This article first appeared on GuruFocus .
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International Services Revenue:$82 million, representing 0.1% quarter-on-quarter constant currency growth and 2.1% year-on-year constant currency growth.
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International Services Rupee Revenue:INR777.2 crores, a degrowth of 0.3% quarter-on-quarter and a growth of 11% year-on-year.
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International Services EBITDA:13.4% for Q1, a degrowth of 4.8% quarter-on-quarter from 20.2% in Q4 2026.
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International Services PAT:INR62.2 crores, including a Forex loss of INR6.8 crores.
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Domestic Business Revenue:INR2,505.6 crores, a growth of 42.4% quarter-on-quarter and 10.2% year-on-year.
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Domestic Business Gross Contribution:INR78.5 crores, a growth of 4.2% quarter-on-quarter and 14.5% year-on-year.
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Domestic Business PAT:INR45.9 crores, including a Forex loss of INR0.6 crores.
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Consolidated Revenue:INR3,279.1 crores, a growth of 29.3% quarter-on-quarter and 10.6% year-on-year.
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Consolidated PAT:INR108.61 crores, including a Forex loss of INR7.4 crores.
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Order Bookings:$97.4 million with a book-to-bill ratio of 1.18x.
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AI Order Book:$21.4 million in Q1 2027, contributing 18.2% of the overall order book.
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AI-Led Pipeline:$340 million in Q1 2027.
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Utilization:88.5% in Q1 2027, down from 91.8% in Q4 2026.
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Headcount:6,293 in Q1 2027, with an attrition rate of 13%.
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EPS:INR3.9 per share in Q1 2027, against INR4.71 per share in Q4 2026.
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Cash Balance:Closing cash balance of INR567 crores with a net positive cash of INR67 crores.
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Release Date: August 07, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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AI-led pipeline improved 21% quarter-over-quarter, with AI-led order wins up 27%.
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Launched enterprise-grade agentic AI service delivery platform 'Workbench' to enhance software delivery and developer productivity.
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Appointed a Chief AI Officer and strengthened leadership in key accounts and regions to drive AI-native transformation.
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Domestic business returned to growth, with revenue up 42.4% QoQ and gross contribution up 14.5% YoY.
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Order bookings improved to a book-to-bill ratio of 1.18x, with AI order book contributing 18.2% of total order book.
Negative Points
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International services revenue growth was flat at 0.1% QoQ constant currency, reflecting mixed market conditions.
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EBITDA margin for international services declined to 13.4% from 20.2% QoQ due to one-time costs, utilization drop, and forex losses.
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Utilization dropped to 88.5% from 91.8% due to delays in a large deal ramp-up and AI capability incubation.
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Consolidated PAT declined 17.1% QoQ, impacted by forex losses of INR35.4 crores.
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Top 10 client revenue share declined to 41% due to growth in the 11-20 client bucket, indicating concentration risk.
Q & A Highlights
Q: Can you provide details on the six value pools and nine micro-verticals that form the core of Sonata's new AI strategy? A: Rajsekhar Roy (CTO) outlined the six value pools: customer engagement and operations transformation using AI/agentic AI, legacy modernization, AI-ready data, resilient AI backbone, and AI-native service delivery and ops. The nine micro-verticals are a sharpening of existing focus areas, such as payments, mortgage and lending, healthcare clinical ops, and logistics in retail manufacturing. The strategy is to build a compelling value proposition at the intersection of these micro-verticals and horizontal offerings, concentrating investments for better market impact.
Q: What caused the significant drop in International Services EBITDA margin from 20.2% in Q4 FY26 to 13.4% in Q1 FY27, and what is the outlook for recovery? A: CFO Jagannathan N. attributed the decline to several factors: a one-time benefit of compensation expenses in the previous quarter (impacting ~2%), a temporary drop in utilization to 88.5% due to a delay in a large deal ramp-up (expected to complete in Q2), significant investments in AI talent transformation and advisory, a detrimental forex impact of ~50 basis points, and marginal cost increases. He stated that the company expects positive EBITDA traction every quarter from here, with one-time impacts normalizing in the coming quarters.
Q: The revenue from top 10 clients declined 6% quarter-on-quarter. Is this due to productivity pass-throughs or weakness in key accounts? A: CFO Jagannathan N. clarified that the decline is a percentage-mix effect. The 11-20 client bucket is growing well, which naturally reduces the top 10's percentage share. He confirmed there are no major issues, discounts, or productivity pass-throughs affecting the top accounts. The absolute revenue number is not disclosed to avoid revealing individual client revenue.
Q: How is Sonata pivoting to output-based contracts, and how will it manage margin stability given the client-specific billing delays this quarter? A: Rajsekhar Roy (CTO) stated that output-based contracts are a traditional strength, and the delivery team has been reorganized and strengthened to ensure consistent execution. Regarding the margin impact, he noted the large deal ramp-up delay is largely behind them, and while AI investments will continue for a couple more quarters, the company expects a positive margin trajectory from the next quarter onwards.
Q: What is the outlook for the largest client, given the recent leadership changes and past drawdowns? A: Rajsekhar Roy (CTO) highlighted three key shifts for the large account: new senior leadership, a move into adjacent AI-led spending areas, and a resulting accretive pipeline. He is hopeful this will lead to revenue accretion soon. CFO Jagannathan N. added that they see stability in the top five accounts and expect growth to return in a couple of quarters.
Q: Can you provide details on the nature of the new deal wins and whether the ticket size is expanding? A: Rajsekhar Roy (CTO) reported seven new customer wins in the quarter. One notable win is a three-year, multi-million-dollar deal involving app dev, modernization, and managed services. He indicated that most of the new accounts have potential for future growth, and the company is seeing consistent headroom for expansion.
Q: What is the steady-state tax rate going forward, and did the R&D tax credit positively impact cash flow? A: CFO Jagannathan N. stated that the normal effective tax rate (ETR) is around 25%. The quarter included an exceptional one-time benefit from a US state R&D tax credit, which reduced the liability and positively impacted cash flow.
Q: Can you explain the nature of the engagement with Microsoft as a Copilot and platform engineering depth partner? A: Rajsekhar Roy (CTO) explained that Sonata is among ~40 organizations globally invited to join the program. The engagement involves identifying vertical go-to-market strategies, working with Microsoft to take differentiated propositions to clients, and scaling their GTM around Copilot and AI. He noted a couple of Copilot-related deal wins in the last quarter or two.
Q: Why is the number of clients generating over $1 million in annual revenue declining? A: CFO Jagannathan N. clarified that this is not due to client losses. Instead, many clients are graduating to higher revenue buckets ($3-5 million and $5 million+). He expects new AI-led deals to add more clients to the lower buckets in the coming quarters.
Q: What is the outlook for the domestic business, and will the focus on smaller clients be margin-accretive? A: Sujit Mohanty (CEO, Domestic Business) expressed confidence in sustaining double-digit growth momentum, having navigated the OEM partner business model change. CFO Jagannathan N. added that while the large deal is positive for absolute gross contribution, it may not be accretive on a percentage basis. The focus remains on growing the absolute amount of gross contribution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
