Sonata Software Shares Plunge Over 16% Amid Q3FY25 Profit Decline and Client Ramp Down Concerns

Sonata Software shares dropped over 16% on February 7 after reporting a 1.4% QoQ decline in Q3FY25 net profit to ₹105 crore, with EBITDA falling 7.8% to ₹163.6 crore. The decline was driven by a client ramp down, severance costs, and wage hikes, impacting margins despite a 3.4% revenue growth in international services. However, the company secured major deals, including a multi-million-dollar Microsoft Fabric project, and remains optimistic about future growth.

CONTENTS:

• Sonata Software Shares Drop Over 13% Amid Client Ramp Down Concerns
• Sonata Software Shares Plunge Over 16% After Q3FY25 Earnings Report
• Sonata Software Q3 Results: Profit Declines 1.4% QoQ, Revenue Sees Growth

Sonata Software Shares Plunge Over 16% Amid Q3FY25 Profit Decline and Client Ramp Down Concerns

Sonata Software Shares Drop Over 13% Amid Client Ramp Down Concerns

Sonata Software Shares Plunge Over 16% Amid Q3FY25 Sonata Software shares dropped over 13% on February 7 following the announcement of a client ramp down in Q3FY25, which is expected to have a full-quarter impact on Q4FY25. The company had previously projected strong revenue growth for Q4FY25 but now anticipates a decline due to the unexpected reduction in business from a key client in the high-tech sector.

In its Q3FY25 results, Sonata reported a 1.4% quarter-on-quarter (QoQ) decline in consolidated net profit to ₹105 crore, with international services profit falling by 8.4% QoQ to ₹57 crore. EBITDA for the quarter dropped 7.8% QoQ to ₹163.6 crore, while the international services EBITDA declined by 16.9% to ₹107 crore.

The revenue from international services saw a 3.4% QoQ increase to ₹731.7 crore, whereas the domestic business experienced a significant 44.4% growth to ₹2,111 crore. However, the company’s margins were impacted due to a one-time severance payout, wage hikes, and furloughs in its international IT business, resulting in a 360 basis points (bps) decline.

Sonata attributed the client ramp down to the customer’s cost-optimization strategy and expects the negative impact to persist until Q4FY25, potentially extending into Q1FY26. Despite this, the company remains optimistic about returning to growth in the coming quarters.

On the positive side, Sonata reported strong deal wins with a total contract value (TCV) of $107 million, with over 44% of its large deal pipeline coming from Fortune 500 clients.

Following the announcement, HDFC Securities revised its earnings per share (EPS) estimates for FY26 and FY27 downward by 9% and 8%, respectively, citing growth concerns. However, the brokerage maintained an ‘Add’ rating on Sonata Software with a target price of ₹570 per share, based on FY27E EPS projections.

Sonata Software Shares Plunge Over 16% After Q3FY25 Earnings Report

Sonata Software Shares Plunge Over 16% Amid Q3FY25 Shares of Sonata Software plunged over 16% on February 7 after the company reported a 1.4% quarter-on-quarter (QoQ) drop in consolidated profit after tax (PAT) to ₹105 crore for Q3FY25. In comparison, the company had posted a net profit of ₹106.49 crore in the previous quarter.

During morning trading, Sonata’s stock was priced at ₹460.7 per share on the BSE, marking a 16.28% decline.

The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 7.8% QoQ to ₹163.6 crore. Meanwhile, its cash and cash equivalents stood at ₹176 crore at the end of the quarter.

Revenue from Sonata’s international IT services grew 3.4% sequentially to ₹731.7 crore. In dollar terms, revenue was $87 million, reflecting a 2.8% QoQ and 3.9% year-on-year (YoY) increase. However, the segment’s EBITDA declined by 16.9% QoQ to ₹107.1 crore, while PAT for international IT services fell by 8.4% to ₹56.9 crore.

The company’s international services posted a 4.4% QoQ growth in constant currency (CC), while the domestic business saw gross contribution growth of 16.7% QoQ.

Commenting on the results, Samir Dhir, MD & CEO of Sonata Software, highlighted key business wins during the quarter, including a multi-million-dollar deal on Microsoft Fabric and a Generative AI modernization project. He expressed confidence in the company’s long-term growth potential.

Headquartered in Bengaluru, Sonata Software maintains a strong global presence, serving markets across the US, UK, Europe, APAC, and ANZ.

Sonata Software Q3 Results: Profit Declines 1.4% QoQ, Revenue Sees Growth

Sonata Software Shares Plunge Over 16% Amid Q3FY25 IT services firm Sonata Software Ltd reported a 1.4% quarter-on-quarter (QoQ) decline in consolidated profit after tax (PAT) to ₹105 crore for the third quarter of fiscal 2025. Meanwhile, earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 7.8% QoQ to ₹163.6 crore. The company’s cash and cash equivalents stood at ₹176 crore at the quarter’s end.

Revenue from international IT services reached ₹731.7 crore, reflecting a 3.4% sequential increase. In USD terms, revenue stood at $87 million, showing a growth of 2.8% QoQ and 3.9% year-on-year (YoY). However, EBITDA for this segment dropped 16.9% QoQ to ₹107.1 crore, while PAT declined by 8.4% to ₹56.9 crore. Additionally, days sales outstanding (DSO) increased to 47 days from 45 in the previous quarter. The company also added 11 new customers during this period.

In the domestic products and services segment, gross contribution grew by 16.7% QoQ to ₹81.9 crore. EBITDA for this segment rose 16.6% QoQ to ₹56.4 crore, and PAT increased by 8.5% to ₹48.1 crore. DSO also climbed to 41 days from 35 in the previous quarter. The company’s return on capital employed (ROCE) improved from 45.2% to 48.5%, while return on net worth (RONW) rose from 44.6% to 47.7%.

Commenting on the results, Samir Dhir, MD & CEO of Sonata Software, noted that the company’s international business recorded 4.4% constant currency (CC) growth, despite EBITDA being impacted by one-time cost items. He highlighted two major deal wins during the quarter, including a multi-million-dollar project on Microsoft Fabric and a Generative AI modernization initiative. Dhir expressed confidence in the company’s long-term growth trajectory.

On Thursday, Sonata Software’s shares closed 0.3% higher at ₹551.60.