domain expertise, proprietary AI toolkits, and a growing ecosystem of academia and industry partnerships are expanding our addressable market and creating new revenue opportunities. LTTS's AI strategy spans across three areas: AI for engineering, AI for products, and AI for manufacturing and operations.

We made progress across all these three areas in the last couple of quarters. AI for engineering: as the V-model moves to a W-model, we are embedding AI across engineering lifecycle through a human-plus-agent delivery model.

In one of our major engagements, we are helping clients accelerate time to market by 50% with 40% of the code being generated by AI. To date, we have upskilled more than 16,000 engineers, about 67% of our workforce, in AI.

AI for products: AI 1, is our platform of 100-plus AI solutions, is gaining client traction. Our AI patent filings crossed 253 this quarter, taking total patent count across the company to 1,808.

AI for manufacturing and operations: we launched a new AI lab in partnership with NVIDIA to build and deliver next-gen physical AI native applications across manufacturing, robotics, and supply chain. We conducted multiple AI readiness workshops for clients in collaboration with MIT Media Lab, and expanded our partnership ecosystem to include Cognite, Anthropic, NVIDIA, and Databricks.

Innovation remains central to our long-term agenda, with a focus on frontier applied research and emerging technologies to address evolving market needs. Looking ahead, our FARM program will connect deep tech startups with clients to accelerate innovation and bring in new technologies to the market.

The LTTS Distinguished Fellows program recognizes and empowers technical leaders who drive innovation, create business impact, and represent LTTS as global industry leaders across the forums. Moving on to segmental performance.

Mobility: Mobility has delivered a phase of steady growth with revenues up 2.3% sequentially. Growth came from Auto North America, Aero and Rail, and Trucks and Off-Highway.

Auto Europe remained muted, but we believe it should bounce back next year, and we continue to see significant large deals in the pipeline in Europe. We are working on building capabilities in system engineering and diversifying with new-age mobility providers to work on advanced transportation platforms and digital microservices.

Aerospace continues to grow strongly as clients continue to expand production, modernize supply chains leveraging digital transformation. Rail as a sub-segment is growing for us, supported by freight rail rolling stock modernization and digitalization.

In Trucks and Off-Highway, we added four new logos across global OEMs, led by AI, with wins spanning autonomy, AI, embedded software, and digital programs. In a strategic deal, a leading automotive technology provider renewed and scaled their engagement with us for AI-powered engineering across product and digital engineering.

In summary, mobility is showing sustained growth, and we expect strong momentum ahead driven by a robust pipeline across geos and ramp-ups of large deals. Moving on to Sustainability: Sustainability continued to be a strong growth engine, up 13.4% year-on-year and 4.9% quarter-on-quarter as we execute multiple large deals won over the past six quarters.

Nearly half of our Q2 large deal wins were in this segment. Industrial Products: growth is led by data centers, energy transition, motion and robotics, and AI-enabled automation with electrification and smart manufacturing driving a robust pipeline.

A leading cleaning equipment manufacturer selected LTTS to design and develop robotic machines. In Plant Engineering, demand continued steadily across oil and gas and chemicals, supported by LNG, upstream, and non-conventional energy projects.

In CPG, we partnered with a leading food and beverage company to scale its Industry 4.0 framework, enabling IT/OT convergence and enterprise-wide AI readiness across its global manufacturing operations. The Sustainability track or segment is on track to deliver another double-digit growth year.

Finally, on Tech: Tech was stable this quarter. The demand was driven by client investments in agentic AI, AI infrastructure, cloud-native modernization, data center software, advanced connectivity, and semiconductors.

Tech Infra and Semicon delivered another strong quarter, while Media maintained steady. We have set up a dedicated data center engineering business line, servicing AI infrastructure servers, storage ecosystem, ODMs, and OEMs.

We expect it to become an important growth area as customers redesign infrastructure for AI workloads. As filed earlier, we won a large AI-led engagement with a global telecom equipment provider to design end-to-end systems spanning AI and data centers.

This program started ramping up in the current quarter. In MedTech, we are expanding in pharma and life sciences while demand remains healthy across digital health, diagnostics, and connected devices.

In the current quarter, a specific program ramped down per schedule, and the next phase will kick in only in H2. In Software and Platforms, pipeline quality is improving.

