Mphasis, one of India’s leading IT companies, reported a solid 8% profit growth in its second-quarter financial results for the fiscal year 2024-2025 (Q2 FY25). The company’s net profit climbed to ₹423.33 crore, compared to ₹391.95 crore during the same quarter of the previous financial year. This impressive growth demonstrates the company's resilience and strategic adaptation in a highly competitive IT services market.

The revenue from operations also saw a substantial boost, reaching ₹3,536.15 crore, an increase of 7.9% from the ₹3,276.50 crore recorded in Q2 FY24. Mphasis' gross revenue grew by 5.4% year-over-year (YoY) in constant currency terms, reflecting strong client engagement and demand for their services. These results reinforce the company's continued growth trajectory despite the macro-economic challenges that have impacted the global technology sector.

EBIT Growth and Margin Expansion

At the operational level, Earnings Before Interest and Taxes (EBIT) for Q2 FY25 rose by 6% sequentially to ₹544.2 crore, compared to ₹513.5 crore in the previous quarter. This increase in EBIT resulted in a 40 basis point (bps) expansion in EBIT margin, which improved to 15.4% from 15% in Q1 FY25. The margin expansion reflects Mphasis' ability to drive operational efficiency and manage costs while maintaining healthy revenue growth.

According to Nitin Rakesh, CEO and Managing Director of Mphasis, the company’s strategic focus on AI-driven transformations is paying off. “We are witnessing increased AI adoption across clients to address enterprise challenges with higher efficiency and accuracy, beyond cost advantage. Savings-led transformation is central to our deal strategies and solutions, significantly enhancing service delivery and client savings," he said.

Significant Deal Wins and Client Engagement

Mphasis has made significant strides in securing new deals during the second quarter. The company recorded new Total Contract Value (TCV) wins worth $207 million in its Direct segment, with 88% of these wins coming from new-gen services. This highlights the growing demand for cutting-edge digital transformation solutions among clients. The company also stated that the conversion to revenue pace has picked up, signaling a healthy pipeline for future earnings.

For the first half of FY25, Mphasis secured $526 million in TCV wins, including 3 large deals in Q2 and a total of 6 large deals in H1 FY25. These wins are expected to provide a steady stream of revenue and position Mphasis as a key player in the evolving IT landscape.

Investment in European Subsidiary

Alongside its quarterly results, Mphasis announced that its board has approved an additional investment of $30 million in Mphasis Europe BV, a wholly-owned subsidiary. This investment will be primarily used to repay borrowings and strengthen the subsidiary's financial position, allowing it to expand its operations across Europe. The investment is set to be completed by March 2025 and is expected to enhance the company’s global footprint and competitiveness in the European market.

Positive Outlook for Mphasis Amid AI Adoption

Despite facing numerous challenges in the macro environment, Mphasis remains optimistic about the future. The company is heavily focused on leveraging AI and automation technologies to enhance client service delivery, improve operational efficiency, and reduce costs. As AI adoption increases across industries, Mphasis is well-positioned to capitalize on this trend, driving growth and profitability in the coming quarters.

The company’s emphasis on savings-led transformations, which aim to provide clients with both operational efficiencies and cost advantages, is central to its growth strategy. This approach aligns with the broader industry trend of utilizing advanced technologies like AI to solve complex enterprise challenges, enhance accuracy, and improve business outcomes.

Mphasis has demonstrated strong financial discipline and the ability to navigate a challenging macro-economic landscape. Its consistent growth in revenue, profit, and deal wins reflects its capability to adapt to industry changes and its commitment to delivering value to shareholders.

For investors, Mphasis remains a compelling opportunity within the IT services sector. With its solid financial performance, strategic investments in key markets like Europe, and focus on AI-driven solutions, the company is poised for continued growth.

Conclusion

Mphasis' Q2 FY25 results underscore its robust financial health and its ability to continue delivering value to its clients and shareholders. The company's decision to invest further in its European subsidiary signals its commitment to expanding its global reach and solidifying its market presence. Moreover, the new deal wins in AI and next-gen services highlight Mphasis' leadership in the digital transformation space.

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