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Persistent Systems bleeds over 9% post mixed Q1; here's what brokerages say
Around 11:10 AM, the Persistent Systems stock was trading 8.24 per cent lower at ₹5,143.50. In comparison, BSE Sensex was down 0.26 per cent at 82,514.88 levels.
Modest growth amid margin pressure
Persistent reported a modest sequential growth for the quarter ended June 30, 2025. Net profit rose 7.4 per cent Q-o-Q to ₹425 crore from ₹395.7 crore, while rupee revenue grew 2.8 per cent to ₹3,333.5 crore from ₹3,242.1 crore. Ebit increased 2.5 per cent Q-o-Q to ₹517.7 crore. However, the operating margin saw a slight dip to 15.5 per cent from 15.6 per cent in the previous quarter, reflecting a marginal decline in profitability.
In dollar terms, revenue came in at $389.7 million, up 3.9 per cent sequentially and 18.8 per cent year-on-year (Y-o-Y). Constant currency (CC) revenue growth stood at 3.3 per cent Q-o-Q and 19 per cent Y-o-Y. Track Stock Market LIVE Updates
Vertical performance and deal wins
Growth during the quarter was driven by the BFSI segment, which saw a strong 9 per cent Q-o-Q rise in revenue in USD terms, followed by the Technology segment at 3.6 per cent, Nomura note highlighted. However, the Healthcare and Life Sciences (HLS) vertical was a drag, posting a 1.9 per cent sequential decline, largely due to ongoing macro headwinds and client-side transition to offshore delivery.
Persistent reported strong deal wins in the quarter with Total Contract Value (TCV) of USD 520.8 million, up 13 per cent Y-o-Y. Net new TCV and Annual Contract Value (ACV) were up ~8 per cent and ~7 per cent Y-o-Y, respectively. The book-to-bill ratio moderated slightly to 1.3x, compared to 1.4x in both Q1FY25 and Q4FY25.
Mixed brokerage views
Nomura termed the results a 'mixed bag,' highlighting slightly lower-than-expected revenue growth in constant currency terms. Ebit margin at 15.5 per cent was in line but down 10bps Q-o-Q. While EPS came in slightly ahead of estimates at ₹27.2, Nomura flagged risks related to slower client decision-making, especially in healthcare.
The brokerage cut its FY26 revenue growth estimate by ~190bps to 16.6 per cent and trimmed FY26–27 EPS by ~3 per cent. It lowered the target price to ₹5,510 (from ₹5,700 earlier) and maintained a 'Neutral' rating, citing rich valuations.
Emkay Global noted the slightly softer operating performance with revenue growth missing expectations, while Ebit margin held steady. The brokerage also pointed to the drag from the healthcare vertical due to a planned offshore shift and macro uncertainty. Despite the management reaffirming its target of $2 billion revenue by FY27 and 200-300bps margin expansion, Emkay retained a 'Reduce' rating with a target price of ₹6,000, citing expensive valuations.
Nuvama Institutional Equities analysts, however, maintained a more optimistic stance. While acknowledging that revenue growth marginally missed its 3.5 per cent CC Q-o-Q estimate, the brokerage noted strong TCV growth and reiterated confidence in Persistent's long-term growth story.
It highlighted the company's reaffirmed guidance of achieving $2 billion revenue by FY27, despite a volatile macro backdrop. Nuvama retained its 'Buy' rating, raising its target price to ₹6,600 from ₹6,250, and increased its valuation multiple to 48x FY27 PE (from 45x earlier). Check List of Q1 results today
Persistent Systems outlook
Management commentary indicated caution amid macroeconomic and geopolitical uncertainty. Persistent Systems noted a slowdown in decision-making across clients, particularly in the US healthcare segment, where regulatory changes and payer transitions are affecting demand.
The company also delayed its annual salary hike cycle to Q3FY26 to manage margins and said it would continue to focus on pricing, utilisation, and sales leverage to achieve its medium-term profitability targets.
That said, while Persistent Systems reported steady growth in Q1FY26 with robust deal wins and improved profit, the marginal miss on topline estimates and slight pressure on margins led to negative investor sentiment. With the stock trading at a premium valuation, brokerages remain split on its near-term prospects, though the long-term structural story remains intact.
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