Pure-play software world is impacted with the adoption of new-age tools, AI tools. We see demand for AI-led software development across existing and new logos in retail, fintech, and platform companies.

Providing you two more inputs, one on business landscape and then we will summarize. On business landscape, across our client interactions this quarter, the common theme is that clients are doubling down on growth.

This makes us cautiously optimistic about their investment plans. Technology spending is shifting towards AI infrastructure, silicon, cloud platforms, data centers, and time to market.

We've aligned our portfolio, per our Lakshya 31 strategy, to these priorities and our AI capabilities help clients improve productivity in current programs and free up investments for next-gen technologies. To summarize: Q2 was a good quarter.

I'd like to thank our clients, our employees, our stakeholders for that, with improved growth, margins ahead of plan, and our strategic investments gaining traction. With our order backlog and pipeline both improving year-on-year and several large deals in play, we expect revenue momentum to further strengthen in H2 while sustaining healthy EBIT margins.

Growing demand for our AI solutions, diversified portfolio, dedicated large deal engine, and improving regional opportunities gives us confidence in our medium and long-term trajectory. This progress supports our long-term aspiration of 13% to 15% revenue CAGR with EBIT margins in the 16% to 17% range over the next 3 to 5 years.

With that said, I'm going to stay back for questions. I would like to request Rajeev to provide his comments.

Thank you, Amit. Greetings to everyone.

Wishing you and your family Happy Navratri and Happy Dussehra in advance. Let me start by sharing key highlights for the quarter.

Q2 FY27 was a strong quarter across all key parameters: large deal wins of $203 million, sequential revenue growth of 2.7% in constant currency terms, EBIT margins of 16.3% with margin expansion across all segments. Pleased to share that we've been able to achieve our committed mid-16% margin aspiration ahead of time by a couple of quarters.

Disciplined capital allocation towards building scalable business and profitable growth is yielding results. Sustainability, our most profitable segment, grew double-digit year-on-year basis at 13.4% and now contributes to 38% of our revenues.

Our Q2 FY27 annualized EPS came in at ₹143.12, which is an increase of 23.5% over FY26 EPS. We successfully concluded disinvestment of SWC business in this quarter.

This resulted in a one-time gain of ₹165 crore in Q2 FY27. With that, I will move to Q2 financials starting with the P&L.

Revenue for the quarter was ₹3,040 crore, representing growth of 3.4% sequentially and 12.1% year-on-year. EBIT margin for the quarter stood at 16.3%, improvement of 60 basis points sequentially and 220 basis points year-on-year.

Effective tax rate for the quarter was 26%. Going ahead, we expect ETR to remain in the range of 26% to 26.5%.

Net income for the quarter was ₹548 crore, up 53.7% sequentially and 66.8% year-on-year. This represents 18% of revenue.

This includes a one-time gain of ₹165 crore from disinvestment of Smart World business. EPS from continuing operations was ₹35.78 for the quarter, translating into annualized EPS of ₹143.12, and compared to reported FY26 EPS of ₹115.89, an increase of 23.5%.

This improvement reflects our disciplined capital allocation towards sustainable profitable growth and investments in new technologies aligned with our long-term strategy. Other income was ₹17 crore for the quarter, higher compared with the previous quarter while absorbing forex volatility and currency movements.

Moving to balance sheet and cash flow, let me highlight the key line items. Q2 FY27 overall DSO came in at 78 days.

This is split as billed DSO of 60 days and unbilled DSO of 18 days, which remains stable versus 77 days in Q1 FY27, well below our guided range of 80 to 85 days. With disinvestment of Smart World business now complete, henceforth we will report overall DSO.

Our year-to-date free cash flow was ₹790 crore, a healthy 108% of net income. Our cash and investments stood at ₹4,197 crore end of Q2 FY27 compared with ₹3,394 crore at the end of Q1 FY27.

The board has approved an interim dividend of ₹20 per share, reflecting our focus on creating value for our stakeholders. On revenue metrics, revenue in dollar terms was USD 317.1 million compared with USD 309.9 million in Q1 FY27, which is a constant currency sequential growth of 2.7% and year-on-year growth of 4.8%.

On segment margin performance, we saw margin expansion across all the segments. Mobility margins in Q2 improved to 16.9%, up 130 basis points sequentially, resulting from quality of growth and operational efficiencies.

