What's in the News

Mphasis launched its global brand campaign, "AI Without Intelligence Is Artificial," to position its next generation AI platform Mphasis NeoIP as a contextual, outcome driven partner for enterprises across banking, healthcare, insurance, and hi tech (company announcement)

The new campaign focuses on intelligent engineering and continuous learning AI systems, aiming to differentiate Mphasis in a crowded AI market and highlight real world business and IT transformation use cases (company announcement)

Mphasis introduced NeoIP, a unified AI platform that connects data, systems, and processes to automate complex decisions, predict and prevent issues, and enable continuous modernization across application development, ITOps, and business operations (company announcement)

Early NeoIP deployments reportedly delivered up to 60 percent improvement in development and modernization efficiency and about 50 percent reduction in incident detection and resolution times for clients, strengthening the company’s value proposition in large transformation deals (company announcement)

The company also unveiled quantum focused offerings qCryptsec for quantum safe cryptography and QOptiDecision for quantum enhanced decision optimization, targeting use cases such as route optimization, bin packing, and crew scheduling (company announcement)

Valuation Changes

Fair Value: Raised slightly to ₹3,058 from ₹3,006, reflecting a modestly higher intrinsic value estimate for Mphasis shares.

Discount Rate: Increased marginally to 16.07 percent from 15.99 percent, implying a slightly higher required return or perceived risk in the valuation model.

Revenue Growth: Lifted moderately to 11.32 percent from 10.66 percent, indicating stronger expectations for top line expansion.

Net Profit Margin: Trimmed slightly to 12.74 percent from 13.00 percent, reflecting a small downward revision to long term profitability assumptions.

Future P/E: Eased marginally to 35.06x from 35.35x, suggesting a slightly less aggressive but still elevated earnings multiple over the forecast period.

Key Takeaways

Accelerating AI-led deals, proprietary platforms, and industry-specific traction position Mphasis for strong, sustainable revenue and margin growth amid rising digital transformation demand.
Structural shift to platform-driven, fixed-price, and automation-centric services boosts operating leverage, supporting higher win rates and industry-leading financial performance.
Heavy reliance on legacy business, sector concentration, and lagging innovation expose Mphasis to revenue and margin pressures amid evolving technology and market dynamics.

Catalysts

About Mphasis

Operates as an information technology solutions provider that specializes in cloud and cognitive services in the United States, India, Europe, the Middle East, Africa, and internationally.What are the underlying business or industry changes driving this perspective?

The company's record-high deal pipeline and TCV wins-particularly the fact that 68% of new TCV is AI-led-indicate that enterprise clients are accelerating investments in AI, cloud modernization, and digital transformation, which are expected to drive robust revenue growth in coming quarters.
Mphasis's investments in next-generation proprietary platforms (like NeoZita, NeoCrux, and NeoSaBa) and AI/ML assets position it to benefit from the increasing adoption of generative AI and automation across industries, supporting both top-line growth and potential margin expansion due to higher-value, IP-led service offerings.
Deepening traction in BFSI and Insurance verticals, with strong wallet share gains and large new logos, demonstrates the company's ability to capture growing technology spend by global financial institutions as fintech adoption and digital payments rise; this supports sustainable recurring revenues and topline stability.
A structural shift towards fixed-price contracts, higher productivity, and platform-driven and automation-led service delivery is driving greater operating leverage, suggesting scope for continued or improved EBIT margins even as revenue scales.
With traditional IT providers facing customer fatigue and clients preferring technology partners who drive measurable efficiency, speed, and innovation, Mphasis's differentiated, outcome-driven approach and micro-level client execution should enhance win rates and accelerate revenue conversion from the current pipeline, potentially translating into industry-leading revenue growth and EPS upside.

Mphasis Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Mphasis's revenue will grow by 10.7% annually over the next 3 years.
Analysts assume that profit margins will increase from 12.0% today to 13.0% in 3 years time.
Analysts expect earnings to reach ₹25.6 billion (and earnings per share of ₹133.99) by about September 2028, up from ₹17.4 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹22.5 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 35.4x on those 2028 earnings, up from 31.6x today. This future PE is greater than the current PE for the IN IT industry at 26.7x.
Analysts expect the number of shares outstanding to grow by 0.54% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 16.0%, as per the Simply Wall St company report.

Mphasis Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The rapid acceleration of AI and automation, both within client organizations and in the IT services delivery model, could reduce the demand for traditional outsourcing and people-based services, leading to pricing pressure and challenges in revenue growth for Mphasis's core legacy business over the long term. (Revenue risk)
The increased client emphasis on cost-efficiency, vendor consolidation, and preference for outcome-based, fixed price engagements places persistent pressure on margins, particularly as Mphasis must invest heavily in proprietary platforms and new technology to win deals, potentially limiting future margin expansion. (Net margins risk)
Despite claims of broad-based client growth, the company remains heavily exposed to the BFSI (Banking, Financial Services, and Insurance) sector and top client concentration, making it vulnerable to abrupt declines in case of spending slowdowns or account losses in these verticals. (Revenue and earnings risk)
Global macroeconomic uncertainty, including persistent geopolitical tensions, regulatory complexities in data/cybersecurity, and potential protectionist policies, could disrupt cross-border service delivery or cause clients to favor local/regional providers, narrowing Mphasis's addressable market and affecting revenue growth and contract retention. (Revenue risk)
The industry-wide shift to software-as-a-service (SaaS), integrated multi-cloud platforms, and platform-led models risks bypassing traditional system integrators like Mphasis, especially if it cannot continually innovate or maintain its differentiation amidst intensifying competition, leading to potential stagnation in premium service lines and longer-term revenue pressures. (Revenue and long-term earnings risk)

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of ₹3006.147 for Mphasis based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹3625.0, and the most bearish reporting a price target of just ₹2140.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹197.0 billion, earnings will come to ₹25.6 billion, and it would be trading on a PE ratio of 35.4x, assuming you use a discount rate of 16.0%.
Given the current share price of ₹2893.4, the analyst price target of ₹3006.15 is 3.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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