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 in EUR vs €252.0m prior; +2.0% YoY in constant currency) and lifted adjusted EBITDA to €37.8m (+23.9% YoY; 15.0% margin vs 12.1%). H1 2026 revenue was €500.5m (+4.2% YoY in constant currency), with adjusted EBITDA rising to €69.1m (+13.7% YoY) and net profit up to €29.8m (+52.0% YoY). Despite EBITDA/EBIT declines due to higher share-based payment costs and lower gross profit, operating cash inflow improved in Q2 to €29.8m and the company declared a €1.00/share dividend (14.9% of 2025 EBIT).

Analysis

This is more a quality-of-earnings story than a growth story. The market should treat the adjusted EBITDA improvement cautiously because the cash business is not yet compounding fast enough to justify a higher multiple, and share-based comp is leaking through the P&L in a way that can keep reported earnings under pressure even when management highlights margin progress. In IT services, the winners over the next 12 months will be vendors that can show both mid-single-digit constant-currency growth and stable conversion; Nagarro is only halfway there, so any rerating should remain capped versus larger, more liquid peers like EPAM or ACN.

The near-term support comes from capital return and a still-healthy balance sheet, which can put a floor under the stock and blunt downside in the next few weeks. The real watch item is cash collection: flat DSO at a high level means the H1 cash profile is not yet self-evidently durable, so if Q3 receipts slip again the market will likely treat the current cash generation as timing noise rather than a structural improvement. That would matter more than the dividend itself because it would re-open the debate on whether earnings quality is improving or just being managed.

Contrarian read: the consensus may be overvaluing the adjusted margin expansion while underweighting dilution and weak euro-reported growth. Unless management can show a step-up in organic growth and reported EBITDA convergence over the next 1-3 quarters, this looks like a stock that can support income investors but struggle to sustain a premium multiple over 6-18 months. The thesis breaks if constant-currency organic growth re-accelerates above roughly 3-4%, DSO falls materially, or reported EBITDA begins tracking adjusted EBITDA more closely.

Key Decisions for Investors

• Short NGRRF on any post-print strength over the next 1-3 weeks; thesis is multiple compression on low growth and SBC drag, with downside limited only by dividend support. Cover if management guides to >3-4% organic constant-currency growth for 2H or if reported EBITDA improves without another SBC spike.
• Pair trade: long EPAM / short NGRRF for 1-3 months to isolate quality-vs-quality: better organic growth and cleaner earnings conversion on the long leg versus Nagarro's cash-flow timing risk and diluted reported margins on the short leg.
• Treat NGRRF as a hold-only income name, not a growth re-rating candidate, unless Q3 cash collections confirm the H1 cash inflow was structural. If DSO stays at ~86 or rises, fade rallies rather than adding.
• For more risk-tolerant accounts, buy downside protection in NGRRF around the next earnings call rather than outright shorting; the dividend and cash balance can create temporary support, but a miss on collections is the cleaner catalyst for a sharp re-rate.