Sustainability margins saw improvement to 29.5%, up 40 basis points sequentially, supported by execution of large deals and strong growth in this segment. Tech segment margins improved to 12%, up 50 basis points sequentially.

Ramp-up of a recently won AI-led engagement with a global telecom equipment provider also aided in margin improvement. On the operational metrics for Q2 FY27, our offshore mix improved to 55.9% in the quarter, reflecting our continued efforts in improving offshore mix.

Fixed-price mix improved to 35.6% in Q2, progressing towards higher-value fixed-price and outcome-based engagements. Client profile remained stable on a sequential basis, reflecting the strength of our customer relationships.

Client contribution to revenue remained broadly similar compared with Q1 FY27 across categories. Headcount marginally increased from 23,845 in Q1 to 24,035 in Q2.

Attrition remained largely range-bound at 14.7% during the quarter. Realized rupee for Q2 FY27 was 95.9 to the dollar, depreciation of 1.09% compared to Q1 FY27.

Now, before concluding, I will share a bit around the margin outlook. We achieved our margin aspiration of mid-16% EBIT levels ahead of time by a few quarters and aspire to maintain this margin range in the near future.

Our margin levers mainly will be revenue growth and healthy segment mix, operational efficiency including AI-led productivity gains across delivery and functions, and disciplined SG&A management. We remain confident of our growth trajectory, supported by healthy pipeline, deal ramp-ups, prudent capital allocation, engineering intelligence-led execution, and continued operational discipline.

We expect these factors to drive stronger revenue growth for us while sustaining our margin performance and reiterate our aspiration of 13% to 15% CAGR over the next five years with margins in the range of 16% to 17%. I take this opportunity to thank our investors, analysts, and stakeholders for their continued trust and support, and the entire LTTS team for their dedication and resilience.

I will now hand over the call to the moderator for questions.

Hi, team. Thanks for taking the questions on really good performance.

In the past, we've seen that the Sustainability segment was a bit volatile. I think you've been trying to move towards more annuity deals and the way you've now shown very good growth in the last couple of years, does that mean that you've moved successfully?

Could you talk a bit about how much of the revenue are long-term programs and how you managed to bring down the volatility in this?

Hi, Ravi. Good evening.

The question is how did we bring down volatility in Sustainability, right?

Correct, sir.

Okay. See, over the last two years, if I look at it, there are two or three things that have thematically changed, right?

Number one, when we look at Sustainability, we've now got that business split up into four broad categories, if I may. The four categories that we have broken up that business on is: oil and gas, chemicals is part one, FMCG is part two, energy automation is part three, and industrial machinery and building technologies is part four, right?

One, we've basically homed in in these four areas, we've defined, redefined our offerings, and the offerings are broken up into, almost like service industry into Mod 1, Mod 2, Mod 3, or Gen 1, Gen 2, Gen 3, and we have doubled down on it. If I look at the oil and gas, chemicals business that we've got, we've been able to win some large-term relationships that are trust with our clients and those are continuous work volumes that continues to, say, stay steady, increase over a period of time, and they're almost like you're moving from supporting one refinery to do some design to a second one to a third one, but across the landscape of that client time.

The second part is that we have invested in creating solutions for digital twin in this area, and not just that, now we are leveraging AI. It's not single-variable and single-dimension, but multiple-dimension, multiple-variable solutions, right?

That is helping reduce downtime for our customers. It's helping them on planned shutdowns, etc.

That's the second part. I'm just giving one example, there are various solutions that we've created there.

The third part is that as the six-layer AI cake has unfolded, there is work happening across the six layers, and the layer starts with energy, right? We're seeing work coming in that area on a continuous basis.

Finally, given work that we have done and solutions, this has always been a moat for the company for the longest period ever, and with the double focus that we've had, we've been able to win large deals in this area. In fact, one of the questions earlier used to be that you have won large deals, you're not growing.

A lot of those large deals that we got last year in Sustainability have actually moved to revenue and execution right now. Current quarter also, more than 50% of the deals are in Sustainability.

As I look forward in the future, we're actually bringing in a lot more AI content into this part as well, and we believe that this will be the next wave to help us to sustain the growth that we've had.

Thank you so much for that detailed answer. On the mobility side, you know that German OEMs are still, I think in restructuring mode.

