Sonata Software (SONATSOFTW) Q2 25/26 earnings summary

Executive summary

• Q2 FY26 focused on scaling AI modernization, large deal wins, and strategic vertical/geography expansion, with AI order book rising to 10% and a large healthcare deal secured.

• North America now contributes over 70% of revenue, up from 54% three years ago; Cloud & Data now constitute 62% of revenue, up from 50% in FY22.

• Workforce AI readiness at 95%, with 80% of managers AI-trained; attrition at 14%.

• Recognized with CII AI Awards and Everest Group's AI Application Development Services ranking.

• Unaudited standalone and consolidated financial results for Q2 and H1 FY26 were approved, with a second interim dividend of ₹1.25 per share declared.

Financial highlights

• Q2 consolidated PAT: ₹120.2 crore, up 10% QoQ and 12.9% YoY; EPS: ₹4.33.

• Q2 consolidated revenue: ₹2,119.3 crore, down 28.5% QoQ and 2.3% YoY; H1 revenue: ₹5,084.5 crore, up 8.2% YoY.

• International services Q2 revenue: $82M, up 0.2% QoQ (1% in constant currency); EBITDA margin 17.3%.

• Domestic business revenue: ₹1,391.3 crore, down 38.8% QoQ; PAT: ₹42.2 crore, up 9.3% QoQ.

• Cash and equivalents: ₹323 crore at Q2 end, down from ₹600 crore in Q1.

Outlook and guidance

• PAT expected to further accrete in H2 FY26, with full impact of Q2 actions in Q3; management confident in long-term growth from AI and large deal wins.

• Book-to-bill ratio at 1.28x; management targets 1.2–1.3x as sustainable.

• Large BFSI client headwind to be fully absorbed by Q3, with growth expected from Q4.

• Large deal pipeline robust, with 28 large deals in pursuit and 40% of active pipeline classified as large.

• Continued focus on Microsoft SMC sector, AI-led partnerships, and large system integration deals for domestic business.