While Mastek reported a soft top-line in Q3FY26, its margin expanded by 120bps q/q. CC revenue declined 4.8% q/q to $102m, owing to higher furloughs, planned project go-lives in the US & AMEA and right-shifting of few engagements. However, management maintained that the pipeline remains strong across the UK, US and AMEA with good demand in Healthcare and AI-led solutions. Geographically, revenue was UK-heavy (66.1% of revenue; down 3.3% q/q), as it remains the key stabiliser amid seasonal weakness. North America (22.5%; down 6.1% q/q) and MEA (11.4%; down 16.6% q/q) faced the brunt of project timing and ramp shifts. Notably, execution discipline and AI-led efficiencies supported profitability. Q3 weakness is largely timing-driven (furloughs + ramp-up schedules) rather than a pipeline deterioration, with healthcare demand and AI-led solution competency providing a durable demand visibility.

Encouraging Client Acquisition coupled with Strong Cashflows: Mastek’s active clients rose to 333 (vs. 314 in 2QFY26), including 17 new clients (vs. 13 in Q2FY26). Revenue from Top-10/Top-5 clients fell ~5/8% q/q. This coupled with 120bps margin expansion, ~51% growth in CFO to Rs2.1bn in Q3FY26 (vs. Rs1.39bn in H1FY26) reflects Mastek’s optimization of client-mix and potential for wallet-share expansion opportunities.

Continued Scaling in AI-led Work: Mastek saw continued scaling of AI-led work, calling out >26 new AI engagements and 17 client addition in Q3FY26. The TTM order backlog rose 18.4% y/y to ~$296mn, keeping the medium-term revenue visibility intact despite near-term adversity.

Outlook and Valuation: We have increased / (decreased) our FY26/27/28e revenue and EPS estimates by -2.1/9.5%, -4.9/1.3% and -4.2/1.1%, respectively with 8.2% CAGR in adj. EPS over FY26-28e. At CMP, the stock trades at 16x/14.5x FY27/28e P/E. Hence, we retain our BUY rating with a TP of Rs2,885, implying ~32.6% upside from the CMP.

Risks and Monitorable: (a) UK’s fiscal challenges may weigh on Mastek’s UK government business; (b) timeline of US & AMEA growth recovery – a key monitorable; (c) delay in order book growth translating to topline expansion