KPIT Technologies shares plunged 17% to Rs 559.20 on Wednesday, bringing the company's market capitalisation down to Rs 15,421.96 crore, after the automotive engineering software firm flagged an unexpected revenue slowdown linked to its European clients, with analysts pointing to BMW and Volkswagen.
In a preliminary update on its Q1FY27 performance, KPIT stated that it now expects results to come in below earlier expectations, citing a sudden decline in revenues over the last few weeks. The company stated that it expects USD-reported revenue to decline by roughly 1% year-over-year in Q1FY27, a reversal attributed to the abrupt actions of some European original equipment manufacturers (OEMs) following their own profit warnings and weaker business outlooks. KPIT described the impact as unforeseen until recently, but characterized it as a short-term phenomenon that could, over time, push more outsourcing and automation work its way.
The profit hit will be worse than the revenue hit. KPIT said operating margins (EBITDA) and net profit margins will fall sequentially in Q1FY27 by proportionately more than revenue, since there isn't enough time in a single quarter to cut costs in response.
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BMW and VW source of pain?
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.
What KPIT says comes next
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.
