Sonata Software dips 7% post Q1 results; Emkay retains Buy, here's why

Shares of Modernisation Engineering Company Sonata Software fell as much as 6.61 per cent to an intra-day low of ₹386.55 per share on the NSE during intra-day deals on Thursday, July 31, 2025. 

 

At around 1:40 PM on Thursday, Sonata Software shares were seen trading at ₹392.85 per share, down 5.10 per cent from its previous close of ₹413.95 per share on the NSE. The counter saw trades of around 1.5 million equity shares estimated to be valued at around ₹58 crore on the NSE, and BSE. 

Why are Sonata Software shares falling today?

The fall in the company's share price came on the back, after the company reported its Q1 results,  which came below street expectations. During Q1FY26, the company reported a rise in its profit after tax (PAT) by 3.5 per cent year-on-year (Y-o-Y) to ₹109.3 crore from ₹105.6 crore reported in Q1FY25. The company’s revenue increased by 17.3 per cent Y-o-Y to ₹2,965.2 crore from ₹2,527.4 crore.

 

During the quarter, the company's earnings before income tax, depreciation, and amortisation (Ebitda) advanced 3.5 per cent Y-o-Y to ₹109.3 crore from ₹105.6 crore.  Check List of Q1 results today

Management commentary

Commenting on the Q1 performance, Samir Dhir, MD & CEO of Sonata Software, said, "international IT Services Q1 marked steady progress with revenue growth of 0.6 per cent on a sequential basis. We secured three large deals -two in BFSI and one in TMT- underscoring our focus on large deals and execution strength. Our focused investments in Healthcare and BFSI have scaled from 13 per cent to 32 per cent of revenue over three years, validating our diversification strategy. As clients accelerate modernization to stay competitive, we remain confident in our long-term growth trajectory."

 

Sujit Mohanty, MD & CEO of Sonata Information Technology, added, "We gained new clients in cloud and data protection services. Our continued investments and partnerships with leading cloud providers position us well to grow revenue from cloud-managed services in the coming quarters."

Emkay retains 'Buy' rating on Sonata Software shares

Analysts at Emkay have retained their Buy rating on the stock with a target price of ₹475 at 22x Jun-27E EPS. The analysts, however, highlighted that the company posted another quarter of weak operating performance in Q1.

 

Analysts pointed out that the company secured three major deals in Q1, including a $73 million total contract value (TCV) with a US-based TMT client. It reported total order bookings of $105 million and a book-to-bill ratio of 1.28x. Growth during Q1 was led by a large TMT deal ramp-up, continued strength in HLS, and demand for data and AI services.

 

However, performance was impacted by softness in retail and manufacturing, budget pressures at a key BFSI client, and broader macroeconomic slowdown. The domestic business faced the impact of a slowdown in the IT/ITeS sector, with several OEMs planning a shift to a direct engagement model for large clients.

 

The analysts further highlighted that, "The management refrained from providing specific growth outlook, citing challenges in RMD, a large BFSI client, and macro uncertainty. However, it remains hopeful of positive revenue growth in IT Services in FY26. It expects to achieve near-20 per cent Ebitda margin in IT Services by FY26-end, driven by large deal ramp-ups, improved utilisation, offshore shift, and pyramid rationalisation. Factoring in the dismal Q1 performance, analysts have cut FY26-28E EPS by 1-9 per cent."

About Sonata Software

Headquartered in Bengaluru, Sonata Software is an IT services and solutions company specialising in modernisation engineering and digital transformation. The company's suite of Modernisation Engineering Services spans data, cloud, Dynamics, automation, cybersecurity, and newer technologies like Generative AI, Microsoft Fabric, and other modernization platforms. Sonata Software has a strong global presence, including key regions such as North America, the UK, Europe, APAC, and ANZ. The company has a market capitalisation of ₹10,981.44 crore on the NSE, as of July 31.