Nagarro presents Q2 and H1 2026 numbers, posts 2.0% and 4.2% YoY revenue growth in constant currency in Q2 and H1 2026, respectively

Nagarro reported Q2 2026 revenue of €252.4m (flat YoY at +0.2% in euro terms), with adjusted EBITDA up to €37.8m (+23.9% YoY) and adjusted EBITDA margin rising to 15.0% from 12.1%. H1 2026 revenue was €500.5m (+0.3% YoY in euro terms) and net profit increased to €29.8m (+52.0% YoY), while operating cash inflow slowed to €29.5m (down from €42.4m) due to pending client collections. The company declared a €1.00/share dividend (~€12.4m, 14.9% of 2025 EBIT), and ended June 30 with cash of €131.3m vs €124.6m at year-end.

Analysis

This reads more like a margin repair story than a demand inflection. The market will likely reward the adjusted EBITDA beat in the near term, but the more important signal is that revenue quality is still only low-single-digit in constant currency and gross margin has not re-accelerated. In IT services, that usually caps multiple expansion because investors eventually anchor on pricing power and utilization, not just adjusted profit optics.

The biggest tell is the widening gap between adjusted EBITDA and reported EBITDA/EBIT, which implies equity compensation is doing a lot of the heavy lifting. If that SBC burden persists, the company can look healthier on the surface while true per-share economics remain flat. Second-order, a slow-growth environment pushes more competition into price and mix, which tends to pressure mid-cap digital engineering peers before it shows up in headline revenue.

Balance sheet and cash generation are still the bull case: leverage is manageable, cash is ample, and the dividend signals management confidence. But the H1 cash pattern also means the next catalyst is collections, not just bookings; if working capital doesn’t normalize in Q3, the market will discount the adjusted numbers more aggressively. Over 1-3 months, the call and any guidance commentary matter; over 6-18 months, the thesis depends on whether AI transformation spend becomes real incremental demand rather than a rebranding of existing projects.

Key Decisions for Investors

• Sell strength / fade any post-earnings rally in NGRRF over the next 1-3 months; the risk/reward favors downside if investors refocus on flat organic growth and SBC dilution. Stop out if management raises full-year organic growth guidance or shows sustained >5% constant-currency growth.
• Relative-value pair: long EPAM vs short NGRRF into the next 1-2 quarters. EPAM should command the higher quality-growth multiple, while NGRRF is more vulnerable if revenue momentum stays low-single-digit. Falsify the pair if NGRRF prints a clear re-acceleration in gross margin or bookings.
• If holding NGRRF for yield, keep it small and treat it as a cash-flow/defensive position rather than a growth asset. Re-underwrite only if Q3 cash collections reduce working capital drag and DSO falls below current levels.
• Watchlist alert, not a trade: if reported operating cash flow in Q3 does not recover materially, expect another de-rating in the stock despite adjusted EBITDA stability. That would be the cleanest signal that reported earnings quality is not converting into shareholder returns.