Before we begin, let me briefly explain how you can submit questions. If you join us via Zoom, please use the raise hand icon or the Q&A box, both located at the bottom of your Zoom window. If you have joined us via the phone, please press star one on your telephone keypad. Please limit yourselves to two questions initially. You may re-enter the queue. We will return to unanswered questions if time permits. With that, it is my pleasure to hand you over to Michael.
Great. Thank you, Adam, and good afternoon, everyone. My name is Michael Knapp, and I am part of the investor relations team at Nagarro. If you have not yet received a copy of our earnings release, you can find it, as well as a copy of our half yearly statement and today's presentation, in the investor relations section of nagarro.com. Joining me today is Manas Human, our Co-founder and Custodian of Entrepreneurship, and Prateek Aggarwal, our Chief Financial Officer. Before we begin, please note that some of our statements made during this call may be forward-looking and are subject to risks and uncertainties as outlined in our financial reports. Additionally, please refer to our half yearly statement for important information regarding non-IFRS measures. With that, I am pleased to hand you over to Manas.
Thanks, Michael. Once again, welcome everyone, and thank you for joining us on this earnings call. Let me start this call by talking a few minutes about the topic of the day, AI. It is now becoming very clear that enterprise AI transformations will have to be anchored in excellent engineering. The challenge with AI, as we are hearing about every day, is to make it work consistently, dependably, and safely across complex mission-critical environments, and that is primarily an engineering problem. This is now becoming very obvious to our clients. It is very exciting and very validating, if I may say so, that the capabilities that Nagarro has developed over the years and over decades are now an excellent fit for this new world. Nagarro brings deep engineering depth across data, AI platforms, and products.
On top of this engineering, we bring strong client intelligence and client context developed over long-term relationships with these clients that stretch over years and very often decades. Having worked so long in digital transformations at those clients, we bring the capability to navigate those clients, to navigate the enterprise complexity across business, tech, and operations. We have always been helping clients go from strategy to execution. We work routinely with the world's leading consulting firms to bridge the gap between that strategic advice and the engineering execution. Hence today, when our clients want to scale AI and create value with responsible guardrails and with safety and trust, we believe Nagarro is the right engineering partner for them.
Beyond the results of the quarter just gone by that we will get into in a moment, this is the overall context that as we stand at the starting line of this AI revolution, we feel that Nagarro is a very strong contender. With those introductory words, let's get into the quarter. There have been many exciting developments since the last earnings call. I will start with the most important among them, our potential combination with Persistent Systems. On June 26, Persistent and Nagarro signed a business combination agreement to form the Persistent Nagarro Group, a global leader in AI-led digital engineering. Following up on that, on August 4th, Persistent announced that its shareholders have approved the proposed acquisition of Nagarro SE in their AGM. Following the authorization by BaFin, Persistent's voluntary public takeover offer for all of Nagarro shares is now open.
You can find the details of this offer at www.galaxy-offer.com. Please note that several mandatory regulatory approvals are still not in place and still awaited, and the teams are working hard to procure these. Please also note that some hours ago, Nagarro's management board and supervisory board have issued the joint reason statement on the voluntary public takeover offer, which supports and welcomes the offer as being in the best interest of Nagarro, and recommends that the Nagarro shareholders accept this offer. This is just the gist of the joint reasons statement. The entire joint reasons statement can be found on our website. We will not be taking any questions here about the proposed combination on this call since the joint reasons statement is out there in all its glorious detail, and we can't really add to it with our answers. Please bear with us on this.
We will not be taking any questions. You are, please invited to refer to the joint reasons statement. Moving on to other exciting developments in this quarter. Nagarro's quarterly NPS has hit an all-time high of 70. Our NPS has mostly stayed in the 60s, dropping below 60 only once. But to have it up at 70 for the first time is very gratifying. I would like to congratulate all my colleagues who are doing great work for all our clients, and also thank our clients for their trust and collaboration that's delivering this joint success. In 2026, Nagarro participated in the ISG Digital Engineering Services study for mid-sized providers for the very first time. And we were ranked number one globally in customer satisfaction and delivery execution, which got us the CX Star Performer in the ISG Star of Excellence.
