This article first appeared on GuruFocus .
Release Date: November 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Sonata Software Ltd ( BOM:532221 ) reported a 10% increase in EBITDA, reaching 17.3%, driven by operational efficiencies and AI adoption.
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The company's AI order book grew from 8% to 10% quarter-on-quarter, indicating strong demand for AI-driven solutions.
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Sonata secured a large multi-year deal with a leading healthcare provider in the US, showcasing its capability in modernization and AI integration.
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The North America business now represents over 70% of Sonata's total revenue, reflecting successful geographic expansion.
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Sonata's training initiatives have resulted in 95% of its workforce being AI-trained, enhancing its future readiness and service delivery capabilities.
Negative Points
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Sonata faced significant headwinds from its largest BFSI client due to organizational changes and budget constraints, impacting revenue.
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There were decision delays in the largest TMT customer and global RMD, affecting the company's growth momentum.
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The company's domestic business faced challenges due to potential changes in Microsoft's direct billing strategy, which could impact future revenue.
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Sonata's on-site to offshore revenue mix remains skewed, with a lower offshore percentage compared to industry peers.
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The BFSI vertical experienced a notable revenue decline, attributed to issues with a top client, affecting overall vertical performance.
Q & A Highlights
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Q: Why is Sonata Software's on-site offshore mix skewed towards on-site compared to other large companies? A: Unidentified_1 clarified that Sonata's offshore ratio improved from 53% to 57% this quarter. The comparison with other companies might be based on headcount mix, whereas Sonata's figures are based on revenue mix. Unidentified_5 added that the focus should be on revenue mix rather than headcount mix.
Q: What interventions are required to achieve broad-based growth across verticals, and how is the products business performing despite revenue drops? A: Unidentified_3 explained that Sonata has made significant progress in banking and healthcare verticals, with revenue from these sectors increasing from 13% to 32% over three years. Retail manufacturing has been slow, but TMT has shown strong growth outside of big tech. Unidentified_7 added that the focus is on maintaining and growing gross contribution despite revenue fluctuations.
Q: How is the domestic business, particularly with Microsoft, expected to evolve given potential direct contracts? A: Unidentified_7 stated that Microsoft might engage directly with a limited number of large accounts, but this is not a complete shift from indirect to direct models. Sonata is diversifying its business to mitigate potential impacts and expects to maintain growth in the medium to long term.
Q: Why is there a gap between the net new deal TCVs and incremental revenue growth? A: Unidentified_3 explained that the total contract value (TCV) represents multi-year deals, which may span 3 to 10 years. The revenue growth reflects the realized revenue within a specific year, which is naturally less than the total TCV.
Q: What is the impact of the BFSI client issues on Sonata's revenue, and when can growth be expected to resume? A: Unidentified_3 noted that the largest BFSI client has seen significant ramp-downs, impacting revenue. However, other BFSI accounts are growing well, and the full impact of the large client's issues should be absorbed by the end of Q3, with growth expected to resume from Q4 onwards.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
