Indian pure-play engineering service firms like L&T Technology Services, KPIT Technologies, Tata Elxsi, Tata Technologies and Cyient are expected to report a mixed third quarter amid uncertain demand from the automobile industry, while a gradual pick-up in auto R&D may provide a tailwind.
Analysts at brokerages Motilal Oswal, Kotak Institutional Equities and Equirus Capital expect a quarter-on-quarter (QoQ) revenue growth (in dollar terms) between 1%-2.8% for the October-December period.
Nonetheless, these brokerages expect some improvement in the performance of the companies in the next few months as greater visibility emerges on R&D spending.
“Macro uncertainties impacted spends in calendar year 2025, but the absence of those could be a marginal positive for CY2026… Yet, it would not indicate a broader improvement in demand,” analysts at Kotak noted.
Tata Elxsi is estimated to lead growth, buoyed by the improvement in auto R&D spending, especially for EVs and hybrid vehicles. The company, along with Tata Technologies, had a rating upgrade from global investment bank JP Morgan, leading to the shares of both companies rising 10% on Wednesday.
“The European Union is leading the investments, followed by Asia-Pacific, while the US is still a couple of quarters away from a bounceback,” analysts at JP Morgan said in a note.
While this is positive for KPIT, Tata Elxsi and Tata Technologies, given their higher EU exposure, LTTS’s exposure to the US makes it vulnerable, they highlighted.
KPIT remained the top pick for the brokerages. The company will benefit from the consolidation of its Caresoft and N-dream acquisitions although softness in the passenger vehicle segment could weigh on its performance, they said.
Ebit margins for the company are, however, expected to decline by 30-50 basis points QoQ due to amortisation of assets from its acquisitions and wage hikes.
Meanwhile, some growth stabilisation, including in the mobility and networks segment, is expected to cushion Cyient’s growth, with market participants’ focus on its semiconductor business.
While deal ramp-ups for LTTS are expected to help its revenue growth, analysts said its margins will see an improvement between 60-80 bps QoQ from currency tailwinds.
Looking ahead, Indian ER&D/engineering services growth is estimated at 15–20% in FY26, as global outsourced engineering spend is projected to reach $660 billion by 2030, with engineering service providers growing at a ~21% CAGR, according to research firm UnearthInsight.
“Pure-play ER&D companies remain better placed, benefiting from tailwinds in EVs and software-defined vehicles, even as the broader automotive industry environment remains soft,” said Gaurav Vasu, founder and chief executive of UnearthInsigh
Analysts at brokerages Motilal Oswal, Kotak Institutional Equities and Equirus Capital expect a quarter-on-quarter (QoQ) revenue growth (in dollar terms) between 1%-2.8% for the October-December period.
Nonetheless, these brokerages expect some improvement in the performance of the companies in the next few months as greater visibility emerges on R&D spending.
“Macro uncertainties impacted spends in calendar year 2025, but the absence of those could be a marginal positive for CY2026… Yet, it would not indicate a broader improvement in demand,” analysts at Kotak noted.
Tata Elxsi is estimated to lead growth, buoyed by the improvement in auto R&D spending, especially for EVs and hybrid vehicles. The company, along with Tata Technologies, had a rating upgrade from global investment bank JP Morgan, leading to the shares of both companies rising 10% on Wednesday.
“The European Union is leading the investments, followed by Asia-Pacific, while the US is still a couple of quarters away from a bounceback,” analysts at JP Morgan said in a note.
While this is positive for KPIT, Tata Elxsi and Tata Technologies, given their higher EU exposure, LTTS’s exposure to the US makes it vulnerable, they highlighted.
KPIT remained the top pick for the brokerages. The company will benefit from the consolidation of its Caresoft and N-dream acquisitions although softness in the passenger vehicle segment could weigh on its performance, they said.
Ebit margins for the company are, however, expected to decline by 30-50 basis points QoQ due to amortisation of assets from its acquisitions and wage hikes.
Meanwhile, some growth stabilisation, including in the mobility and networks segment, is expected to cushion Cyient’s growth, with market participants’ focus on its semiconductor business.
While deal ramp-ups for LTTS are expected to help its revenue growth, analysts said its margins will see an improvement between 60-80 bps QoQ from currency tailwinds.
Looking ahead, Indian ER&D/engineering services growth is estimated at 15–20% in FY26, as global outsourced engineering spend is projected to reach $660 billion by 2030, with engineering service providers growing at a ~21% CAGR, according to research firm UnearthInsight.
“Pure-play ER&D companies remain better placed, benefiting from tailwinds in EVs and software-defined vehicles, even as the broader automotive industry environment remains soft,” said Gaurav Vasu, founder and chief executive of UnearthInsigh
