Shares of IT services firm Coforge Ltd. experienced a nearly 5% decline on Monday morning, reaching a session low of Rs 1,814.35. This downturn occurred despite the company announcing robust second-quarter fiscal year 2027 (Q2 FY27) results and an upward revision of its full-year operating margin guidance.
Strong Q2 Performance Metrics
For Q2 FY27, Coforge reported a consolidated revenue of Rs 6,170.8 crore, marking a substantial 53.6% year-on-year (YoY) increase and an 11.6% quarter-on-quarter (QoQ) rise. In dollar terms, revenue stood at US$652 million, up 41.1% YoY. Earnings before interest and tax (EBIT) surged by 67.8% YoY to Rs 984.7 crore, with the EBIT margin expanding to 16%.
The company's reported profit after tax (PAT) also saw a significant jump of 56.5% YoY, reaching Rs 588.1 crore. Coforge achieved a record fresh order intake of approximately US$1.04 billion during the quarter, more than doubling from a year earlier (102% YoY) and growing 51% QoQ. This included securing eight large deals, the highest number in a single quarter in the company's history. The 12-month executable order book grew 45% YoY to around US$2.4 billion, providing strong revenue visibility.
Margin Guidance Raised Amidst Growth
Coforge raised its consolidated EBIT margin guidance for FY27 to 16% from the previous 15.5%, with management targeting a reported EBIT margin of 17% in Q4 FY27 and beyond. The company attributed potential margin expansion to AI-led productivity improvements, general and administrative (G&A) cost efficiencies, and improved economics in fixed-price projects. The FY27 Ebitda margin guidance was retained at 20.5-21%.
Brokerages React with Varied Outlooks
Following the Coforge Q2 results, several brokerages offered updated target prices and analyses:
Nirmal Bang Institutional Equities
Nirmal Bang maintained a 'Hold' rating on Coforge, raising its target price to Rs 2,150. While acknowledging the improvement in EBIT margin and the increased FY27 margin guidance, the brokerage expressed caution regarding potential generative AI-led revenue compression and broader pricing pressure across the technology services sector.
Choice Institutional Equities
Choice Institutional Equities increased its target price to Rs 2,320, citing stronger deal momentum and a higher expected margin profile. The brokerage revised its FY27 and FY28 earnings-per-share estimates upwards, projecting robust growth in revenue, EBIT, and PAT over the coming fiscal years.
Motilal Oswal Financial Services
Motilal Oswal Financial Services retained a positive view on Coforge, setting a target price of Rs 2,370. Key positives highlighted included the record order intake, the eight large deal wins, the improving margin outlook, and anticipated growth acceleration in the second half of FY27. However, they also flagged AI-led pricing pressure and the necessity of converting the order pipeline into organic revenue growth as critical factors to monitor.
Despite strong operational performance and an optimistic outlook from management, the market's reaction suggests investors are weighing these positives against potential industry-wide challenges, particularly those posed by the evolving AI landscape.