Sonata Software (SONATSOFTW) Q3 24/25 earnings summary

Executive summary

• Q3 FY25 consolidated revenue exceeded $336.8M (₹2,842.8 crores), up 31% QoQ and 14% YoY, with strong international and domestic growth.

• International services grew 4.4% QoQ in constant currency, but margins were impacted by a large high-tech client ramp-down and one-time costs.

• Strategic focus remains on AI-enabled modernization, large deal wins, and deepening partnerships with Microsoft and AWS.

• Two major deals were won in Q3, including a multi-million-dollar Microsoft Fabric contract and a Gen AI modernization deal.

• Management targets $1.5B revenue run rate by FY27 and expects long-term growth despite short-term headwinds.

Financial highlights

• International services revenue: $87M (₹731.7 crore), up 2.8%-3% QoQ; domestic business revenue: ₹2,111.1 crore, up 44% QoQ.

• Q3 consolidated EBITDA: ₹163.6 crores, down 7.8% QoQ; PAT: ₹105 crores, down 1.4% QoQ.

• International services EBITDA margin: 14.6%, down from 18.2% QoQ, impacted by 3.5% one-time cost.

• EPS for Q3: ₹3.78, down 1.5% QoQ.

• Cash and equivalents at quarter end: ₹672 crore; net cash: ₹115 crore.

Outlook and guidance

• Q4 expected to see 2.5%-3.5% revenue degrowth in international IT services due to client ramp-down and seasonality.

• Margins expected to recover in Q4 as one-time costs subside, with a return to high-teens EBITDA anticipated.

• Management remains optimistic about long-term growth, citing strong deal wins and focus on modernization engineering.

• Domestic business targets 12% YoY growth.