Sonata Software (SONATSOFTW) Q2 25/26 earnings summary

Executive summary

• Focused on becoming a differentiated AI modernization engineering firm, leveraging proprietary platforms and deepening AI and data capabilities across four verticals and five geographies.

• Consolidated PAT grew 10% QoQ to INR 120.2 crore, with large healthcare and AI-led deals offsetting BFSI headwinds.

• Cloud & Data now constitute 62% of revenue, up from 50% in FY22, reflecting a successful modernization strategy.

• Nearly 95% of workforce AI-trained, with ongoing compensation revisions and industry awards for AI solutions and workplace culture.

• Large deal pipeline remains robust, with 40% of active pipeline consisting of large deals and 32% with Fortune 500 clients.

Financial highlights

• International services Q2 FY26 revenue at $82M (₹730.3 crore), up 0.2% QoQ (1% in constant currency); repeat revenues up 4.3% QoQ.

• Consolidated Q2 FY26 revenue at INR 2,119.3 crore, down 28.5% QoQ and 2.3% YoY; PAT at INR 120.2 crore, up 10% QoQ and 12.9% YoY.

• Domestic business revenue at INR 1,391.3 crore, down 38.8% QoQ and 4.8% YoY; PAT at INR 42.2 crore, up 9.3% QoQ.

• EBITDA before other income and forex improved to 17.3%, up 70 bps sequentially; consolidated Q2 EBITDA at ₹172.7 crore, up 8.2% QoQ.

• Second interim dividend declared at INR 1.25 per share; cash and equivalents at INR 323 crore.

Outlook and guidance

• Expect PAT to further accrete in H2 FY26, with full quarter upside from Q2 actions to reflect in Q3.

• Large deal momentum and AI adoption expected to drive sustainable EBITDA improvement.

• BFSI headwinds expected to be fully absorbed by Q3, with growth resuming in Q4.

• Continued focus on Microsoft SMC sector, AI-led partnerships, and large system integration deals for domestic business.

• Large deal pipeline remains robust, with 28 large deals in pursuit and average pursuit cycle of 4-6 quarters.