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30. July 2025
Sonata Software Surpasses Expectations With 133 Revenue Growth Amid Market Volatility
Sonata Software’s Resilient Performance Amidst Market Pressures
In a recent update on its financial performance for the quarter ended June 30, 2025 (Q1 FY26), Sonata Software announced a robust revenue growth of 13.3% sequentially to ₹2,965.2 crore, despite facing challenges in terms of margin pressure and softness in certain segments of its business. The company’s confidence on long-term growth, particularly driven by the increasing adoption of Artificial Intelligence (AI) solutions, remains unwavering.
CEO Samir Dhir highlighted three significant deals secured by the company, comprising two large BFSI clients and one TMT client, underscoring Sonata’s focus on securing substantial deals and demonstrating its execution prowess. These deals underscored the importance of AI in driving business growth for Sonata Software, as it continues to invest heavily in healthcare and BFSI verticals.
Over the past three years, Sonata’s investments in these areas have expanded from 13% to 32% of its revenue. As clients accelerate their modernization efforts to remain competitive in an increasingly digital landscape, Sonata remains optimistic about its long-term growth trajectory. Dhir emphasized that the company’s ability to navigate these shifts and capitalize on emerging trends will be crucial to its success.
In its international segment, Sonata reported a modest 0.6% revenue growth in reported terms, reaching $81.8 million, while exhibiting a 0.9% decline in constant currency. In rupee terms, this translates to a 0.3% decrease to ₹699.9 crore. The EBITDA margin remained steady at 16.6%, mirroring the previous quarter’s performance.
Notably, Sonata added seven new clients during this quarter, including a landmark $73 million AI-led digital modernization deal with a major US-based TMT company. This significant win not only demonstrates Sonata’s growing reputation in the AI space but also underscores its ability to deliver complex solutions that drive substantial revenue growth.
The domestic products and services segment, which accounted for ₹2,274.7 crore in revenue, up 18.6% QoQ, witnessed a decline in profitability. Gross contribution fell 12.6% to ₹68.5 crore, while EBITDA dropped 22.1% to ₹44 crore, resulting in a net profit decline of 14.6% to ₹38.6 crore.
MD & CEO Sujit Mohanty attributed the growth in cloud and data protection services to new client acquisition, citing its continued investments and partnerships with leading cloud providers as key factors. These efforts position Sonata well to capitalize on emerging opportunities from cloud-managed services in the coming quarters.
Despite the revenue growth, Sonata’s financial performance is characterized by a negative net cash position of ₹62.5 crore, despite having gross cash and equivalents of ₹600 crore. This highlights the need for operational efficiency improvements and prudent management of working capital.
In comparison to Q4 FY25, Sonata’s Q1FY26 reported stronger revenue growth, driven primarily by its domestic business. The consolidated revenue stood at ₹2,617.2 crore in Q4, with net profit slightly lower at ₹107.53 crore.
However, the EBITDA dip and margin pressure raise concerns about operational efficiency and the need for strategic interventions to address these challenges. As Sonata Software continues to navigate the complexities of a rapidly evolving market, its ability to balance growth aspirations with operational discipline will be crucial in determining its long-term success.
Key Statistics:
- Revenue Growth: 13.3% sequentially
- Net Cash Position: ₹62.5 crore (negative)
- Gross Cash and Equivalents: ₹600 crore
Conclusion: Sonata Software’s Q1FY26 results demonstrate resilience in the face of market pressures. The company’s focus on AI-driven solutions and strategic investments in key verticals are driving growth, while operational efficiency improvements remain essential to realizing its full potential. As Sonata Software embarks on this journey, it will be fascinating to observe how the company addresses these challenges and capitalizes on emerging opportunities in the AI space, ensuring a sustainable long-term presence in the market.