Importantly, the Star of Excellence recognition is based on independent customer feedback, which makes it particularly meaningful and gratifying. This is a high honor that correlates very nicely to the point above on our high NPS. In addition to the CX Star Performer recognition, we were recognized as a leader for Europe in the ISG Provider Lens. Finally, we signed on many incredible new clients this quarter. These include an iconic global sporting event that takes place every four years. By the way, we also work with another iconic global sporting event that takes place every four years, but this one is a new client. It includes one of the hottest U.S. brands of running shoes.
It includes a leading European insurance group, a Middle Eastern government health services department, a leading U.S. roofing maker, a leading tiling and flooring maker from the Middle East, a leading auto company in Japan, an iconic apparel group in Australia, and many others. In fact, even after the end of Q2, there have been many similarly exciting new client wins between June 30th and today, but I will leave these for the next earnings call. Now, let's get into the quarter. I will turn my camera off so you can focus on the numbers. We delivered a decent financial performance in the first half of 2026, generating revenue of EUR 501 million, representing 4.2% constant currency growth year-over-year. Q1 was 6.5% constant currency growth, whereas Q2 was slower at 2.0% constant currency growth.
Comparing H1 2026 to H1 2025 across our top five countries, in constant currency, it is interesting that revenues have grown strongly in three of the five largest countries for us. In constant currency, revenues from the U.S. grew 9.0% from H1 2025 to H1 2026. India revenues grew 14.7% in this same period. UAE, the Emirates, revenues grew 16.8%. But revenues from Germany declined 3.8% and Austria declined 5.0% due to a couple of specific client and engagement contexts. We see these Germany and Austria scale-downs as temporary and are working to reverse them. Overall, what we are seeing is that the broader demand environment for digital services remains muted as our clients still work through and think through the implications of AI on digital build. Against that muted demand scenario, our results demonstrate the strength of our customer relationships and the power of diversification.
Gross margin exceeded 32% in Q2 with a healthy mix of business, strong rev delivery execution, and ongoing operational discipline across the organization. At the same time, adjusted EBITDA margin reached 15.0% in Q2 2026, although assisted by some FX movements. We see still large, significant low-hanging opportunities to improve sustainable profitability through improved utilization and streamlining investments. We now have a new CFO. We are working on those and expect to see results by Q4. Customer engagement and satisfaction, of course, remain key indicators of the health of our business, and we continue to see encouraging results in this area. As I just mentioned, our customer satisfaction metrics are excellent. Our CSAT score of 93.2 and a NPS of 70. These underscore the trust our clients place in us and the value they see in our partnership.
We believe that these customer outcomes are a direct reflection of our strategy with people, our culture, and a commitment to delivering measurable business impact. The number of clients generating more than EUR 1 million of revenue in the trailing 12 months increased to 184, up from 179 in the first quarter. With that, Prateek, would you like to discuss the balance sheet and cash flows? Prateek, I think you're on mute. Yeah, go ahead, please.
Yeah, sure. Sorry. I would be happy to. The chart on the left shows our financial position as at June 30th, 2026. The financial liabilities were EUR 310.5 million and lease liability was EUR 67.4 million. Our cash balance remained strong at EUR 131.3 million, in fact, grew versus the previous six in this last six months, implying net liabilities of EUR 246.6 million and a net leverage ratio of 1.7x. The company's liquidity position at the end of the six-month period was comfortable, with working capital of EUR 236.2 million, which of course includes EUR 131 million of cash. Total cash flows for the six-month period ended June 30th show a total cash inflow of EUR 4.6 million versus an outflow of EUR 57.7 million for the comparable period last year. Operating cash flow, OCF, for Q2 was EUR 29.8 million.
