Coforge Ltd Q2 FY26 Earnings Analysis

- Coforge achieved a 9.6% sequential dollar revenue growth in Q1 FY2026, with 51.5% YoY growth in constant currency (CC). - The company expects the second half (H2) of the fiscal year to be much stronger in sales and revenue compared to H1, driven by large deal closures in Q2 that will translate into new revenue. - Growth momentum is anticipated to continue robustly through Q2 and H2, with confidence in achieving strong YoY growth similar to or better than H1. - Coforge aims to close at least 20 large deals in the current fiscal year, up from 14 last year. - The executable order book for the next 12 months is at a record $1.55 billion, 46.9% higher YoY. - BFSI vertical shows healthy demand and is expected to rebound and grow significantly. - The company maintains a strong pipeline and sees sustained and accelerating growth entering its ninth year.

- Coforge expects to deliver 14% reported EBIT in FY 2026. - EBIT margin guidance targets an expansion from Q1's 13.2% to about 14% for the full year; Q2 and Q3 should see operational efficiencies driving margin improvement. - Wage hike impact in Q3 is expected to be largely offset by ESOP cost reductions. - EPS for Q1 was Rs. 9.5 reported, normalized EPS Rs. 9; sustained growth and margin expansion should improve EPS further. - Strong sales execution with 14 large deals last year and a target of at least 20 large deals this fiscal year fuels growth outlook. - Organic quarterly growth of ~6% CC and strong pipeline expected to sustain momentum. - OCF to EBITDA ratio targeted at 65-70%, indicating healthy cash flow conversion supporting profitability. - Capex will taper down to normal 2-3% levels post AI data center investment, supporting profit growth going forward.

- Recent capex spike mainly due to a $85 million AI data centre project; $62 million received as advance from client, $23 million funded through a term loan at 3.5% interest. - Data centre assets have a useful life of five years, increasing depreciation. - Capex increase from 2% of revenues to 5% over the past 5 years largely driven by this data centre investment. - Capex expected to taper down to original levels (~2-3% of revenues) in FY2026. - Beyond the data centre project, no plans to significantly increase balance sheet investments in asset-heavy deals, except acquisitions fitting the firm's profile. - Balance sheet leverage will primarily be used for acquisitions, not further data centre investments. - The firm owns and controls the data centre asset and offers shared services to multiple clients. - No new data centre investments planned in short to medium term.

- Coforge Limited does not plan further investments in the data centre space; the $85 million data centre capex has mostly been realized ($62 million received as client advance). - Future balance sheet leverage will primarily be utilized for acquisitions that fit valuation and capability profiles. - No material additional asset- or balance sheet-intensive deals related to data centres are expected in the short to medium term. - Capital expenditure, which spiked due to the data centre project, is expected to taper down to normal levels (2-5% of revenues) in FY2026. - The balance $23 million of data centre investment was funded through a term loan at 3.5% interest. - No explicit mention of planned new equity fundraising is made in the document.

- The executable order book stands at a record $1.55 billion for the next 12 months. - This represents a 46.9% increase year-on-year from $1 billion a year ago. - Total order intake during the quarter was over $507 million. - The firm signed five large deals in the quarter, reflecting continued strong order momentum. - The large deal pipeline remains high-probability, supporting positive near and medium-term outlook.