Firstsource grows revenue 22.87%, but negative other income cuts profit
Operating margin improved year on year but slipped sequentially, while the company reported four large deal wins and remains below the Services peer median.
Filed 06 Aug 2026, 12:49 IST · Firstsource Solutions Ltd (FSL)
Key takeaways
- Consolidated revenue grew 22.87% year on year, but net profit fell 2.01% as other income turned negative at Rs 65.58 cr.
- Operating margin improved 0.91 percentage points year on year to 16.56%, though it narrowed 0.10 percentage points sequentially as expenses grew faster than revenue.
- Firstsource said it won four large deals in Q1FY27, extending its run to six consecutive quarters with at least four such wins.
Price around the results
Revenue growth did not reach pre-tax profit
Consolidated revenue rose 22.87% year on year and 5.47% sequentially, with operating profit growing faster than revenue year on year. That operating improvement did not translate into net profit growth because other income was negative at Rs 65.58 cr, equivalent to -29.9% of pre-tax profit. The higher tax rate also reduced the conversion of operating gains into earnings, rising 3.77 percentage points year on year and 3.12 percentage points sequentially.
Sequential margin pressure returns after four quarters of improvement
Year-on-year margin expansion was supported by expenses growing 21.54%, below revenue growth of 22.87%, lifting operating margin by 0.91 percentage points. Sequentially, expenses grew 5.60% against revenue growth of 5.47%, narrowing margin by 0.10 percentage points. The trend still shows four successive quarters of operating-margin improvement through Q4FY26, followed by the Q1FY27 decline.
Margin remains below the Services peer median
Firstsource's 16.56% operating margin was 5.23 percentage points below the 21.79% median among 16 Services peers that had reported the quarter. It ranked seventh from the bottom on this measure. Management said its medium-term plan includes curing or ceasing low-margin accounts and aspires to expand EBIT margin by 50-75 basis points.
Deal wins and expansion plans support the management narrative
Management said Q1FY27 produced four large deal wins, the sixth consecutive quarter with at least four wins. The company told investors that its FY27 revenue-growth guidance is at the top decile of its peer group and that double-digit constant-currency year-on-year growth is a medium-term aspiration. Management also said its plans include expanding services in existing verticals, entering US retail and utilities, and widening its presence in the Middle East and Canada, alongside AI infusion and vertical-specific language models.
Past result reactions have leaned negative
The stock rose after three of its eight recent results and fell after five, with a median absolute move of 1.66%. The current result has no post-filing market reaction to assess yet. The recent history includes one 11.33% move, but most of the listed moves were within 2.29% of the prior close.
Q1FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹2,725 cr | ₹2,583 cr | +5.47% | +22.87% |
| Other income | ₹-66 cr | ₹-2 cr | -3735.09% | — |
| Expenses | ₹2,274 cr | ₹2,153 cr | +5.60% | +21.54% |
| Operating profit | ₹451 cr | ₹430 cr | +4.85% | +30.03% |
| Operating margin (%) | 16.56% | 16.66% | — | — |
| Interest | ₹52 cr | ₹52 cr | -0.52% | +19.13% |
| Depreciation | ₹115 cr | ₹116 cr | -1.25% | +17.88% |
| Profit before tax | ₹219 cr | ₹261 cr | -15.83% | +2.87% |
| Tax | ₹53 cr | ₹55 cr | -3.50% | +21.69% |
| Net profit | ₹166 cr | ₹205 cr | -19.16% | -2.01% |
| EPS (₹) | ₹2.40 | ₹2.97 | -19.19% | -2.04% |
Operating margin of 16.56% compares with a Services sector median of 21.79% across 16 peers that have reported Q1FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- The company reported four large deal wins in Q1FY27 and said this was the sixth consecutive quarter with at least four deals.
Guidance & outlook
- The company sees potential to grow at an accelerated pace over the medium term.
- FY27 revenue growth guidance is at the top decile of the peer group.
- The company lists double-digit constant-currency year-on-year revenue growth as a medium-term aspiration.
- The company aspires to expand EBIT margin by 50–75 basis points.
Expansion
- The medium-term plan includes services expansion for existing verticals.
- The medium-term plan includes vertical expansion into retail and utilities in the US.
- The medium-term plan includes geographic expansion into the Middle East and Canada.
- The company plans rightshore delivery as part of its medium-term aspirations.
- Capability expansion is identified as a key investment area.
New orders
- The company reported four large deal wins in Q1FY27.
New initiatives
- The company is infusing AI across its services.
- The company is developing vertical-specific language models.
- The company has expanded its sales team.
- The company is using the Intelligence That Operates playbook to disrupt the traditional business model.
Problems & risks
- The medium-term plan calls for curing or ceasing low-margin accounts.
What to watch
- Whether operating margin holds above 16.56% after the sequential decline.
- Whether expenses continue to grow below the 22.87% year-on-year revenue-growth rate.
- Whether other income remains a drag after contributing -29.9% of pre-tax profit.