Tata Elxsi Q2 grows across verticals and lifts margin despite pay hike
On October 19, 2026, Tata Elxsi filed the transcript of its October 13 earnings call for the quarter and half-year ended September 30, 2026 . The company does design-led engineering that car, media and medical-device makers use to build connected products. It reported operating revenue of Rs. 1,055.7 crore, up 2.3% in constant currency, with all three key verticals growing and EBITDA margin up 70 basis points to 21.9% despite a company-wide pay rise, while soft Europe auto demand clouds the second half .
Sales and operating profit rose; net profit was broadly flat
Source: .
| Rs. crore and margin | Q2 FY26 | Q1 FY27 | Q2 FY27 |
|---|---|---|---|
| Operating revenue | 918.1 | 1,021.1 | 1,055.7 |
| EBITDA | 193.3 | 216.0 | 231.4 |
| EBITDA margin (% of operating revenue) | 21.1% | 21.2% | 21.9% |
| PBT | 214.7 | 232.5 | 239.1 |
| PAT, profit after tax | 154.8 | 170.6 | 170.3 |
| PAT margin (% of total income) | 16.0% | 16.1% | 15.6% |
Growth was broad-based across the three key verticals . Revenue grew 3.4% quarter-on-quarter in rupee terms and 7.8% year-on-year in constant currency .
Profit grew faster than sales at the operating level. EBITDA grew 7.1% quarter-on-quarter and 19.7% year-on-year . The presentation highlighted operating efficiencies despite salary revisions across the entire employee base . On the call, management's more detailed explanation attributed most of the margin gain to currency benefits, while operating leverage and the fading of Q1 one-time costs largely offset the wage hike .
Profit below that line was flatter. PBT grew 2.9% sequentially, while PAT was broadly flat sequentially and up 10.0% year-on-year . Lower other income tempered pre-tax profit growth: it fell to Rs. 34.9 crore from Rs. 41.5 crore in Q1 and Rs. 48.9 crore a year ago. PAT was flat despite higher PBT because the tax charge, calculated as PBT less PAT, rose from about Rs. 61.9 crore to Rs. 68.8 crore sequentially .
Growth was broad, but Europe auto lagged
Transport grew on US and India OEM orders
Source: .
| Software Development and Services in Q2 FY27 | Share | Constant-currency growth QoQ |
|---|---|---|
| Transportation | 55.3% | 2.0% |
| Media and Communications | 33.6% | 3.4% |
| Healthcare and Life Sciences | 9.3% | 3.5% |
| Others | 1.8% | not disclosed |
Transportation, more than 55% of Software Development and Services, grew 2% in constant currency, aided by new deal wins . Growth came clearly from auto makers, with a smaller help from aerospace and defence work on a small base .
The geography of that growth was split. It came primarily from the US and India, with rest of Asia flat and Europe flattish . The featured win is a multi-year deal from a leading auto maker for a cloud-based telematics and connected-vehicle system covering backend modernisation, telemetry, remote operations, over-the-air updates and cybersecurity .
Management is fairly confident on the US and India, hopeful Japan will grow from flat, but says Europe continues to be soft . Large European deals are in final shortlists but unsigned as makers delay decisions .
Americas gained share as Europe slipped
Source: .
| Region share | Q2 FY26 | Q1 FY27 | Q2 FY27 |
|---|---|---|---|
| Europe | 38.7% | 42.2% | 40.7% |
| Americas | 31.6% | 31.7% | 33.2% |
| India | 19.0% | 16.4% | 16.6% |
| Rest of world | 10.7% | 9.7% | 9.5% |
The US and India did very well, while Europe was soft because much of its revenue is automotive . The Americas share stepped up sequentially as Europe stepped back .
There were no fresh European ramp-downs, only slow ramp-up or status quo plus normal closure of ending projects . That is why management stays cautious on Europe. Finance added that as the US and India grew while Europe stayed muted, the share of other geographies is rising, though Europe remains important .