Do you expect that segment to come back or are you more diversified beyond that? What can drive growth in this segment?

Number one, see, we look at our mobility. We've got Auto US, we've got Auto Europe, we've got T&OH, and we've got Aero and Rail, right?

Those are the four broad components, and we've said in the past that Auto contributes to about 50% of our mobility revenues. We're not overtly dependent on Auto Europe, right?

What we've seen happening in the last two quarters for us, and we had shared this earlier as well, that Auto US has a clear strategy and they are in execution mode, and we are seeing that benefit. T&OH execution mode, seeing that benefit.

Aero and Rail in execution mode, seeing that benefit. Auto Europe has been in a problem.

It, in fact, current quarter also, we face some headwinds from Auto Europe, but we do believe that Auto Europe should come back sometime next year, right? In fact, we are working on a lot of solutions on AI-defined mobility.

We're working on OEM software sovereignty that we are working on, and we believe that this will, along with alternative energy part or EV, BEV part, will create the next phase of cycle of growth. Again, early days working through it, we've seen growth in the last two quarters in mobility should continue.

Thanks a lot. One last question if I may.

Aerospace, there is talk about a new single-aisle aircraft program that Airbus might start. Any ideas on when that could be and if that could benefit us?

On a lighter note, I've been waiting to fly on such a plane for the last five years. On a serious note, I think a little more to be done in that area, we'll see.

Okay. Thanks so much.

Best of luck.

Hi. Thanks for taking my question and congrats to the LTTS team for a solid performance.

Amit, a couple of questions from my side. Just digging a bit deep into the verticals.

In the Sustainability vertical, you mentioned that both Plant Engineering and Industrials kind of contributed good to the growth. In the oil and gas vertical specifically, are we seeing any challenges due to the Middle East situation at this point of time?

Not just in that vertical, on the overall business also, any challenges which we saw in this quarter or you foresee in the coming quarters? Second question, on the Mobility vertical, you just mentioned that you expect the Europe or European auto parts to basically come back next year.

Is that comment just for our portfolio in terms of the deals that we are seeing, or do you believe European auto companies themselves might be able to turn around next year in terms of their CapEx spend and could be positive for the industry as a whole? Just two questions, and then probably have one more follow-up.

Sure. Vibhor, on oil and gas, I want to say that most of the work that we're doing for oil and gas companies, chemicals companies, LNG companies is largely focused right now on the US and Europe.

We have very little business going on in the Middle East, right? We're trying to build that out, very little business going on in the Middle East.

The impact is not there. In fact, we're seeing a lot of these medium-sized projects getting kicked off in oil and gas in the US, in Europe, and digital projects and AI projects coming, and we're seeing that as a positive.

Middle East overall is a very small part of our portfolio. Our heart goes out for whatever is happening there, but the impact, we don't have any significant business impact from that yet.

Having said that, as these things drag on, God knows what will happen, but right now, we're not worried about this at this stage. Now, when we come to Europe Auto, Europe Auto, there are two things happening.

See, like US Auto, what they had done last year was that they had gone ahead and done some write-offs clearly from the technology, and they had moved very sure-footedly towards, hybrid vehicles, right? Therefore, they started SDV, they started AI-native solutions, all that, and they're seeing the positivity of that.

Europe Auto, at some point, will have to step back and potentially do whatever they have to do in terms of write-offs, etc., and re-baseline themselves. I believe that time will happen.

A lot of companies are talking about it, some are doing it. I do believe that should clear up in the next 6, 9, 12 months, if you look at it.

Number two, what's happening is there's a number of local European service providers that still continue to work on old ways of working and models. Those are getting replaced by, augmented by India Inc., and that's the second one that we believe will happen.

With our investments in Munich, with our AI center that we have set up, and others, I do believe that we do get a fair chance and share to be able to win some of that.

Got it, got it. That was really helpful.

Just one question for you, one more, and then I have one follow-up for basically on the financials part. Basically, on the high-tech vertical, I think the numbers were a bit on a softer side.

You alluded to that in the opening remarks as well. I think the telecom piece for us is doing well.

It's the Media and the remaining business which is probably not firing as the other segments are. Any color on that?

When do you think that vertical should also start supporting the growth of the overall business?

