Sonata Software, reported domestic business revenue of ₹1,461 croreat a degrowth of 21.4 per cent q-o-q in Q2FY25. The company also aims to increase its revenues to $1.5 billion by FY27.
The company’s international services revenue in the September-ended quarter stood at ₹707.9 crore, with a sequential growth of 2.9 per cent from Q1’s ₹687.8 crore. In FY24, its revenues stood at a $1 billion.
“We are supposed to reach half a billion dollars in international business and a billion in India . While the latter will happen, half a billion dollars in international business may require inorganic growth support. We plan to have organic growth, but with the market conditions changing, we believe inorganic growth investments may be required,” said CFO Jagannathan Chakravarthi.
In Q2, the company secured three large deals—consumer experience modernisation for a US multinational tech corporation, data modernisation for a US financial corporation, and cloud modernisation for a US-based provider of personal facility and food safety systems. About 49 per cent of the company’s active pipeline consists of large deals.
Revenue breakup
In international services, TMT and retail & manufacturing remain the largest verticals by revenue share in Q2 , standing at 32 per cent and 31 per cent respectively . However, in Q1, these stood at 36 per cent and 34 per cent.
“Retail bounce back will take time; it is soft for us. BFSI and healthcare have been doing well. Hi-tech has an opportunity but may be softer for the next two quarters. It might take time, but will be ahead of retail,” said Jagannathan Chakravarthi.
Geography-wise, 72 per cent of the revenue share of Sonata’s international services came from the US, followed by 14 per cent from Europe and 14 per cent from the rest of the world.
Investments made
“There’s a lot of opportunity, particularly in the US market. We also won a deal in Europe. Opportunities have improved in AI and GenAI, and Microsoft Fabric has been a good breakthrough. The pipeline has doubled from $46 million in Q1 to $91 million on Microsoft Fabric. We have invested in our sales team, retail, customer-oriented technology team, and new geographies, and continue to invest in domain experts in BFSI and healthcare,” the CFO explained.
In this quarter, the company’s headcount stood at 6,485, up from Q1’s 6,201. The CFO added while the salary increase in the quarter was 1.1 per cent , the average wage hike will be about 1.6-1.75 per cent in a year, with the remaining mostly happening in Q3.
Sonata will see better revenue growth in H2FY25 compared to the first half, he said, adding that the company is seeing green shoots in BFSI and healthcare.
Rajsekhar Datta Roy, CTO of Sonata Software, expressed optimism about AI. He said, “There are two reasons why AI might pick — if clients see the business value and see it as a secure option. We won a deal that came as managed services because of our AI and responsible AI. A large deal we won recently was also enabled with AI being a key part of the differentiation. While AI might be a smaller component of the deal, it will be a big part of the differentiation, helping us with large deal momentum.”