Margin miss, AI bet unclear—wait for Healthcare, EMR recovery

$3.4B bookings, $1.6B large deals (13 LDs)—modest vs prior; deals slipped to Q2

BFSI +2.6% YoY but −1.2% QoQ; awards real but segment declined sequentially

Margin 16% OPM (down 120bps YoY, below 17%–17.5% target); AI investments cited as drag

Confirmed; excludes M&A, core workforce reduced—consistent with cost discipline

Americas 1 flat YoY/−2.3% QoQ; Americas 2 −7.3% YoY. APMEA +13.5% YoY, Europe +6% YoY

Q4 FY26 call stated 17%–17.5% aspiration; Q1 actual 16% OPM. Management now refuses to forecast when target will be met, citing volatility.

Prior calls framed Healthcare as diversified strength. Q1 shows −3% YoY, −2.6% QoQ. US government/demographic pressures cited; no specific Q2 recovery guidance.

Implied prior that large deals would ramp faster; Q1 acknowledged longer time-to-scale and some slippage to Q2. Margin pressure from extended ramps baked into guidance.

New framing: AI-native business unit 'moved to execution.' Margin benefit theorized but unproven; continued near-term investment planned despite above-margin-target pressure.

Mid-point Q2 guidance −0.75% sequential. Discretionary spend remains slow, decision cycles long; no improvement signaled vs prior call.

Mindsprint M&A team included in count; ex-Mindsprint, headcount down 2,500. Q2 guidance includes Mindsprint revenues.

Europe BFSI up YoY (large deal ramp), APMEA strong. Americas BFSI showing momentum now. Decline was large deal ramp delay and discretionary spend pullback; management confident recovery coming.

No explicit data center plan. AI success driven by client context, domain knowledge, data priming, security, change management—not just models. WINGS platform, Ventures fund targeting AI startups, innovation networks. Consulting-led, not capex-led.

Multiple levers: FPP automation, AI productivity, G&A, bench utilization, pyramid restructure. Gradual endeavor, not quicker. Will not predict exact timing due to macro volatility. Committed to continued AI-native investment.

US Healthcare (payers, providers) under structural/demographic pressure; budgets flattish. New opportunities in AI-driven claims automation, contact center optimization, compliance (HIPAA). Will not forecast beyond Q2. AI structural opportunity across healthcare.

$3.3B Q1 bookings healthy. Some deals slipped to Q2. Pipeline strong: BFSI (Americas, Europe) strong, EMR (Europe post-wins) strong, Healthcare careful, Consumer modest, Tech & Comms very strong.

Mix: cost-optimization deals competitive (margin pressure). Reimagine AI newer spends drive premium rates. Data, advisory, AI services incrementally margin-positive. Large traditional deals remain competitive.

Yes, that impact is behind us as of Q1.

AI reshaping spend allocations; traditional IT/BPO budgets compressed. Clients want cost-out via AI. Large traditional deals competitive (vendor consolidation)—margin pressure. Reimagine AI deals (net-new) much better margins. Must balance margin defense with growth.

Maintained from prior call. Mid-point −0.75% sequential; conservative given macro uncertainty and selective client spending.

Q1 missed at 16% OPM. Srini refused to forecast when target will be reached; multiple levers cited (FPP automation, AI productivity, G&A, restructure). Continued AI investment planned despite near-term dilution.

US payer and provider budgets under sustained pressure from government policy and demographics. −3% YoY, −2.6% QoQ. Large client base in this sector; recovery timeline unclear.

Large deal ramp-ups are extending beyond prior schedule, large traditional deals are margin-pressured due to competitive cost-out bidding, and AI-native business unit investments are not yet revenue-generative. 120bps OPM miss in Q1; no timeline for recovery to 17%–17.5% band.

Several large deals won in prior quarters are ramping slower than expected. Some deals slipped from Q1 to Q2. Ramp profitability margins tighter due to competitive pricing and extended delivery schedules.

Energy, manufacturing, and resources (EMR) sector declined −8.9% YoY and −3.6% QoQ. Soft across Europe and APMEA; some recovery in Americas/LATAM post-deal wins, but magnitude uncertain.

WINGS platform, Reimagine AI services, and AI-native business unit are stated as strategic but early-stage. Token cost economics uncertain. Large traditional deals baked with forward productivity that may not materialize if AI tooling proves less productive than marketed.

Americas 1 flat YoY (−2.3% QoQ), Americas 2 −7.3% YoY (−2.5% QoQ). Management cites soft market, discretionary spend pullback, but momentum building in BFSI. Still largest revenue region; sustained weakness is risk.