Sure. There are four parts in high-tech: there is the MedTech piece, right, where we had this one program, significant program that ramped down, and the follow-on program didn't start, right?

That's been that piece. Outside of that, we have been having a fair degree of smaller wins in the MedTech space.

The second area is Semicon that continues to grow for us and is differentiated for us. The third is the Tech Infra space where we have won this program, AI-led program for communication.

The fourth is the Media piece, right? The fifth actually is the Systems and Platform which we bought with Intelliswift.

The Systems and Platform piece has actually improved in margins for us sequentially as well as year-on-year, and we do believe that that growth trajectory will accelerate sometime in quarter four and beyond. Media will be steady.

I don't expect anything great from Media. Tech Infra will show growth because of the deal that we have won.

Semicon will continue to grow. Medical, I would like to say quarter three, but I'm going to be careful and say quarter four because I want to give a little time to our teams as they regroup, rebuild, and take things forward.

Overall, Tech for you will be muted in quarter three, but beyond that, we do see growth coming back.

Got it, got it, sir. Sir, that's really helpful.

Just one last question for Rajeev. Rajeev, you mentioned our DSO days now is at around 70 78, including billed and unbilled.

These are the numbers that we are comfortable with, or do you think post divestment of SWC being complete, there could be further scope of maybe improving it from these levels?

Hi, Vibhor. I will say at this point, we are comfortable.

The range that I have provided is between 80 to 85. I think we are operating well under that range.

Fairly comfortable. This is where we like to operate.

Got it, perfect. Great, thank you so much for taking my questions and wish you all the best.

Thank you for the opportunity and sir, congratulations on the good execution. My question largely on the bookkeeping side on SWC exit parameter.

This discontinued number we cannot expect in upcoming quarter? Operational line is around $36 million.

Now we can expect zero from next quarter?

Yes, hi. Jyoti, thank you for this question.

I did highlight this is a one-time gain in quarter two. The one-time gain is ₹165 crore.

Now, this is completely a business that has been disinvested. What you will see going forward, quarter three will be only the continued part of the business, while we have reported it as part of whatever the accounting principle, separately for continued and separately for discontinued.

Going forward, we will only report continued business.

Thank you, sir. Follow-up question on the Europe side.

We continue to see downside in Europe and fell around 4% year-on-year. Are we seeing any changes in the ER&D budget side from your top clients, or still it's flat or shrinking?

Actually, Europe grew for us quarter-on-quarter and year-on-year. Maybe there's something to do with the currency billing that we had.

We've got Alind here who runs growth markets and large deals. Alind, would you like to talk about the momentum in Europe?

Yeah.

Yeah.

Thank you. Look, Amit already covered the Auto, I'll not spend time on that.

If you look at the other sectors, pretty much the AI infrastructure-led spend which is there in Europe is there. We are seeing the effects of that and what you see in Sustainability growth, part of that is coming from Europe as well.

Plus, we are fairly gung-ho on the plant side of the business as well. Both of them, Industrial and Plant, will continue to grow in Europe.

We are opening up few more areas in Tech based on some of the recent wins that we had. Europe will stay cautious, as Amit had said, on Automotive, but otherwise, we see fair amount of growth happening.

I would suggest that if you look at maybe a quarter down the road, the consolidation deals that we have been talking about, they can also contribute to the growth that we see in Europe. We remain fairly gung-ho about what can happen over there.

Sure. Thank you, sir.

Sir, just two more questions from me. One is on the furlough side, how we're expecting in Q3 and are we seeing this momentum to hold?

Another, just 28, how's the deal wins we are seeing shaping up?

Okay. Two two answers here.

One, in terms of, we are not providing quarter-on-quarter on annual guidance. What I'm confirming is that H2 will be better than H1.

We expect regular furloughs to happen. That's the lay there of the land.

Now, in terms of deal wins, look, this quarter we've done $203 million. I still owe you all $100 million from last quarter, I haven't forgotten that.

I'm looking at my colleague here as I answer this. We will make sure that we get you that extra $100 million in Q3 and Q4 because we want to keep to that $200 million pace.

Lastly, ma'am, your question around next year is also, as you have seen, right, Sustainability, we had deals last fall last year, and now this quarter as well, it's coming to revenue. Similarly you will see this coming to revenue, that's the focus that we've got.

