Tata Elxsi Ltd Management Discussions

FY 2025-26

Business Environment

The global economy in FY 2025-26 has demonstrated tenuous resilience, navigating a complex landscape of divergent growth patterns, shifting trade policies, supply chain constraints and heightened geopolitical environment. Also, the escalation of tensions in the Gulf region during the last quarter of FY 2025-26 has contributed to global economic volatility and deep concerns on energy security. Global growth indicators have remained tepid with governments and businesses balancing the global headwinds and risk mitigation considerations against a backdrop of significant technological influences related to Artificial Intelligence (AI) and digital infrastructure.

Enterprises globally are transitioning to a dual-speed model through relentlessly optimising legacy costs while aggressively funding future-focused innovations. The discretionary spends, especially in media, entertainment and automotive segments have remained muted to moderate and are expected to remain so in the near term. During the financial year, global Automotive and Healthcare markets experienced heightened volatility as U.S.-led localisation initiatives, changes in Federal policies and tariff-driven trade barriers disrupted supply chains and cost structures, prompting industries to reassess R&D investments and operating models.

Technology and Engineering R&D Spend

Multiple surveys indicate the global technology spending in FY 2025-26 is showing an increasing trend, as enterprises transition from limited proof-of-concept AI and digital initiatives to production-ready deployments. Organisations are increasingly allocating a higher proportion of budgets towards scalable and resilient digital infrastructure, with cloud, AI- and data-related investments accounting for a significant share of discretionary technology spend.

The integration of Artificial Intelligence as a new operating system is a top 2026 trend, focusing on automation and predictive customer experience. Enterprises maintained emphasis on organisational efficiency, operational resilience, and cost optimisation. Technology investments were largely directed towards AI-enabled automation, cloud platforms, cybersecurity, and data engineering, reflecting priorities around productivity improvement, risk mitigation, and regulatory compliance.

Global Engineering Research & Development (ER&D) spending is experiencing a growth trajectory, driven by digital transformation, sustainability imperatives, and AI acceleration, with the sector shifting towards intelligent, software-defined products, with a significant surge in outsourced ER&D to India. The following specific trends are noticed:

Core Technology Trends

> Enterprises are adopting GenAI as a high-priority spend area to improve carbon-efficient product designs, sustainable product life cycles, augment product features, to deliver secured AI-native products

> Digital Engineering (IoT, Cloud, AI) is garnering a larger share of overall ER&D budgets to enhance efficiency and product connectivity

> Software-defined Vehicles (SDV) with greater emphasis on Autonomous, Connected, Electric, and Shared (ACES) technologies

> Digital Twins & Digital Threads are becoming the most chosen approach for predictive maintenance and simulation that connects the product lifecycle

> Companies are investing in simulation-rich validation to shrink product development timelines and meet rapidly changing consumer expectations

Strategic Dimensions

Due to geopolitical tensions and tariff considerations, enterprises are spending on regionalised R&D to market specific decentralised, hyper-local engineering models

Rise of Global Capability Centres (GCCs) in India are evolving from back-office support to hubs of innovation and is becoming the norm for major R&D spenders especially in Automotive, Telecom, Media & Entertainment and Medical Device verticals

While India remains the dominant outsourcing hub, nearshore hubs in LATAM and Eastern Europe are gaining prominence for better talent acquisition and retention

Outsourcing contracts are moving away from purely domain-centric talent towards system-level, end-to-end engineering teams / capabilities

Enterprises are prioritising agility, cost-efficient consumption models, and regulatory compliant digital transformation initiatives

Sector specific spending patterns

(@y$sy) Automotive & Transportation:

Spending directed towards EV development and ADAS (Advanced Driver Assistance Systems)

Healthcare & Medical Devices:

Higher spend on remote diagnostics, wearable technology, and AI-driven drug discovery

Telecom, Media & Entertainment:

Focused on cloud-native platforms and software applications and platforms to promote mobility, connectivity and interoperability

