410bps as % of revenue) due to non-recurring severance and ERP costs, more than offsetting lower other expenses. Net profit fell 13% YoY as margin compression and a higher effective tax rate (25.1% vs 18.9% YoY) weighed on the bottom line.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹3,845.2 Cr | 18.0% | 6.4% |
| EBIT | ₹440.7 Cr | -5.9% | |
| Net profit | ₹330.2 Cr | -13.0% | |
| EPS | ₹5.41 | -13.4% | |
| EBIT margin | 11.5% |
P&L walk
Revenue grew 18% YoY but EBIT margin contracted 500bps to 11.5% as employee cost surged +410bps to 58.9% of revenue, offsetting lower other expenses. Net profit fell 13% YoY due to lower EBIT and higher effective tax rate (25.1% vs 18.9%).
Segments
Healthcare & Insurance emerged as the growth engine (+32% YoY) and Manufacturing & Consumer (+31% YoY) also posted strong gains, while Professional Services grew only +7% YoY and Travel & Transportation declined -5% YoY. Segment profits rose across most verticals, with Banking profit +33% YoY and Healthcare & Insurance +19% YoY.
Key positives
- Revenue grew +18% YoY to ₹38,452 mn, the highest quarterly revenue in the prior results series, led by Healthcare & Insurance (+32% YoY) and Manufacturing & Consumer (+31% YoY).
- Segment profit (before unallocated costs) rose +14% YoY to ₹13,959 mn, with Banking segment profit growing +33% YoY.
- Cash generated from operations of ₹5,767 mn for H1FY26, up +18% YoY from ₹4,892 mn (H1FY25: ₹6,009 mn despite higher opex).
- Interim dividend declared of ₹8.50 per share (vs ₹5.75 in prior interim), a +48% increase.
Key concerns
- EBIT margin contracted sharply by 500bps YoY to 11.5%, the lowest in the prior results series since Q3FY24, driven by employee cost surge (+410bps as % of revenue).
- Employee cost includes non-recurring severance costs of ₹328 mn and ERP transformation costs of ₹52 mn, indicating restructuring drag.
- Net profit fell -13% YoY, despite 18% revenue growth, due to margin compression and higher effective tax rate (25.1% vs 18.9% YoY).
- EPS declined -13.4% YoY, underperforming PAT decline slightly, tracking higher share count from ESOP issuances.
- Other income was negative ₹501 mn (loss) vs positive ₹13 mn YoY, largely from exchange rate losses of ₹783 mn.
Research and educational content only. Not investment advice.