Our pipeline is up more than 25% year-on-year, order bookings are up. Knock on wood, let's see where it goes.

Okay. Great, sir.

Thank you.

Thank you. A couple of questions.

Firstly, if I look at our daily TCV over the last few quarters, it was always very strong, right? The question was that converting into revenues, which seems to be playing out right now.

If that is what is playing out in the environment and can you just help, what has changed at the client's and why are they spending now, given the macro still remains uncertain, what has changed from a client perspective which is driving this deal conversion to revenues and helping the growth? The second question is on margins.

Good to see you hitting that mid-16% band this time. In the near term, how should we think about sustainable margins going forward?

Will there be a case for a growth-margin trade-off where the margins remain around 16.5% before you think about expanding margins? Because just trying to understand what could be the exit margins by 4Q because that will set the pace for next year margins.

Thank you.

Yeah. Bhavik, thank you so much.

Bhavik, if I look at what's changed in the last few quarters, see, client conversations actually, I'll tell you, have been very positive with the AI CapEx spends around across chips, across software, across industrial electrical companies, across Telco Infra. It is powering up a lot of companies and a lot of spend.

That's a positive that we're seeing. Second, when I go talk to our clients or our executive team is going and talking to clients, they're largely focused on growing their businesses in spite of the unstable environment, rather than cost cutting.

That's a big second that we're seeing as a shift. Third is everybody wants to get some help on AI and say, how can I make myself more resilient and productive?

Our AI 1 strategy, etc., is playing out, if you ask me, in our favor in that area to take things forward. Also, I believe that we are about 9 to 12 months ahead of competition and peer group in this area.

We are actually gaining market share as opposed to competition. All those three put together, I remain cautiously optimistic in terms of the fact that growth has accelerated actually across the three quarters.

Let's see where it goes. That's where that is.

Do you want to talk about

Let me take that. Bhavik, thank you for bringing up the margin.

I did clarify in my commentary, but let me add to it. In terms of margins, we, in quarter two, came in at 16.3%.

Like we said earlier, this has been two quarters ahead of time. Near term, you should take it to be at these levels around the mid-16% EBIT levels.

Few things, what has helped us in terms of getting to these margin levels, one, of course, the segment mix has improved. I did talk about Sustainability revenues now almost contributing 38% of overall revenues.

Second, the AI revenues now have clocked $120 million on an annualized basis. The third, quality of revenues improving across segments.

In fact, Mobility as well, right, we talked about Auto US and all of this is adding. There are still levers, but we believe some of that we will continue to double down on growth while maintaining margins at these mid-16% levels.

Got it. Thank you.

Hi. Thank you for taking my question.

Just wanted to understand your view on wage hikes for this year. How are you looking at that?

That's my first question. I'll follow up with the

Why don't you give us a second question also, then we'll answer it together, brother.

My second question is, I'm sorry if I missed this, but was around your comment on 2H and strengthening the momentum from here. How does that translate in terms of numbers, given that 2Q growth has been 2.7%?

When you say strengthening momentum from here, does that mean better growth from 2.7% as a benchmark, or how are you looking at that comment? Yes, that's it from my side.

Excellent.

Excellent. Second question first, and first question second.

In terms of where we see growth, I talked about H. If I look at our H1 performance, right, you can make your math on year-on-year and quarter-on-quarter.

What I'm confirming to you is that H2 will be better year-on-year and quarter-on-quarter than H1, sequentially as well as year-on-year, right? That's number one.

I'm not getting into the quarter on purpose because we are getting into this muted quarter. We'll see where it goes.

Again, look, at the end of it, I would like to deliver profitable growth. That's why we're here, right?

That's one. Second, wage hike is confirmed to all the employees.

We will be doing wage hikes in quarter three, and we have released a note to that effect to our employees. The margin remaining in the mid-16% levels is after considering all of this.

Sure. Thank you.

All the best.

Yeah. Thanks.

Thanks for the opportunity and congratulation on a great set of numbers. Most of the question has been answered.

Amit, in your opening remarks, you also said that clients are accelerating AI-led engineering and the spend. What is driving this for you as well as for the industry?

Is it clients are shifting spend from cloud, hyperscaler, and GPU-based subscription to the system integrators more on the engineering side, or that trend is too early to call out?

