Business
Explained: Why Tata Elxsi shares crashed 7% after KPI Tech’s Q1 revenue, profit guidance warning
The company said it expects its Q1FY27 reported revenue in U.S. dollar terms to decline by around 1% year-on-year compared with Q1FY26. The decline has been primarily attributed to sudden actions by some European original equipment manufacturers (OEMs) following their recent profit warnings and adverse business outlook.
Also read:Why KPIT Tech shares crashed today: The BMW & Volkswagen connection explainedKPIT Technologies and Tata Elxsi are peers in the automotive technology space, developing software and engineering solutions for global automakers and Tier-1 suppliers. Both focus on next-generation mobility technologies, including software-defined vehicles, autonomous driving (ADAS), connected vehicles, electric vehicles, and vehicle electronics and embedded software.
Source of trouble
JPMorgan, which downgraded the stock, connected the dots directly by saying the update largely reflects an earlier profit warning tied to KPIT’s BMW account, compounded by troubles at Volkswagen. BMW is significant to KPIT’s business; the brokerage noted it is its largest client, representing 12% of revenues.
The global brokerage downgraded KPIT to Underweight and slashed its target price to Rs 550 from Rs 700. The brokerage estimated the $ revenue decline implies a steeper 4% quarter-on-quarter drop in constant currency terms, driven by the European OEMs‘ sudden pullback.
It also cut revenue estimates by 5–8% and margin estimates by 20–270 basis points across FY27–29, translating into EPS cuts of 9–22%, while trimming its target price-to-earnings multiple to 17x from 21x. JPMorgan now expects FY27 to mark a second straight year of organic revenue decline, projecting a 2.6% drop versus a 1.4% decline in FY26.
JM Financial also downgraded the stock, moving to REDUCE from ADD. The brokerage cut its FY28–29 earnings estimates by 12–13% and lowered its target multiple to 20x FY28E EPS from 24x, citing a muted near-term outlook. JM Financial said the update pushes KPIT’s recovery timeline further out and that FY27 is likely to be a soft year overall, even as it acknowledged that longer-term client cost pressures could eventually benefit KPIT through higher outsourcing. The brokerage flagged that earnings estimates remain vulnerable to further downgrades.
Read more: KPIT Tech shares crash 17% as company expects Q1 revenue decline, sharp hit to marginsShort term pain for KPIT?
Despite the warning, KPIT maintained that its underlying business remains strong. The company pointed to continued momentum in its products and solutions business, the trucks and off-highway segment, and markets including the US, Korea and India, along with new client wins in passenger vehicles.
It said it is pursuing AI-led productivity and cost-containment measures and remains confident of delivering sequential growth by Q4FY27, setting up a stronger FY28. Both H1FY27 and FY27 as a whole, however, are expected to fall short of earlier expectations.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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For more evidence that Tesla might not be a car company, consider the recent report that Tesla could be thinking of leaving its largest, most productive car plant in the world’s largest market for new cars and new EVs behind, in favor of an all-artificial-intelligence future.
Wall Street extended its late-month rebound on Friday, but it wasn’t enough to offset what’s been a tough July for equities.
The Nasdaq Composite ended the final trading day of July higher, up 1%. The S&P 500 also rose, gaining 0.7%. The Dow Jones Industrial Average climbed 0.5%, or 277 points.
Despite these gains, the S&P 500 and the Nasdaq weren’t able to finish the month higher. The Nasdaq ended July down 3.2%, while the S&P 500 fell 0.1%. The Dow ended the month higher, up 0.3%.
Ian Bezek is a former hedge fund analyst at Kerrisdale Capital. He has spent the decade living in Latin America, doing the boots-on-the ground research for investors interested in markets such as Mexico, Colombia, and Chile. He also specializes in high-quality compounders and growth stocks at reasonable prices in the US and other developed markets. Ian leads the investing group Ian’s Insider Corner. Features of the group include: the Weekend Digest which covers everything from new ideas to updates on current holdings and macro analysis, trade alerts, an active chat room, and direct access to Ian. Learn More.
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Japan to announce joint yen intervention with US, sources say – Reuters
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What Happened in Markets Today
Amazon shares surged 15% on strong cloud sales. The company reported 37% revenue growth in Amazon Web Services, the fastest growth rate in 18 quarters. Apple stock fell roughly 7% after it gave a disappointing forecast for the September quarter. Supply chain constraints are making it difficult for the company to source components for its iPhones and iPads.
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Why Roblox Had Its Worst Day Ever After Earnings
Treasury yields extended their recent gains Friday after three Federal Reserve officials explained why they cast dissenting votes in favor of raising interest rate this week.
Yields, which rise when bond prices fall, were also driven higher by economic data, including a stronger-than-expected reading on Chicago-area economic activity.
The yield on the 10-year U.S. Treasury note settled at 4.743%, according to Tradeweb, its highest closing level since January 2025. The 30-year yield closed at 5.274%, its highest since July 2007.
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