Netweb Technologies Ltd. - Strong performance driven by execution of AI mission deal

We revise our target price on Netweb Technologies to Rs 3,725 and maintain our HOLD rating. Netweb delivered strong numbers in Q3FY26, led by execution of AI mission deal (Rs 4.5 Bn) which boosted growth in the AI systems segment (47.6% contribution 9mFY26). Govt contributed 25.1% revenue vs non-Govt 74.9% as the AI deal is classified as non-Govt. We expect full year margins to be in the range of 12.5-13.5% going ahead on the back AI mission deal execution and higher cost of components. Cash conversion cycle improved on the back of higher payable days. We expect Netweb to deliver 49.7% revenue CAGR over FY25E–28E, on the back of strong deal pipeline (Rs 42.7 Bn), consistent execution, and healthy balance sheet (Rs 2.0 Bn cash).

AI Systems continues to drive growth:

We expected AI systems to contribute 40%+ in FY26e (14% in FY25) and it has delivered contributed 47.6% with a growth of 104.1% in 9mFY26(excluding the AI mission deal). This is on the back of large deal wins from enterprises for high grade AI systems. HPC and HCI grew 16.3% and 23.9% on a 9m basis. On a 9m basis the company has grown at 33.3% excluding the AI mission deal, which is in-line with their guidance of 30-40% growth. The strong growth in the orderbook (11.9% qoq, 45.9% yoy) gives us confidence that demand continues to be strong across segments.

Margins to normalize over FY27-28e:

Margins declined by 280 bps qoq and 100 bps yoy on the back of the AI mission deal. AI mission deal was executed at 150-200 bps lower to the recurring business and that shall hold true for rest of the order. We expect margins to normalize to 12.5-13.5% in FY27 /28e. Higher component prices are also adding to the pressure on the supply side. Since the company was well equipped to manage their inventory for H2 they didn’t face any issue with execution. Cash conversion cycle days improved to 69 days in Q3 vs 120 days in Q2 on the back of higher advances from clients. We expect cash conversion cycle to be in the range of 85-90 days for FY26e (84 days in FY25).

Strong Outlook:

Netweb continues to be on a firm strategic footing, backed by strong execution, a healthy deal pipeline (Rs 42.70 Bn) and L1+Orderbook (Rs 8.57 Bn) (excluding AI mission) which will be executed over the next 3-4 months, and a future-ready product portfolio. We believe the company will continue to grow at 30%+ organically over the next 2 years on the back of strong demand for HPC’s, private cloud and rising adoption of AI systems.

Valuations, view & risks:

We are factoring in 49.5%/48.1%/49.7% Revenue/EBITDA/PAT over FY25-FY28E, and value the company at 55x Q3 FY28 PE, resulting in a TP of Rs 3,725. We have trimmed our EPS by 6.6% over FY6-28e to factor in the lower margins from AI mission deals and higher component prices. We expect the company to win orders worth Rs 8-10 Bn from the existing AI mission over the next 12 months. Our base case estimates do not factor any possible deal wins from AI mission in the upcoming budget or NSM 2.0. Our bear/Bull case TP is at Rs 2,760/4,406 respectively. Key risks: Slowdown in execution of AI mission deals, cancellation of any orders won from AI mission, slowdown in organic growth from cloud and HPC’s.

Company website: https://www.netwebindia.com/

*CMP is as per report published date

Click to download the full Netweb Technologies Ltd Q3FY26 Company Update

Analyst:

• Vinay Menon - Senior Research Analyst, Institutional Equities (NISM-201600112117)
• Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)

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FAQs on Netweb Technologies Ltd Q3FY26 Company Update

Investors evaluating Netweb Technologies often focus on its AI-driven growth, margin outlook, and short-term trading potential. Below are concise answers to the most relevant investor queries.

1. Is Netweb Technologies a good swing trading stock?

Netweb offers a selective swing trading setup supported by strong AI system execution, improving cash flows, and a visible orderbook, though upside is capped by near-term margin pressure.

2. What is driving Netweb’s recent performance?

Strong execution of the AI mission deal and rapid growth in AI systems, which contributed nearly half of revenues, are the key growth drivers.

3. Why are margins under pressure?

Margins declined due to lower profitability on AI mission deals and higher component costs, though normalization is expected over FY27–FY28.

4. How strong is Netweb’s order visibility?

The company has a healthy deal pipeline and L1 orderbook that provides revenue visibility for the next few quarters, supporting growth confidence.

5. What are the key risks for investors?

Key risks include delays in AI deal execution, order cancellations, and slower growth in HPC or private cloud demand.

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