Industry Outlook

Automotive

The global automotive industry during the financial year was characterised by a recalibrated electrification trajectory alongside stable overall demand, with global light vehicle sales projected to remain largely flat at approximately 92 million units. While Battery Electric Vehicle (BEV) adoption continues to expand, with volumes expected to reach around 17.4 million units in 2026, the pace of transition has moderated, prompting original equipment manufacturers (OEMs) to increasingly prioritise hybrid models as a pragmatic bridge to address infrastructure and adoption challenges. OEMs adopted a more calibrated approach to EV investments, focusing on cost competitiveness, platform scalability, and software-led differentiation. As a result, engineering spends increasingly shifted towards optimising EV platforms, power electronics, battery management

According to NASSCOM, the ER&D outsourcing market is expected to show a stable or increasing trend, driven by digitally connected, AI-first products and platforms, Industry 4.0 and smart manufacturing, platformisation, next-generation mobility, and data and AI-centric engineering.

In summary, the ER&D sector is witnessing a shift towards higher-value innovation, accelerating AI-enabled design and digital-twin techniques to compress development cycles.

Tata Elxsi is well positioned to support clients on the above trends and priorities by leveraging its design-led, AI-first, domain-centric capabilities, while maintaining focus on operational discipline and long-term value creation.

systems, and vehicle software like ADAS, rather than capacity expansion alone.

India, China, and Southeast Asia remained key contributors to incremental vehicle volumes and technology adoption. These markets also saw increasing penetration of connected vehicle features and digital services, with consumers demonstrating a willingness to pay for enhanced infotainment, user experience, and software-enabled functionality. The growing adoption of connected and software-driven architectures has simultaneously heightened OEM and consumer focus on automotive cybersecurity, data privacy, and compliance with evolving regulatory standards. The prevailing uncertainties, softness in demand and shift towards a software-heavy product development are weighing heavily on the revenues and margins of automotive suppliers, even

as global OEMs recalibrate their product and technology strategies and R&D spends.

In this industry context, global OEMs and suppliers continued to pursue innovation while exercising greater discipline in R&D and engineering investments, increasingly focused on technologies that offer regulatory compliance, safety enhancement, and monetisation potential. Key areas of sustained investment included software-defined vehicles (SDVs), advanced driver assistance systems (ADAS), telematics and connected vehicle platforms, vehicle-to-everything (V2X) communication, automotive cybersecurity, and fast-charging and power electronics technologies.

Against this backdrop, Tata Elxsis Automotive & Transportation business remained aligned to the evolving needs of global OEMs and ecosystem partners while expanding business from OEMs headquartered in Japan and Germany, including large multi-year strategic engagements aligned to our customers future roadmaps. The Companys capabilities across SDV engineering, AUTOSAR and middleware development, EV systems and powertrain engineering, ADAS and autonomous systems, connected vehicle platforms, cybersecurity, and digital user experience positioned it well to support OEMs in their platform transformation and cost-optimisation initiatives. Tata Elxsis design-led approach, spanning product engineering, embedded software, validation, and digital experience, enabled customers to accelerate time-to-market while addressing quality, safety, and regulatory requirements.

Media & Communications

The global media & entertainment industry is undergoing a period of structural transformation, marked by significant disruption to traditional business models.

Artificial intelligence assumed a more central role across the Media & Communications value chain. The industry progressed from exploratory initiatives to targeted deployment of GenAI across content operations, customer engagement, and network management. Media enterprises increasingly applied AI to content editing, quality control, localisation, metadata enrichment, and accessibility, while communications service providers (CSPs) advanced towards AI-driven assurance and closed-loop operations. This evolution also increased focus on governance, transparency, and controlled adoption frameworks.

Regulatory and trust considerations became increasingly integral to platform and product decisions. Globally, enhanced platform governance frameworks increased expectations related to content moderation, auditability, and risk management. These developments influenced customer priorities, with compliance-by-design and privacy engineering becoming essential components of technology programmes. Global media markets continued to operate in a measured demand environment. Streaming platforms maintained a cautious approach to content and technology investments, balancing subscriber growth with margin and cash-flow considerations. This resulted in increased emphasis on ad-supported tiers, content portfolio optimisation, bundling strategies, and selective investments in high-impact content categories. Technology spending was increasingly directed towards improving monetisation efficiency, content discoverability, and operational resilience, rather than capacity expansion.