For the six-month period, OCF was EUR 29.5 million, decreasing by EUR 12.9 million from EUR 42.4 million in H1 of 2025. This was primarily due to pending collections from some clients, which we are confident of collecting in Q3. The first 1.5 months of Q3 have already been very productive, and we are promised very good numbers for the upcoming quarter. Working capital was also impacted by increased payments related to trade payables and statutory dues as compared to H1 2025. Days sales outstanding increased from 85 days at June 30th, 2025, to 86 days at the end of June 2026, which we are confident of bringing down in Q3, as I mentioned earlier. As you all know, we calculate DSO based on quarterly revenues and include both contract assets and trade receivables.
Cash flow from investing activities for the current six-month period was an outflow of EUR 2.9 million, and CapEx was just EUR 1 million, less than 1% of the six-month revenue, reflecting our asset-light model. Cash outflow from financing activities for the current six-month period was EUR 22.1 million as compared to EUR 95.8 million in H1 last year. Cash outflows decreased mainly due to decrease in the purchase of treasury shares amounting to EUR 47.8 million and a decrease in net repayment of bank loans of EUR 23.9 million. With that, I'll hand the call back to Manas.
Thanks, Prateek. Before we conclude and before we go to Q&A, I'd like to leave you with a few thoughts on why I'm so excited about the future. We believe that this potential combination of Persistent and Nagarro represents a unique opportunity to create a truly differentiated global leader in AI-led digital engineering. The strategic logic is very compelling. We have laid out in public the complementarities in terms of geographical presence, the complementarities in terms of industry footprints, and the complementarities in terms of our offerings as well. Even beyond that, while these complementarities are very important, even beyond that, what is equally important is that this combination will bring together two organizations that share similar ethical values, a strong heritage in engineering, and a long-term commitment to clients and associates around the world. That's what is very, very exciting for us.
But meanwhile, regardless of that process and regardless of those outcomes, Nagarro remains fully focused on serving our clients and executing our strategy for transformation, growth, and leadership in this new AI world. Thank you for your continued support, your engagement, and your confidence in us. With that, we can now transition to Q&A. As I mentioned before, we will not be taking any questions related to the potential business combination with Persistent. Over to you, Adam.
Thank you. As a reminder, if you would like to ask a question on today's call and you have joined us via Zoom, please use the raise hand icon or the Q&A box provided at the bottom of your Zoom window. If you are joining us via the telephone, please press star followed by one, and participants are reminded to limit yourselves to two questions initially and re-queue for further questions. Our first question today will come from Martin Comtesse from Jefferies. Martin, please go ahead, unmute and ask your question.
Hey, Manas. Hey, Prateek. Thank you for taking my question. I just wanted to touch quickly on the respective regions. I can see that, and you mentioned that Germany in particular stood out as a negative in the second quarter, but also in the first half, while the U.S. accelerated. Can you just point out specific topics or reasons why that is? Is it really just a geographical difference in terms of how uncyclical the markets are? In that regard, maybe also touch on the status quo of your initiative with German Mittelstand, but also maybe with Japan as a new focus area, because that has been quite a highlight in the past. The second question would be on pricing. Can you mention how pricing has evolved since your debates evolved much more around AI and how you worked it into your offering in the tender process?
Thank you.
Thanks, Martin. Thanks for the question. Our results in Germany are affected by the planned ramp down of some SAP projects, among other things. I think it's a little bit temporary and not necessarily structural. On the other hand, in the U.S. especially, our management consulting-related work is increasing. This is, again, tying back to what I just said about the link between strategy and engineering execution. I think we do that very well, and that is actually playing out well in the U.S. as companies are trying to move faster on AI. In terms of the Mittelstand, I think our progress has been strong in the SAP space. Beyond SAP, we have had some progress, but it's still been not moving the needle as much as we would like it to.
