Sonata Software (SONATSOFTW) Q1 25/26 earnings summary

Executive summary

• Strategic focus on modernization engineering, AI-driven solutions, and platformization across healthcare, BFSI, retail, manufacturing, and TMT verticals, with operations in five key geographies.

• Three large deals secured in Q1 FY26, including a $73M AI-led digital modernization deal and major contracts in technology outsourcing and cloud/data transformation for US-based clients.

• Cloud & Data now represent 59% of revenue, up from 50% three years ago, reflecting a successful modernization strategy.

• AI-enabled services expected to contribute 20% of revenue in three years; 93.5% of workforce trained on AI.

• Recognized among the fastest-growing service providers and as a most preferred workplace for 2025-26.

Financial highlights

• Consolidated revenue at ₹2,965.2 crore, up 13.3% QoQ and 17.3% YoY; PAT at ₹109.3 crore, up 1.7% QoQ and 3.5% YoY.

• International services revenue at $81.8M, up 0.6% QoQ, down 1.1% YoY; EBITDA margin at 16.6%.

• Domestic business revenue at ₹2,274.7 crore, up 18.6% QoQ and 23% YoY; EBITDA down 22.1% QoQ.

• Cash and equivalents at ₹600 crore; net cash negative due to Quant earn-out and loan repayment.

• EPS per share: ₹3.94 for Q1 FY26.

Outlook and guidance

• No concrete forward guidance; focus remains on achieving top quartile growth among mid-tier peers.

• Management expects positive growth for the year, supported by order book momentum and large deal pipeline, but acknowledges ongoing uncertainties.

• Margins targeted to approach 20% by year-end, driven by large deal ramp-up, improved utilization, and cost management.

• Continued investments in cloud, AI, and data modernization, with significant partnerships and product launches.

• Strategic bets on verticalization, large accounts, and global brand evolution to Sonata.AI.