Against this backdrop, Tata Elxsis Media & Communications business remained aligned with the evolving priorities of its global customers. The Company supported OTT platforms with cloud-native streaming architectures, multi-CDN optimisation, device testing and certification, and enhancements to content discovery and personalisation. Tata Elxsi also worked with advertisers and media platforms to modernise AdTech ecosystems, focusing on privacy-resilient identity solutions, clean-room integrations, and measurement frameworks.

For communications service providers, Tata Elxsi focused on network and customer experience transformation initiatives aligned to operators margin and efficiency objectives. The Company delivered solutions across network modernisation, service assurance, and AI-enabled cloud-native network architectures. These engagements supported CSPs in improving operational efficiency, service quality, and resilience amid ongoing monetisation pressures.

Looking ahead, the Media & Communications industry is expected to continue its digital-led transformation, with ongoing focus on monetisation efficiency, automation, and regulatory compliance. Advertising-funded video, OTT and

Healthcare

The global healthcare industry in 2026 continues to benefit from strong structural tailwinds, driven by increasing investments in technology and innovation. Advancements in artificial intelligence are playing a pivotal role in enhancing drug discovery, improving clinical efficiency, and optimising patient outcomes, thereby helping offset the impact of rising medical inflation.

The sector is also witnessing a gradual shift towards decentralised care models, with the emergence of hospital-at-home frameworks supported by remote monitoring solutions and AI-enabled diagnostics. Regulatory developments increasingly shaped design choices and delivery models. In the EU, the AI Act entered into force with phased applicability and is expected to classify most AI-driven medical devices as high-risk, adding requirements for data governance, transparency, human oversight, and post-market monitoring alongside MDR/IVDR (Medical Device Regulation/in vitro Diagnostic Regulation). In the US, interoperability progressed under TEFCA (Trusted Exchange Framework and Common Agreement) and industry dialogue at HIMSS 2025 reinforced the centrality of secure data-sharing to unlock AI value. These dynamics favoured compliance-by-design architectures spanning data pipelines, model life-cycles, and clinical workflows.

AI-enabled operations are expected to remain key areas of technology investment, while customers are likely to remain selective and outcome-oriented in their spending decisions. In this environment, Tata Elxsi continues to focus on deepening long-term customer relationships, strengthening its engineering and platform capabilities, and supporting customers across the lifecycle-from platform design and development to optimisation, compliance, and continuous evolution. The Companys domain expertise and design-led engineering approach position it to support Media & Communications enterprises as they navigate ongoing industry transformation.

The industry is expected to sustain a technology-led transformation, with a continued shift from pilots to platform-level adoption across digital front-doors, interoperability, and AI-enabled operations. Providers are likely to emphasise operational efficiency and patient engagement; payers will advance AI-assisted claims, utilisation and member services; and MedTech will invest in differentiated innovation while navigating evolving AI and device regulations.

In this environment, Tata Elxsi will continue to deepen strategic partnerships, expand capabilities across Software-as-Medical-Device (SaMD) and connected-care platforms, and support customers across the full lifecycle-from concept and design through development, validation, regulatory enablement, and post-market evolution.

Business Analysis

Tata Elxsi is regarded by our clients and industry analysts as a specialised technology partner, delivering design-led AI-native engineering R&D solutions leveraging emerging digital technologies. During FY 2025-26, the Company further consolidated its presence in North America, Europe and Japan through sustained deal wins and strong servicing capabilities. Additionally, Tata Elxsi was able to leverage its strong portfolio to advance adjacencies in each of its core verticals. Tata Elxsi continued to win engagements in Transportation, Media & Communication and Healthcare verticals including a few early wins from aerospace and defence players.

Tata Elxsis business growth was further supported by its strong ecosystem of strategic partnerships across cloud platforms, semiconductor and SoC leaders, and global system integrators. These alliances enabled the Company to offer silicon-to-cloud, scalable and future-ready solutions that aligned closely with customers transformation priorities. By co-innovating with partners and jointly addressing complex engineering and digital challenges, Tata Elxsi enhanced its relevance in large customer programmes, expanded wallet share within existing accounts, and accelerated the conversion of opportunities across key verticals. Tata Elxsi also strengthened its growth trajectory through focused partnerships in AI and digital technologies, positioned across the continuum from intelligent edge to cloud. Collaborations with hyperscalers, AI platform providers, and domain-focused digital partners enabled the Company to embed AI into its offerings and platforms. This ecosystem brought both diversity of innovation and depth of expertise, allowing Tata Elxsi to address use cases spanning embedded intelligence, real-time analytics, and enterprise-wide digital transformation.

