66% of Mphasis' New Deals Are AI-Led. But Its Latest Results Tell a Bigger Story

AI is becoming a larger part of the business pipeline for Indian IT services companies, and Mphasis' latest financial results offer a clear example of this shift.

The Bengaluru-based IT services company reported 9.2% year-on-year growth in dollar revenue for the second quarter of FY27, reaching $486.1 million. More notably, AI-led contracts accounted for 66% of its new total contract value (TCV) wins during the quarter.

The company has also raised its FY27 revenue growth guidance to the low double-digit range, moving up from its earlier expectation of high-single-digit to low-double-digit growth.

However, the results reveal a more complex picture. While revenue and net profit improved, employee utilisation declined and reported operating cash flow turned negative.

AI Is Taking a Larger Share of Mphasis' Business

The most significant development in the quarter was the growing contribution of AI-led contracts.

Mphasis secured $466 million in new TCV during Q2 FY27, with 66% coming from AI-led engagements. This compares with 42% in Q2 FY26 and 63% in the previous quarter.

TCV represents the overall value of contracts won over their agreed duration. It is not the same as revenue already earned, as these contracts generally generate revenue over time as work is delivered.

The company also reported five large deals worth more than $20 million each during the quarter.

CEO and Managing Director Nitin Rakesh said the company's total deal pipeline reached a new high, growing 23% year-on-year and 4.4% sequentially.

He attributed the momentum to demand for business modernisation and business reimagination projects, where enterprises are looking beyond traditional IT upgrades towards broader AI-led transformation.

Revenue Growth Improves as Mphasis Raises Its FY27 Outlook

Mphasis reported quarterly revenue of $486.1 million, up 9.2% year-on-year in dollar terms and 9.7% in constant currency.

In Indian rupee terms, revenue increased 17.4% year-on-year to ₹4,580.9 crore.

Net profit also recorded growth, rising 19.6% year-on-year to ₹561.1 crore. Earnings per share increased 19.2% to ₹29.4.

Based on its revenue performance and deal pipeline, the company raised its FY27 growth guidance to the low double-digit range.

The revision reflects management's confidence in the conversion of existing contracts and opportunities into future revenue.

However, the $466 million in quarterly TCV wins was lower than the $528 million recorded in the previous quarter. This indicates that stronger AI demand does not necessarily mean every part of the business is accelerating at the same pace.

The Pressure Behind the Growth Numbers

Despite stronger revenue and AI-related bookings, some operating indicators point to challenges.

Mphasis' operating margin remained at 14.8%, unchanged from the previous quarter but down 50 basis points year-on-year.

Employee utilisation also declined to 82%, compared with 88% in Q2 FY26. Total headcount increased 6.9% year-on-year to 32,920 employees, while billable headcount reached 28,755.

Lower utilisation means a smaller proportion of available employee capacity is being billed to clients. For an IT services company, this can affect workforce efficiency and profitability if additional employees are not matched with sufficient project demand.

Cash flow was another area requiring attention. Reported operating cash flow was negative ₹54.8 crore, compared with positive ₹366.3 crore in the corresponding quarter last year.

Mphasis attributed part of this decline to $39.5 million in remittances initiated on September 30 but received in October. After adjusting for this timing difference, the company reported normalised cash flow of ₹322.9 crore.

This distinction matters because the reported cash position was affected partly by the timing of customer payments rather than only by operating performance.

Why Mphasis' AI Strategy Matters to the IT Industry

Mphasis' results reflect a broader shift taking place across the technology services industry.

Enterprises are moving beyond small AI experiments towards projects involving workflow automation, software modernisation, data systems and AI integration across business functions.

For IT services companies, this creates opportunities to take on larger transformation projects rather than simply providing traditional application maintenance and technology support.

Mphasis has been positioning its Mphasis Tria platform around this opportunity, focusing on bringing AI into enterprise operations and business processes.

The challenge will be turning these AI-led contracts into consistent revenue while maintaining margins and making better use of its workforce.

The Bottom Line

Mphasis' Q2 FY27 results show how AI is becoming a significant part of the Indian IT services business.

With 66% of new contract wins classified as AI-led and a higher revenue growth outlook, the company is seeing growing demand for AI-driven enterprise transformation.

But revenue growth alone does not tell the complete story. Lower utilisation, margin pressures and reported cash flow challenges remain important indicators to watch.

The bigger question for Mphasis is no longer just how many AI-led contracts it can win, but how effectively it can convert them into profitable, long-term business.