Shares of Birlasoft surged 13 percent on October 29, marking their biggest single day gain in five years, after brokerages assessed the companys September quarter performance positively. The stock rose to a four month high of Rs 347.20 apiece around noon, supported by revenue growth that exceeded analyst expectations.

Birlasoft reported constant currency revenue growth of 2.1 percent sequentially in the second quarter of FY27, although revenue declined 1.1 percent year on year. The sequential growth was the companys strongest performance in the past eight quarters, indicating an improvement in its near term revenue momentum.

The companys EBITDA margin stood at 15.2 percent, declining approximately 95 basis points sequentially and 84 basis points year on year, according to InCred Equities. Wage hikes, which affected margins by approximately 170 basis points sequentially, along with continued investments in sales and capabilities, weighed on profitability. Operational efficiencies, productivity improvements and better revenue quality provided some offset.

InCred Equities noted that increasing artificial intelligence engagements could support margins, but continued investments to strengthen sales and drive revenue growth are likely to keep margins around 15 percent during the second half of FY27. The brokerage sees limited scope for meaningful margin expansion in FY28 and FY29.

The brokerage also reduced its growth expectations, lowering its projected US dollar revenue compound annual growth rate for FY26 to FY29 to 1.6 percent from 2.3 percent previously. Its projected rupee profit after tax growth over the same period was cut to 10.7 percent from 12.1 percent. InCred maintained a Hold rating on the stock and reduced its target price to Rs 306 from Rs 439, citing concerns about the companys growth outlook despite its substantial cash and investments.

Nomura maintained a Neutral rating on Birlasoft with a target price of Rs 330. The global brokerage highlighted weak deal wins during FY25 and FY26 as a key challenge. Although management has been revamping its sales team and increasing its focus on large client accounts, the benefits of these initiatives may take time to translate into stronger revenue growth.

Nomura observed that second quarter revenue and EBITDA were slightly above estimates, but stressed that stronger deal wins and an improving sales pipeline remain essential for sustaining growth. Management also indicated that the order book fell short of its expectations as several deals were delayed and shifted into the third and fourth quarters of FY27.

Birlasoft aims to maintain EBITDA margins at or above approximately 15 percent, although seasonal variations may affect quarterly performance. Nomura expects EBITDA margins of 15.6 percent in FY27 and 15.7 percent in FY28, compared with 16.3 percent in FY26.

The sharp rally reflects investor relief over better than expected quarterly performance. However, the companys ability to convert delayed deals into revenue, improve order inflows and sustain profitability will remain critical to its medium term outlook. While artificial intelligence engagements and operational efficiencies offer potential support, persistent weakness in client spending or delays in large contracts could constrain the pace of recovery.