The Secret Recipe for 3i Infotech's Turnaround: Ingredients from Q1 and Q2FY26 That Promise a Tasty Future.

~Sumon Mukhopadhyay.

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Introduction:

Imagine crafting a perfect dish – one that starts with fresh ingredients, blends bold flavors, and emerges from the oven stronger and more appealing than before. That's exactly what 3i Infotech Ltd (Rs.17.20), the global IT services provider specializing in digital transformation, cloud, cybersecurity, and automation, is doing with its business in FY26. 

After years of restructuring and challenges, the company is mixing the right elements to cook up a profitable comeback. Using the latest financial results from Q1FY26 (quarter ended June 30, 2025) and Q2FY26 (quarter ended September 30, 2025), we see clear signs of stabilization and growth potential. 

Sequential revenue growth, surging profitability, new client wins, and a fortified leadership team are the key ingredients in this recipe. For investors with patience, 3i Infotech could serve up substantial returns as the digital IT sector booms worldwide.

The company, headquartered in Navi Mumbai, has been on a transformation journey, focusing on core IT services while shedding legacy burdens. In H1FY26, it has delivered consolidated profits where many peers struggle with margins. Let's break down this "recipe" step by step, highlighting how these fresh financials point to a bullish outlook.

Gathering the Base Ingredients: Revenue Stability with Sequential Growth:

Every great recipe starts with a solid base. For 3i Infotech, that's revenue from operations.

In Q1FY26, operational revenue stood at ₹170.55 crores. Moving to Q2FY26, it grew sequentially by 2.54% to ₹174.89 crores. This modest but meaningful quarter-on-quarter increase shows the company is gaining traction in its core business. Total income jumped even higher – from ₹192.08 crores in Q1 to ₹210.71 crores in Q2 – reflecting efficient cost management and additional contributions.

Year-on-year, operational revenue dipped slightly by 1.53% in Q2 compared to Q2FY25's ₹177.60 crores, but this is understandable in a restructuring phase. The focus has shifted to higher-quality, profitable deals rather than sheer volume. Importantly, the company onboarded 14 new clients in Q2FY26, mostly from the US and including a prominent player in India's fast-growing quick commerce sector. This expands the client portfolio across key industries, setting the stage for recurring revenue streams.

Think of this as sourcing premium spices – not the cheapest bulk, but ones that add real flavor. With over 4,000 employees and a renewed emphasis on AI-led capabilities and digital partnerships, 3i Infotech is positioning itself in high-demand areas like automation and analytics.

Adding the Profit Booster: Dramatic Surge in Bottom Line:

No dish shines without the right seasoning, and for 3i Infotech, profitability is the star spice.

Q1FY26 delivered a consolidated net profit of ₹7.62 crores – already a positive shift from prior losses in comparable periods. But Q2FY26 turned up the heat: net profit soared 141.86% sequentially to ₹18.43 crores. For H1FY26 combined, the company reported an EPS of ₹1.46, a stark improvement from ₹-1.07 in H1FY25.

This profitability isn't just a flash in the pan. Other income contributed significantly (₹35.82 crores in Q2, up from ₹21.53 crores in Q1), providing a buffer while core operations stabilize. Even with operational challenges noted in some analyses – like negative operating profit excluding other income at ₹-5.29 crores in Q2 – the overall trend is upward. The company maintains low leverage with a debt-to-equity ratio of just 0.01, and shareholder funds provide a stable foundation.

CEO Raj Ahuja highlighted this in the Q2 commentary: the performance reinforces the path toward profitable growth, with a cohesive leadership team focused on deepening client partnerships and expanding digital/AI offerings. This surge in PAT reflects successful cost optimizations and strategic realignments, including global entity restructuring for efficiency.

Like adding garlic and herbs that transform a bland base into something aromatic, these profit numbers signal that 3i Infotech is moving from survival mode to growth mode.

Mixing in Strategic Flavors: Client Wins, Leadership, and Focus Areas:

A recipe needs variety for depth. 3i Infotech is blending exciting new elements.

The 14 new client additions in Q2 are a game-changer, particularly in the US market and emerging sectors like quick commerce. This diversifies revenue and builds a pipeline for future quarters. The company's services – spanning Application, Automation, Analytics (AAA), Infrastructure Services, and Business Process Services – align perfectly with global digital transformation trends.

Leadership enhancements add richness: a unified team under Group CEO Raj Ahuja is driving consistency. Ongoing restructuring, such as voluntary liquidations of non-core subsidiaries, streamlines operations and reduces drag.

These ingredients – client momentum, strategic pruning, and sector tailwinds – create a flavorful mix poised for expansion.

Baking It All Together: Why the Outlook is Bullish:

As the dish simmers, the potential becomes clear.

H1 FY26 profits mark a turnaround from prior year losses, with sequential improvements across key metrics. In an industry where digital spending is accelerating – driven by AI adoption, cybersecurity needs, and cloud migrations – 3i Infotech's focused portfolio positions it well. The stock, trading around ₹17-18 levels post-Q2 results (with some volatility), appears undervalued relative to its recovery trajectory. Market cap around ₹375-400 crores leaves room for upside if execution continues.

Analysts note dependencies on non-operating income, but the core recipe is improving: better client wins, cost controls, and profitability momentum. With no major debt overhang and a clear strategy for sustainable growth, 3i Infotech is baking a comeback story.

The "Chef’s Warning" (Risks to Watch):

​While the turnaround looks promising, long-term investors should keep an eye on:

​Price Volatility: The stock recently touched a 52-week low (~₹15.70), indicating that the market is still waiting for "proof of concept" over multiple quarters.

​High Employee Costs: Employee expenses remain around 70% of revenue, a metric that needs to normalize for long-term margin stability.

Low cash position (₹45.54 crores in H1) is a pinch of caution, but the near-zero debt provides flexibility for investments in growth areas like AI and cloud.

Conclusion:

Just as a well-followed recipe yields a delicious meal that delights diners and leaves them wanting more, 3i Infotech's FY26 performance so far – anchored in Q1 and Q2 financials – is crafting a compelling turnaround narrative. 

From sequential revenue growth of 2.54% and a 141.86% profit surge to new client acquisitions and strategic focus, the ingredients are aligning for sustained success.

For long-term investors, this is a stock worth adding to the portfolio – one that could season handsomely as the company delivers consistent quarters ahead. The digital IT feast is just beginning, and 3i Infotech has the recipe to claim a bigger share. Bon appétit to future gains!