Shares of major midcap information technology companies, Persistent Systems and Coforge came under the heat of intense selling on July 24, tanking 8% each as investors reacted to their June quarter earnings.
While Coforge’s Q1 numbers reflected margin pressures and weaker-than-expected growth, those of Persistent Systems presented a mixed show.
Persistent Systems delivered a steady topline performance this quarter, with revenue rising 3.9% sequentially to $389.7 million, or 3.3% in constant currency. Growth was driven by a robust 9% uptick in the BFSI vertical and a healthy 3.6% gain in software, hi-tech and emerging industries.
However, the healthcare and lifesciences segment slipped 1.9% due to a planned offshore pivot by a few large clients. Despite topline strength, the firm’s Ebit margin contracted 10 basis points on quarter to 15.5%, which was also boosted by a 230 bps boost from lower Esop costs. Stripping that out, core margins slipped to around 13.2%, reflecting a 240 bps erosion.
However, the management struck an optimistic tone over medium-term growth but flagged that persistent macro and geopolitical clouds could weigh on near-term client spending.
Persistent Systems’ Q1 also showed signs of caution. The company delayed salary hikes by a quarter and saw no major pickup in deal wins, which stood flat at $520 million in Q1 as compared to $517.5 million last quarter.
Following the earnings report, brokerages stood divided over Persistent Systems. The stock valuations seem expensive and while some brokerages like Nomura flagged that out as a concern, others like Nuvama Institutional Equities believes the stock deserves the premium.
On the other hand, analysts at JM Financial are not too alarmed by the client specific slowdown faced by Persistent. That said, JM Financial also acknowledged that pickup in deal wins is needed to build confidence on FY27 growth outlook.
JM Financial believes Persistent’s early lead in AI-led platforms gives it a solid foundation. However, the brokerage has trimmed its FY26/27 dollar revenue growth estimates to 16% each (from 18%/17%) out of caution, resulting in a slight 0–2% cut to earnings forecasts. It also flagged the stock’s rich valuation as a risk, suggesting limited room for disappointment in the near term.
Meanwhile, Coforge reported a revenue growth of 8.2% on quarter to ₹3,689 crore, slightly below estimates. Margins slipped to 11.3% from 11.8%, missing Bloomberg’s 13.5% forecast. Adjusting for one-offs, Coforge reported an Ebit margin of 12.7%, which is not only below expectations, but also a contraction from the previous quarter.
In addition, the company posted a 22% jump in net profit at ₹317 crore, although that too fell short of Street expectations.
