Sonata Software (INE269A01021) led a strong performance in the technology sector on Thursday, with its shares soaring 8.02% to close at Rs 421.50. The company's impressive gains were part of a broader rally that saw other tech stocks, including Newgen Software and Zen Technologies, also posting significant increases.

Tech Sector Outperforms

The technology sector showed robust performance, outpacing the broader market:

• Sonata Software: Up 8.02% to Rs 421.50
• Newgen Software: Climbed 7.05% to Rs 947.00
• Zen Technologies: Advanced 5.00% to Rs 1,621.30

These gains were particularly noteworthy as they surpassed the Nifty IT index, which itself saw a healthy increase of 1.70%.

Market Context

The strong performance of these tech stocks occurred against a backdrop of overall market optimism. The broader Indian market rallied, with both the Nifty 50 and Sensex trading nearly 0.5% higher. This positive sentiment was largely attributed to the U.S. Federal Reserve's decision to cut benchmark lending rates by 25 basis points, bringing the range to 4-4.25%.

Analyst Perspectives

Analyst coverage for these tech stocks reveals mixed outlooks:

Sonata Software, in particular, shows a favorable analyst sentiment with a majority of buy ratings and no sell ratings, although its upside potential is the lowest among the three at 6.9%.

The varied analyst opinions across these tech stocks highlight the complex dynamics within the sector, with each company facing unique opportunities and challenges in the current market environment.

As the technology sector continues to evolve rapidly, investors and market watchers will be keen to see if Sonata Software and its peers can maintain this momentum in the face of global economic shifts and industry-specific trends.

Sonata Software , a global IT services and solutions company, has reported a mixed performance for the first quarter of fiscal year 2026, navigating through both tailwinds and headwinds in the market.

Revenue Growth and Large Deals

The company's international services revenue grew marginally by 0.60% quarter-on-quarter to $81.80 million in Q1 FY26, while experiencing a slight decline of 1.10% year-on-year. Despite the challenging environment, Sonata Software secured three large deals during the quarter, with total order bookings of $105.00 million, achieving a book-to-bill ratio of 1.28.

Sector Performance

The company saw varied performance across its key verticals:

• Healthcare and Life Sciences (HLS): This sector, along with Banking, Financial Services, and Insurance (BFSI), now contributes over 30% of total revenue, up from 13% three years ago, indicating strong growth in these areas.

• Technology, Media, and Telecom (TMT): The TMT vertical showed resilience, benefiting from the ramp-up of a large deal announced in April.

• Retail and Manufacturing: This sector continues to face headwinds, particularly due to global tariff uncertainties.

AI and Digital Transformation

Sonata Software is positioning itself strongly in the AI space:

• The company expects AI-enabled services to contribute 20% of its revenue over the next 3 years.
• The AI pipeline has reached $46.00 million, showcasing growing demand for AI solutions.
• Sonata has launched AgentBridge, making it one of the first mid-tier firms with enterprise-grade agentic AI workflows.

Client Base and New Logos

The company added 7 new enterprise customers during the quarter and now has 7 clients with more than $10.00 million in annual run rate. The number of clients with over $5.00 million run rate increased to 13 in Q1 FY26 from 11 in the previous quarter.

Financial Highlights

• EBITDA improved marginally to 16.60% from 16.50% in the previous quarter.
• The company declared its first interim dividend of INR 1.25 per share and plans to pay quarterly interim dividends going forward.
• Consolidated revenue stood at INR 2,965.20 crores, showing a growth of 13.30% quarter-on-quarter and 17.30% year-on-year.

Challenges and Outlook

Sonata Software faces some challenges, including:

• Global softness in the Retail Manufacturing sector.
• Budget pressures from two large clients in the BFSI and High-Tech sectors.
• Potential risks in the domestic SITL business due to partners considering direct engagement models.

Despite these challenges, the company remains optimistic about its long-term strategy, focusing on becoming a differentiated modernization engineering firm powered by AI and modern technologies.

Samir Dhir, Managing Director and CEO of Sonata Software, commented on the results, saying, "We remain confident in our long-term strategy and committed to drive sustainable growth and shareholder value. Our focus on large deals, strategic verticals, and AI-led transformation is helping us navigate through the current market challenges."

As Sonata Software continues to adapt to the evolving market conditions, it maintains its vision of being in the top quartile of growth companies in the mid-tier IT services segment.