In Japan, I think we have started to increase our footprint, our headcount, our number of clients, but again, like Europe, it's a geography where progress takes time and takes the building of trust and relationships. We, again, have some work ahead of us. Coming to pricing with AI, of course, the models are still evolving. When it comes to fixed bids and long-term engagements, clients are expecting the productivity gains of AI to be factored into those long-term models. That is not a very large part of our business, I must say. In the time and expense part of our business, there's a lot of room to design it in different ways. You must have heard about it from all the industry players. We see a large variety of different plays there.
But in general, the pricing pressure is less on the time and expense side of things. In fact, we don't feel it as much there at all. Thanks, Martin.
Thank you, Manas.
The next question comes from Yannik Siering from MPCM. Yannik, please go ahead and unmute and ask your question.
Great. Can you hear me?
Yes, we can.
Great. Thanks a lot for taking my questions. The first one would be on the margin bridge of your guidance. Q2 improved quite a bit. You hit already these 15%. Could you maybe provide some color on how much of the Q2 step-up is related to this non-repeat of last year's, I think it was around EUR 18 million FX revaluation losses, compared to really genuine utilization, SG&A leverage, and then also what underlying margin we should carry forward into H2? That would be the first one. The second question would be on the organic demand. Organic growth decelerated quite a bit in Q2. Could you talk about the drivers of the slowdown, maybe also about your pipeline, where book-to-bill is right now, and if your weaker verticals are stabilizing or if they are still deteriorating? Thank you.
Thanks, Yannik. Maybe I'll take the revenue one first, and then we can go to Prateek for the margin bridge. In terms of the revenue side, as you can see from the numbers I just talked about, the weakness is coming from the German and Austrian markets, where it's linked to a few clients where we've had either planned project ends or there's been some temporary cutbacks. But we expect that to be fixed in the coming quarters. As far as the pipeline is concerned, the pipeline remains kind of stable. I think that we continue to see weakness in the horizontal tech part, but that's an increasingly smaller part of our business. There are other parts, like the management consulting segment, which is doing well, and manufacturing and industrial is also doing reasonably well. So I think we see a spread in that.
We don't have a formal booking or pipeline number that we share, and we don't share book-to-bill, et cetera, numbers. But in general, the pipeline looks just reasonable. But I will just hand it over, Yannik, to Prateek for the margin bridge to guidance.
Sure, Manas. Yannik, as you know and you would have seen if you've been tracking us, that there are some large moving around numbers on two scores. One is the share purchase ESOP, the cash-settled ESOPs that we have. And depending on how the share price moves in any quarter, those numbers have been impacting the P&L. The second one, which you already referred to, is the Forex line items, and there are at least three or four different types of Forex line items. Some related to the intercompany loan that we have between SE and the Inc. part of our businesses or legal entities and the mark to market and so on and so forth. So while they were individually large items individually, but at the aggregate level, they more or less, the difference was not more than three odd million as far as the numbers go.
There are some numbers which are affecting the P&L, obviously, because our costs have gone up in the last one year, et cetera. But overall, without that, 15% is something which is not grossly because of these moving elements. The Forex, which you talked about, has certainly given a positive impact. But at the same time, as you would have seen, there is EUR 10 million of adjustments this quarter, and the largest one of them is EUR 8.1 million, which is basically because of the share price going up and the cash-settled calculation that are there as per Black-Scholes model, et cetera, based on the last day share price has given that EUR 8.1 million hit. So that's more or less nullifying the benefit of the Forex. Hope that helps. Thank you.
Great. Thanks a lot.
Thanks, Yannik.
As a reminder, if you'd like to ask a question and you've joined us via Zoom, please use the raise hand icon or the Q&A box. If you're joining us via the phone, please press star followed by one on your telephone keypad. We have no further questions, so I'll hand it back to the management team for any closing comments.
Great. Well, thank you, Adam, and thank you everyone for joining us today and for your questions and participation. We appreciate your interest in Nagarro, and we look forward to connecting with you again soon.
This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.