As AI increasingly becomes foundational to customer strategies, these partnerships enhance Tata Elxsis ability to deliver differentiated, future-ready offerings, deepen customer engagement, and create sustainable long-term growth across its key industries.

While Tata Elxsi has been able to maintain a strong roster of clients and reported significant deal wins over the course of the year, the uncertain global spend and volatility have resulted in FY 2025-26 being challenging in terms of financial performance. During FY 2025-26, the Company announced operating revenues of 3,757.4 crore, a growth of 0.8% over the previous year. Tata Elxsis operating profit, measured as EBITDA, reached 846.8 crore, with an EBITDA margin of 22.5%. Profit before tax before exceptional items amounted to 920.8 crore. The Companys profit after tax (PAT) before exceptional items for the year was reported at 698.6 crore.

Industry Verticals

Transportation, Media & Communication, Healthcare & Life Sciences are the three main verticals. Tata Elxsis offerings are seen by its clients as differentiated and our clients acknowledge the human-centric approach, end-user intuitive experience design and sustainability dimensions in its solutions, all of which are being delivered in the AI Native paradigm.

The Transportation vertical accounted for 55.9% of SDS operating revenues in FY 2025-26. In line with the shift in market dynamics, OEM contribution increased to 75% of transportation revenues in FY 2025-26 from 69% in FY 2024-25. In line with evolving market dynamics, we continue to deliberately pivot our customer portfolio towards OEM engagements. We are selectively expanding our OEM partnerships while structuring large, high-impact engagements. The modest growth of 3.9% in FY 2025-26 was led by large SDV programmes with OEMs. The 10.0% improvement in the second half of FY 2025-26 over the first half underscores the shift to OEM revenues and large deal wins, and establishes a solid foundation for continued growth in FY 2026-27.

Media & Communication vertical accounted for 31.8% of SDS operating revenues in FY 2025-26. The segment witnessed consolidation moves amongst the players, leading to demand shifts from its current customers towards efficiency driven by increasing contribution from AI-led and platform-based engagements. In the muted market environment, this vertical reported a marginal degrowth of 1.2%. While the market recovers, the 7.9% uplift achieved in the latter half of FY 2025-26 strengthens our platform for accelerated growth in the next financial year.

Healthcare & Life Sciences vertical accounted for 10.9% of SDS operating revenues in FY 2025-26. Your Company secured multi-year deals in AI and GenAI-enabled regulatory workflows, with a growth outlook for FY 2026-27.

Across all the verticals, we continued our efforts to move up the product engineering value chain, strengthening our position as a chip to cloud engineering partner. Our multi-faceted association with Qualcomm has led us into

new frontiers such as virtualising the System on Chip (SoC) for software defined vehicles (SDV), pioneering the worlds first RDK B integration on 5G fixed wireless access platform, and innovating on extended reality-based platforms. Our alliances with Infineon and Renesas have enabled access to latest semiconductor technologies and help us engineer next generation hardware for new energy vehicles. The strategic partnership with ARM processors and its automotive enhanced (AE) technology will help automotive OEMs and Tier-1s to fast-track their development cycles.

The geographic contribution to revenues remained well diversified during FY 2025-26, with growth led by Japan and Europe within the transportation vertical, while North America dominated revenues for Media & Communication and Healthcare. The Companys offshore delivery model remained a key strength, contributing to 73.8% offshore revenue mix, enabling scalability and cost efficiencies across programmes.

Your Company had a workforce of 11,540 employees at the end of FY 2025-26. Attrition remained stable, supported by continued focus on talent retention, skill development, and nurturing a performance-led culture.

The Companys operations across verticals and geographies are supported by its core service lines, including Software Development and Services (SDS) and Systems Integration and Support (SIS). Continued investments in SDV platforms, AI/GenAI frameworks, and domain-specific solutions such as NEURON, AVENIR, and RegAI have strengthened the Companys positioning as a design-led and technology-driven engineering partner.

