Sonata Software Shares Fall 5% as Q2 Revenue Drops; Company Declares Interim Dividend

Sonata Software witnessed notable pressure on its stock on Friday, November 14, as investors reacted to the company’s latest quarterly performance. Shares of Sonata Software slipped nearly 5% after the company reported a sharp revenue decline for the September quarter, despite improvements in profit and margins.

Profit Rises but Revenue Takes a Hit

For the second quarter of FY25, Sonata Software reported a 10% growth in net profit, rising to ₹120 crore from ₹109 crore in the previous quarter (QoQ). This improvement in profitability reflects better operational efficiency and cost management.

However, the company’s topline performance saw significant weakness. Revenue fell 28.5% to ₹2,119.3 crore, compared to ₹2,965 crore in the previous quarter. This steep decline weighed on investor sentiment and contributed to the downward movement in the stock price.

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Margins Improve in Q2

While revenue slipped sharply, the company recorded healthier operating metrics. EBIT rose 9.2% to ₹146.3 crore, compared to ₹134 crore in Q1.

Moreover, EBIT margin improved to 6.9% from 4.5%, indicating stronger profitability despite lower revenue. This margin expansion suggests the company has been able to manage costs effectively amid challenging market conditions.

Interim Dividend Announced

In addition to its earnings, Sonata Software also announced a shareholder reward.

The company declared a second interim dividend of ₹1.25 per equity share (125% on face value of Re 1) for FY2025-26.

• Record Date: November 21, 2025

• Dividend Payout Date: On or before December 3, 2025

This dividend announcement highlights the management’s confidence in its financial position, even as revenue performance remains weak.

Management Commentary: AI, Deal Wins, and Growth Strategy

Managing Director & CEO Samir Dhir highlighted the company’s progress during the quarter, despite external challenges. “International IT Services reported steady progress during the quarter, with consolidated PAT improving by 10% quarter-on-quarter,” he noted.

He also emphasised the company’s strategic focus areas:

• Sonata secured a large deal in the healthcare vertical, strengthening its presence in a key global market.

• The company continues to invest heavily in Artificial Intelligence, which is beginning to show results.

• AI-led orders contributed nearly 10% of the overall order book, signalling strong early traction.

Dhir added that the company remains committed to growing its business through a combination of large deals and consistent operational execution.

Sujit Mohanty, MD & CEO of Sonata Information Technology, also pointed to consistent growth drivers. He said the company added clients across all three business pillars, with particularly strong momentum in the Microsoft SMC segment.

“Despite industry headwinds, our disciplined execution and focused investments continue to position us well for sustained growth,” Mohanty stated.

Stock Performance

Following the Q2 announcement, Sonata Software shares were trading 4.69% lower at ₹371.15. The stock has seen a significant decline this year, falling 38% year-to-date.

Investors appear cautious, reacting to the mixed bag of results—strong profitability and margins on one hand, but a sharp revenue drop on the other.

Conclusion

Sonata Software’s Q2 earnings highlight contrasting signals:

• Profit and margins improved, thanks to disciplined cost management and growth in key segments.

• Revenue declined sharply, raising concerns about near-term demand and project flow.

The interim dividend offers comfort to shareholders, while the company’s strong focus on AI-driven business and new client additions indicates long-term intent.

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