I want to request Munjal to add to what I'm going to say here. Number one, look, what we're seeing definitely is that AI is a board question that's coming to all our CXO community: What are you doing to leverage AI?

Are you leveraging it enough? etc.

That is creating a push top-down on using AI, number one. Number two is, in all our daily lives, we have started to use AI, whether it be ChatGPT, whether it be Anthropic, whatever whatever, in a significant manner.

Your work people that are there, right, your teams, they are using it and very familiar with it as well. Now there is a confluence of both of those where the demand is there.

Now, the legacy spends are going down, no two questions about it. One of the and that is why that move money is shifting, if I may, to AI, number one.

Number two is the overall budget is also increasing in line with respective companies' growth. If somebody is growing at 5%, their budgets are expanding as well, all right?

Once that's happening, second, there's a shift within. That is why we've invested early on.

About a year ago, we've been talking about this. Now, this data center offerings we started two quarters ago, we didn't talk to you about it because we wanted to get some wins.

We've got a win in that area. Part of that is what we're going, and overall addressable TAM is going up for us.

Would you like to address, Munjal, on what we are doing on AI specifically?

Sure, Amit. Thanks.

Let me give a little color on what the shift is. A, people have stopped using this POCs, and they're looking at a broader process which can deliver a P&L impact.

That's a big change which is happening in the market. All of our customers are looking at that.

Secondly, what they are trying to do now using AI is to do things faster. Speed is very important.

Because they can do it faster, they are looking at their ability to accomplish a process change or a migration from A to B in a quicker timeframe. Three, what has happened, and that is very relevant to us, is the, as you know in the market, the context for training these AI agents is very, very important.

We bring that to the fore. Our ability to bring the context is one of the biggest moats that we have when we have to shift the narrative when we discuss with the client.

If you look at the combination of all three, we are seeing large, complex programs which can shift some P&L of the client is being considered for execution, and we are getting a lot of that. I think that's what Amit is alluding in terms of expansion of the market.

Because we are able to do, we are playing into a segment or deals that was not available to us earlier, and we are able to execute to that.

Yeah. Thanks.

Thanks, and all the best.

Yeah. Thanks for the opportunity.

Two questions. First, I would just want to understand how we define this AI-led revenue.

Can you help us understand? Is it 100% new, which let's say were not there part of our revenue 2-3 years back?

What kind of profitability it operates, because one of the reason for margin expansion you indicated is mix change. If you can give some sense around it.

That is question one. Second question is on the wage hike.

You indicated effective quarter three. Can you give some sense about the likely impact from wage hike?

Okay. Why don't we request Rajeev to take the wage hike.

On the AI revenue, I want to request Munjal to talk about how does he qualify AI revenue. Margins, we are not going to give out on service lines, we're not doing that right now.

Needless to say, I want to tell you that we do charge a premium. If you have a project, you can give it to us, we will charge you a premium, you will realize how much we're charging.

Over to you, Munjal.

Dipesh, good to hear. See, what we do is if you take any deliverable that we are creating, and a significant part of the deliverable is getting created through leverage of AI stack, then we classify that as AI revenue.

The significant part is very important, right? It is not like a report that you can build at the end of the project and claim AI revenue.

It is part of the deliverable that we create, and that's how we are tracking. The number that you see around 9.5% for the quarter, which is like $120 million odd.

Profitability, I'll let Rajeev handle that.

Thank you, Dipesh, for the few questions that you put up. Let me take the wage hike first.

I think we did mention that we have already announced the wage hike in quarter three. The impact likely will be in the range of, I would say 50 to 80 bps.

We are still working out the modalities, but we will clarify as we come and talk around the quarter three commentary. On the AI-led profitability, Dipesh, at this stage, we will not like to quantify it.

I think what you will see is the implication and the impact of it on the overall LTTS profitability. Like you're seeing, and I did talk about it earlier, the AI-led revenue is, in fact, a lever for margin improvement and will continue to be so.

Hope that answers your questions, Dipesh.

Thank you.

Yeah. Thanks for the opportunity.

Two questions from my side. Firstly, with the AI-infused deals in the mix and a lot of platform offerings across verticals, any change you're seeing in the tenure of deals versus, let's say, two years back?

That's the first question. Just wanted to understand if the average tenures are increasing, decreasing, or staying stable.