Software Development and Services (SDS)

SDS remains the core growth engine of the Company, delivering integrated design, software, and digital engineering solutions across industries. During FY 2025-26, the Company strengthened its design-led and AI-enabled engineering strategy, resulting in deeper engagement across customer product lifecycles and increased participation in large, multi-year transformation programmes. Key investments in proprietary platforms such as AVENIR for SDV, RegAI for healthcare, and AI-led automation frameworks have enabled differentiated offerings and stronger deal conversion.

The SDS segment reported revenues of 3,648.7 crore, reflecting steady business supported by strong momentum in transportation and improving trends in other verticals. Over 90% of SDS revenues were generated from existing clients, highlighting the depth and strength of relationships. At the same time, the Company continued to add marquee clients in each of the chosen verticals and diversify its portfolio through expansion into adjacent segments such as off-highway transportation, AI-led healthcare solutions, and aerospace and defence. This diversification, combined with a strong pipeline of large deals and increasing adoption of AI/GenAI technologies, provides a robust foundation for sustained growth in the coming years.

System Integration and Support (SIS)

During FY 2025-26, the System Integration and Support (SIS) business continued its shift towards value-added professional services, expanding its role in delivering consulting-led, end-to-end technology solutions to enterprises. The business now operates in alignment with our three verticals, offering comprehensive services spanning hardware, software, IT infrastructure, and cloud deployment in a multivendor environment.

The practice has been strengthened through the integration of advanced technologies such as AR/

VR, Digital Twins, and data-driven decision support platforms for managing large-scale IT infrastructure. These enhanced capabilities position SIS strongly to tap into emerging opportunities across enterprise digital transformation and cloud modernisation. During the year, Tata Elxsi strengthened its industry leadership through key recognitions, including being honoured as the ISG Field Support Partner of the Year for Dell Technologies, the LG Strategic Partner Award and the VR Excellence Award from Barco.

Key Wins

Tata Elxsi delivered a year marked by strategic customer additions, large multi-year engineering programmes, and significant progress across its Transportation, Media & Communications, and Healthcare & Life Sciences businesses. These wins strengthen the Companys design-led engineering positioning and reinforce its role as a partner of choice for global OEMs and enterprises.

In Transportation, Tata Elxsi secured multiple long tenure, multi-miNion-dollar Software Defined Vehicle (SDV) programmes, led by its expanding partnership with Suzuki. The SDV development centre in Thiruvananthapuram continued to scale, where a new Cloud Hardware-in-Loop (HIL) and simulation centre was inaugurated to accelerate validation for next-generation vehicle platforms. Your Company secured a prestigious deal with Mercedes-Benz India to develop software defined vehicle (SDV) programmes. The Company also won additional marquee programmes with leading Japanese OEMs and a European OEM. With Transportation contributing over half of overall revenues, the vertical demonstrated healthy business traction driven by deal ramp-ups, new logo wins across Japan and Europe, and healthy momentum in adjacencies such as off-highway.

Aerospace and Defence is the latest addition to the transportation vertical. The Company secured a turnkey design and development programme for advanced airport guidance systems from a U.S.-headquartered aerospace supplier. The multi-year engagement spans system design, validation, regulatory compliance, and manufacturing support - demonstrating Tata Elxsis growing credibility in high-assurance engineering domains. Your Company also handed over the prototype of unmanned combat aerial vehicle CATS Warrior to HAL (Hindustan Aeronautics Limited) and delivered the next iteration of Crew module recovery model (CMRM) with uprighting system to Human Space Flight Centre (HSFC) of ISRO.

In Media & Communications , the Company won a significant digital transformation mandate from a media leader to build a next-generation streaming and audience engagement platform. Efficiency-led consolidation deals continued to scale, supported by proprietary platforms such as NEURON for network automation. The Company also won a marquee project with a major media and publishing group in the Middle East & Africa to develop an immersive, digital-first news and entertainment platform that integrates GenAI for content and experience acceleration.

The Company partnered with MBC to power its new MBCNOW entertainment aggregator to seamlessly integrate linear TV with Voice on Demand (VOD) for a unified viewing experience. This has won the Best in Linear Distribution BroadcastPro Middle East Awards 2025.

