Sonata Software Ltd. share price target

Mixed bag quarter; AI-led pipeline remains strong About the stock: Sonata Software (Sonata) provides IT services and product licensing services to its clients in BFSI, HLS (Healthcare & Lifesciences), R&M (Retail...

Sonata's outlook is anchored on management's guided "gradual improvement in growth over the medium term." Domestic business should return to growth within FY27 and BFSI is largely stabilised, though minor further client-level contraction is possible.

Sonata Software delivered a resilient FY26 despite a challenging macro backdrop, with consolidated PAT growing 9.3% YoY to INR 464.4cr and international business PAT to INR 292.7cr, up 18.7% YoY. International dollar revenue grew modestly at 2.1% YoY to USD 328.4mn, while EBITDA margins in Q4 improved by 70bps QoQ to 20.2%, driven by better utilization (91.8%), offshore mix improvement, and AI-led operational efficiency. AI-led order book reached USD 49mn for FY26, now contributing ~18% of total bookings, with pipeline at USD 280mn across 100+ clients. The company announced a...

Sonata Software delivered a resilient Q3 FY26 performance despite headwinds from a few large clients. Revenue grew marginally QoQ, but profitability improved sharply, with EBITDA rising to ~19.5%, driven by higher utilization, offshore mix improvement, AI-led productivity, and cost optimization, even after absorbing wage hikes and higher cloud costs. The company's strategy as a modernization engineering firm powered by platforms and AI is gaining traction, with AI-led deals now contributing 14% of the order book and cloud/data forming ~50% of the pipeline. Large deal momentum remains strong, with two...

Q3FY26 Performance: International IT services (IITS) revenue came at US$ 82.3 mn, up 0.3% QoQ/ down 6.8% YoY in CC terms. IITS EBITDA margin at 19.5%, up ~220 bps QoQ. Consol revenue came at US$345.8 mn, up 42% QoQ while in rupee terms it stood at 3,080.6 crores, up 45.4% QoQ and 8.4% YoY with EBITDA margin...

Growth is expected to recover gradually as the impact of large-account headwinds tapers off and ramp-ups from recent wins begin to contribute more meaningfully.

Sonata Software demonstrated a resilience performance with reported consolidated revenue at INR 2,119cr, reflecting a 2.3% YoY decline but stable order book growth with a book-to-bill ratio of 1.28x. International services revenue grew 3.2% YoY to USD 82mn, driven by strong demand in Healthcare, BFSI, and TMT verticals. EBITDA margin expanded by 70 bps QoQ to 17.3%, supported by higher utilization (87.3%), planned large-deal offshoring, and AI-led productivity improvements, partially offsetting salary inflation impact. Sonata secured one large multi-year healthcare deal and several mid-sized...

Q2FY26 Performance: International IT services (IITS) revenue came at US$ 82 mn, up 1% QoQ/ down 2.9% YoY in CC terms. IITS EBITDA margin at 17.3%, up ~70 bps QoQ. Consol revenue came at US$ 242.8 mn, down 30% QoQ while in rupee terms it stood at 2,119.3 crores, a decline of 28.5% QoQ and 2.3% YoY with EBITDA...

Revenue: Sonata Software Q1FY26 revenue grew by 17.3% YoY (+13.3% QoQ) to INR 29,652 Mn, outperforming expectations primarily on the back of strong domestic business momentum, despite several headwinds faced by the company during the quarter.

Sonata delivered a steady Q1 FY26 performance, with international services revenue at USD 81.8mn (up 0.6% QoQ, down 1.1% YoY) and EBITDA at 16.6%. USD105mn order book and USD 46mn in AI-led deal wins, including three large deals across BFSI and TMT, reflect strong momentum. Seven new enterprise clients were added, and BFSI and Healthcare & Life Sciences now contribute over 34% of revenue. Sonata's modernization strategy has anchored in AI, data platforms, and engineering which continues to scale, supported by strategic partnerships with Microsoft, AWS, Wharton, and IISc. AI now drives 20% of the...

Sonata posted a weak operating performance in International IT Services (IITS) in Q4. IITS revenue declined 7.2% QoQ CC, below our expectations. The decline was majorly attributed to higher-than-expected ramp down at a large TMT client, along with Quant seasonality.

We initiate coverage on Sonata Software (SSOF) with BUY and TP of Rs780, at 30x Dec-26E earnings. In its International IT Services business, SSOF delivered ~26% revenue CAGR over FY21-24 and ~4.3% CQGR over the last 10 quarters which remain among the top quartile revenue growth performances.