Second question, Amit, is on the AI data center build-out. Can you elaborate what role LTTS is playing in it, what are the kind of deals LTTS is pitching in, and the deal sizes and deal tenures?

Sure. See, average tenures have actually increased a little as opposed to reduced, and our focus always is to try and bring more ACV than TCV.

It is what it is, right? Clients in engineering take a little time to start.

Tenures are expanding, staying the same. There's no significant change that I can call out, right?

See, with a $100 million deal, it will be 5, 7 years. If it's a $50 million deal, it will be 4 to 5 years.

If it is a $25 million deal, it'll normally be about 3 years. A $10 million deal will be between 2 to 3 years.

These are norms that are there, right? That's number one.

Number two, when we look at data centers specifically, see, there are about approximately multiple layers here, right? For the physical infrastructure, we work through the OEM, the electrical companies, the HVAC companies, all these, and that revenue for us is showing up in Sustainability.

The GPU bring-up, infrastructure validation work, as well as building cluster, baselining, etc., is something that we are seeing in the Tech vertical that we've got. Then there's the control plane, there is token metering software to be done, usage, token ingestion, automated invoicing, anomaly guardrails, all that kind of stuff, and then observability, autonomous AIOps, and finally agents on top.

There's about six, seven layers here, and we are a service provider. We can work with anybody who is setting up a data center and running a data center or a neo cloud to be able to help them.

Now, our first business that we've actually done a lot of work on is the physical infrastructure piece with the electrical OEMs and the HVAC companies, and we are starting to do work with the other layers as well. As you go forward, you will see more and more of that happening.

In fact, this deal that we won with the Tech Infra major is for them to service a data center on communication.

Got it. Thanks for the elaborate answer.

Sir, just one more question on the European Auto. Is the business stabilized or it can further drag the Mobility vertical from here on?

If you can also quantify how much is the European Auto for you in the overall percentage?"

Karan, we don't qualify exact numbers on European Auto. Alind, if you want to give a answer on European Auto.

Yes, sure. Look, you've been reading what's there in European Auto in general.

Our feeling is that it's going to be steady for now for the next about 6 to 9 months. We don't foresee further decline happening in European Auto.

The growth that we have been talking about that we see should start coming back in the next 9 to 12 months. Now, if you read about Auto in general, the North American companies or the OEMs which were there, they have very clearly articulated their strategy about what kind of cars they're going to bring out and what kind of technology will go in their cars, right?

Once that is done, now it goes to execution, which is why you see North American Auto revenue go up. Similarly, if you look at Japan, they have recently declared on their positioning on the car models and so on over the next few years.

They all talk about 3, 4 years in future. European Auto is still to do that.

That is what we believe will happen as we look at early next quarter or so. Once that happens, then again they will get back to execution, and it should go back to the ramp-up that we're expecting in about 9 to 12 months.

Got it. Thanks, and all the best.

All right.

I have one question like you have disclosed annualized in

My question is, you have disclosed annualized engineering intelligence-led revenue of $120 million, and AI-related deals are accounted for over 50% in Q2 of large deals TCV. Could you clarify how much of $120 million annualized revenue translate into the actual revenue recognized during this quarter?

This quarter, Chandan, the revenue is $120 million annualized, you can divide by 4 and check it out. Now, if I look at the AI deals that we've won is more than 50%, they will go into operation, right?

Some of that, in fact, last quarter, we had AI revenue we tracked was a lot lower, it's expanded. You will see this expansion as you go forward from these deals that you've got.

A significant part of those deals have not operationalized, if I may, or very marginally operationalized in the current quarter.

Maybe to add to Amit, Chandan, we will continue to quantify this every quarter, right? You will see that the AI-led revenues improving quarter-on-quarter.

I think to be able to say that, look, 50% of that overall deal win, what does it translate for AI revenues, these are over a tenure, right? You will not be able to break it down.

We will certainly quantify on quarterly basis how is the trend in terms of AI-led revenues.

Thank you.

Thank you. Thank you all for joining us on the call today.

We hope we were able to answer your queries. If there are any follow-ups, we'll be happy to address them.

With that, we are signing off for the day and look forward to interacting with you through the quarter. Wish you all a very Happy Dussehra and a good day.

Thank you.