In Telecom, Tata Elxsi was selected as the strategic partner by a leading European telecom operator to drive its three-year autonomous network transformation journey using NEURON, reinforcing the Companys leadership in platform-led orchestration and automation across 4G/5G networks. These wins strengthen its position in addressing operator transformation, cost efficiency, and software-defined network modernisation.

In Healthcare & Life Sciences , the Company won multiple strategic programmes across geographies, including a multi-year, multi-million regulatory workflow transformation deal with a Europe-headquartered MedTech multinational. Powered by Tata Elxsis RegAI framework, this engagement integrates AI, GenAI and automation to reduce cycle times and improve traceability and compliance.

The Company advanced its dedicated offshore centre initiatives, strengthening long-term customer engagements and expanding capacity for high-value, critical programme deliveries. It has expanded its delivery footprint with the establishment of a Global Technology Centre for Medical Devices for Bayer. This dedicated centre will co-develop advanced radiology devices and technology aimed at early and accurate diagnosis of critical illnesses. The Company also opened an Engineering Centre for Terumo , supporting the development of cardiac and vascular solutions.

Additional wins included a next-generation drug preparation system for a leading U.S. healthcare major, and advanced system design and simulation for a Japan-headquartered OEM. Together, these programmes strengthen Tata Elxsis portfolio across medical devices, digital health, regulatory technology, and imaging innovation.

Across customer experience and design-led engagements, Tata Elxsi continued to build success through award-winning innovation. The Companys work in GenAI-powered development, immersive design, and systems engineering across multiple marquee brands further strengthened its reputation for delivering differentiated, high-valued outcomes.

Products and Platforms

Tata Elxsis products and platforms continued to mature and gain industry-wide recognition through FY 2025-26. They bring together deep domain expertise across autonomous, electric, connected, and software-defined vehicles, supported by state-of-the-art labs, mobility innovation centres, and a growing portfolio of AI-enabled engineering solutions.

AVENIR Tata Elxsis SDV suite brings together cloud-native development, validation, and deployment frameworks that accelerate OEM transitions to Software Defined Vehicles. AVENIR integrates advanced simulation, large-scale HIL infrastructure, and Tata Elxsis extensive automotive software expertise to support end-to-end SDV engineering programmes across global OEMs.

MOBIUS+ is designed to accelerate the shift towards cleaner mobility by enabling digital transparency, traceability, and compliance across the EV battery lifecycle. As part of a consortium-led initiative showcased at the Battery Summit 2025, Tata Elxsi demonstrated Battery Aadhaar powered by MOBIUS+, supporting Indias ambitions for sustainable mobility and circular energy systems. Developed in collaboration with leading industry and research partners, the platform enables verifiable battery identity, lifecycle insights, and sustainability tracking aligned with national green mobility goals. NEURON continued to stand out as one of Tata Elxsis most visible platforms in FY 2025-26. The autonomous network orchestration and automation platform enables operators to modernise networks through zero-touch operations, cloud integration, service assurance, and efficient multi-domain management. NEURON underpinned large consolidation programmes, next-generation service delivery platforms, and a multi-year autonomous network transformation initiative with a leading European telecom operator. It forms a critical foundation for 5G and emerging 6G-aligned network transformation.

DevStudio.Ai strengthens Tata Elxsis position in the automotive engineering value chain by enabling OEMs and Tier-1 suppliers to accelerate automotive-grade software development. Its multi-agentic Engineer-plus-AI model enhances productivity across system, software, and test engineering, offering end-to-end traceability aligned to ASPICE standards. The platform is already deployed across Body, Chassis, Infotainment, ADAS, and emerging Software-Defined Vehicle programmes, with leading customers in North America, Japan, and India reporting tangible speed-to-market and efficiency gains.

TETHER AUTO continues to be our winning platform that enables OEMs to deliver secure, scalable, and data-driven connected vehicle experiences. Its vendor & cloud-agnostic design positions TETHER AUTO as a cost-efficient platform with exceptional low-latency performance. Building on its success, TETHER has now onboarded two new passenger vehicle OEMs in APAC and Agri Equipment OEMs in Europe and Japan, delivering seamless connectivity features.