L&T Tech's Q3 excites, but don’t ignore the near-term headwinds

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Subscribe to enjoy similar stories. Midcap IT firm L&T Technology Services Ltd (LTTS) surprised the Street with solid deal wins and margin expansion in the December quarter (Q3FY25). Investors cheered, taking the shares up about 8% on Thursday.

Sequential constant currency (CC) revenue grew 3.1%, broadly in line with estimates, and led by the tech and sustainability verticals. The mobility segment remained at a sore point, hurt by furloughs and a pause in spending by some clients. Nonetheless, the demand outlook is steadily improving, and all verticals are slated to grow in Q4, LLTS management said, adding that FY26 would be better than FY25.

Its FY25 year-on-year CC revenue growth guidance still stands at 10%. This includes a contribution from the recent Intelliswift acquisition, with which LTTS forays into the high-growth software ER&D (engineering research and development) segment. Q4 performance is expected to be strong, aided by the ramp-up of Q3 deal wins and a favourable seasonality in SWC business.

Deal wins were at an all-time high in Q3 with eight large deals won above $10 million, spread across all three key verticals having an average deal tenure of about three years. LTTS expects similar booking levels in Q4 and sees no significant impact on large deal ramp-ups. “Go deeper scale" strategy implemented in H1FY25 is yielding results as reflected in deal bookings, the management said.

Earnings before interest and tax (Ebit) margin improved by 80 basis points (bps) sequentially to 15.9%. This was led by offshoring and lower selling, general, and administrative expenses partly offset by wage hikes impact and one-time M&A expenses. However, LTTS expects Intelliswift acquisition, which has a weak margin profile, to