Media and healthcare carried the rebound
Media ramped past deals and added GenAI work
Media and communication grew 3.4% in constant currency on sustained ramp-ups and AI-led wins . Management said it entered the quarter confident on this vertical given deals tracked .
Part of the last two quarters reflects ramp-up of already-closed deals . New proof is a strategic AI mandate from a US-headquartered technology leader for a multilingual GenAI virtual assistant, plus a GenAI knowledge-graph platform for a US media leader to unify audience, content and business data . Management sees sizable opportunities and hopes to sustain momentum in the second half .
Large multi-year deals in auto and media now protect the base. That has improved revenue leakage versus a year ago, after heavy leakage on the auto-supplier side over the prior five to six quarters gave way to a swing toward makers .
Healthcare bounced after bottoming and widened beyond the US
Healthcare grew 3.5% in constant currency on new turn-key product engineering and digital-health wins . Management said the business bottomed last quarter and finally grew, with good pipeline visibility .
The notable win is a full redesign of a next-generation home dialysis system for a global renal-care leader, spanning user experience, mechanical design, electronics, embedded software and regulatory compliance .
Asked on concentration after sudden past swings, management acknowledged the business was built around high-quality US-centric med-tech customers . It said the last five to six quarters were about adding customers and regions, citing Bayer from Germany and Terumo from Japan as public examples of diversification .
Currency supported margin, with staffing levers still available
Currency did most of the Q2 margin work
Management reported EBITDA of Rs. 231.4 crore with margin at 21.9%, up 70 basis points sequentially, after a workforce-wide wage increase . There was no one-time cost in Q2 itself; the bridge was versus Q1 .
About 60 to 70 basis points of that move was cross-currency benefit. The balance of 10 to 20 basis points was operating leverage and fading Q1 one-timers, largely offsetting the hikes . With hikes done for the year, management expects operating leverage and a slightly upward margin path. It expects no material movement in employee costs except for selective investments, while acknowledging that some costs will rise with revenue .
New wins will not lift margins by themselves. They are innovation and product-engineering deals with reasonably flat margins, not back-ended consolidation deals . Any gain must come from delivery, not deal seasoning .
Utilisation and junior mix can lift margins further
Source: .
| Utilisation | Level |
|---|---|
| Q2 FY27 | about 78% |
| Prior peak | around 81% to 82% |
Utilisation rose from last quarter, with room to grow alongside calibrated junior hiring . Management still sees headroom to the prior peak .
The other lever is pyramid correction over the next half year to two to three quarters . Work kick-started with senior experts will be shifted carefully to trained junior bench, to correct changes built up over four to six quarters . No margin number was guided .
New wins need quarters to scale into a short Q3
Growth needs both ramp-up of won deals and fresh wins. Ramp-up takes a couple to three quarters to reach full level because the talent is very specific, while project endings constantly need replacement .
The auto telematics deal has just started and is not fully ramped . Complex aerospace and defence deals need at least two to three quarters after crucial early milestones . Management flagged Q3 as typically short with fewer working days and awaited customer direction on furloughs . Even so, it expects the second half to be better than the first half, except for Europe auto uncertainty .
Enterprise AI budgets still take away what could be discretionary research budgets, with no big change in that pattern . But burning tokens fast with no value is making clients more thoughtful and return-based, which management sees as a slight qualitative improvement . It argues returns will be judged where costs sit largest, such as supply chain in autos, and hopes that lens frees more research spend .
Small bets stay tucked inside existing reporting buckets for now. Aerospace and off-road growth is included in Transportation . The Sarla Aviation eVTOL collaboration is an aerospace example, covering flight-critical systems and certification toward first flight . Smart manufacturing and battery storage sit within Others in Software Development and Services; that bucket is about 2% of Services and is growing fast year-on-year off a small base .
Both Tata Motors and JLR remain important, with Tata Elxsi content in most new JLR programs and design, cockpit, connected-car and electronics work in Tata Motors electrification . Management is watching JLR closely through its business challenges across the second half . It declined to disclose their share but said much of Q2 auto growth came from outside group customers, especially in the US, India and Asia .
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