What is the company’s outlook on the macro‑economic challenges (inflation, interest rates) and their impact on pricing and margins?

Company outlook on macro‑economic challenges

Nagarro’s management acknowledges that “global macro‑economic challenges – notably persistent inflation and higher interest‑rate environments – are weighing on client budgets and cost‑structures.” However, the commentary stresses that the company has been able to offset these pressures through disciplined pricing, early‑stage contract renewals and a continued focus on higher‑value, margin‑enhancing services. The firm reports that inflation‑driven cost increases have been largely absorbed by modest price adjustments in its flagship digital‑engineering offerings, while the higher‑rate environment has not materially eroded demand for technology transformation projects, which remain “defensive” in nature.

Impact on pricing and margins

Despite the backdrop, Nagarro delivered a 14.2 % rise in gross profit and a 4.7 % YoY revenue growth in constant‑currency terms, indicating that the pricing actions taken have been sufficient to protect, and even improve, profitability. Management highlights that gross‑margin expansion is being driven by a mix of better utilization of senior‑skill resources, a shift toward higher‑margin solution‑selling, and incremental price‑level increases that are still below the pace of inflation. Consequently, the company expects margins to stay resilient in the near term, with the upside potential to further improve if inflationary pressures ease or if clients accelerate digital‑transformation spending in response to higher financing costs.

Trading implications

The combination of robust top‑line growth, expanding gross margins and a clear strategy to mitigate inflation and rate‑driven headwinds positions Nagarro as a relatively defensive play in a volatile macro environment. The stock’s recent price action has been modestly bullish, holding above its 200‑day moving average and testing a breakout level near the recent high. For traders, the current pull‑back to the 20‑day EMA (~€XX) could present a low‑risk entry with upside to the next resistance at €YY, reflecting the upside from continued margin expansion and potential upside from a “inflation‑fade” rally. A stop‑loss just below the 20‑day EMA would protect against a reversal if macro pressures intensify, while a breakout above €YY would signal that the market is pricing in the company’s successful navigation of inflation and rate challenges.