Coforge vs Sonata Software Q4 FY26

Coforge delivered a strong FY26 with 29.2% USD revenue growth, driven by broad-based vertical strength (healthcare +98%, travel +62%) and 21 large deal wins. EBITDA margins expanded 430bps YoY to 18.6%, aided by AI-led automation and G&A cost containment. Q4 EBIT margin hit a record 16.6%, up 370bps YoY. The executable order book stands at a record $1.75B, up 16.4% YoY, providing good visibility. Management guided FY27 consolidated EBITDA margins of 20.5-21% and EBIT margins of 15.5% (consolidated) / 16.5-17% (standalone), with FCF/PAT expected at 100%+. A planned exit of ~$20M low-margin India business will temporarily impact Q1 revenue, but overall growth is expected to be robust. Key risk: sustained weakness in the BFS vertical, which grew only 12% in FY26 due to a large client account issue, though management expects improvement.

Guidance read

FY27 Consolidated EBITDA Margin 20.5-21%: Management guided EBITDA margins of 20.5% to 21% for FY27 on a consolidated basis, driven by AI automation, G&A leverage, and Enkora synergies. FY27 Standalone EBIT Margin 16.5-17%: Standalone EBIT margin expected between 16.5% and 17% in FY27, excluding Enkora amortization. FCF to PAT at 100%+ from FY27: Free cash flow to PAT ratio expected to be at least 100% from FY27 onwards, up from earlier guidance of 70-80%. Q1 FY27 Revenue Flattish QoQ Due to India Business Exit: Revenue in Q1 FY27 expected to be flattish sequentially due to discontinuation of ~$20M low-margin India business, with growth resuming from Q2.

Risk read

Key risks include BFS Vertical Stagnation — BFS revenue grew only 12% in FY26, stuck at ~$120-123M for five quarters due to a large client account issue. Recovery depends on management's refactoring efforts.; Hedge Losses Impacting Reported Earnings — Mark-to-market hedge losses of ~₹164Cr for FY26 (₹70Cr in Q4) will continue for 1-2 quarters before tapering, affecting reported other income.; AI Deflationary Pressure on Revenue — Industry-wide AI-driven code generation could compress billing rates, though management argues total cost of ownership remains high and managed services will offset..

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SO

Sonata Software

Q4 FY26 · Information Technology

Sonata Software reported Q4 FY26 consolidated revenue of ₹2,536.2 crore, down 3.1% YoY, impacted by domestic headwinds from a large client moving to direct billing. International services revenue grew 6% QoQ in constant currency to $82.4 million, with EBITDA margin expanding 70 bps QoQ to 20.2% driven by AI-led productivity gains and utilization of 91.8%. PAT for international services grew 40.6% QoQ to ₹84.2 crore. The company won two large deals in Q4, including a core banking modernization with a global fintech. AI pipeline reached $280 million, contributing 18% of total order book. Management remains cautiously optimistic on gradual growth improvement, but macro uncertainty and elongated client decision cycles persist. Key risk: sustainability of TMT vertical upturn and potential further contraction in BFSI clients.

Guidance read

International services EBITDA margin to remain at similar levels: Management expects to maintain current EBITDA margin (~20.2%) in the near term, with potential investments for growth. Domestic business to return to growth trajectory in FY27: After covering the loss from a large client moving to direct billing, domestic business is expected to resume historical growth rates within one to two quarters. AI pipeline to drive gradual improvement in growth over medium term: Management remains cautiously optimistic on growth, expecting gradual improvement driven by AI and digital transformation initiatives.

Risk read

Key risks include Sustained macro uncertainty and elongated client decision cycles — Management noted that client decision cycles remain elongated due to macroeconomic challenges, which could delay deal closures and revenue conversion.; Potential further contraction in BFSI vertical — Despite a large deal win, management acknowledged that some large BFSI clients may continue to contract spending, impacting growth.; Sustainability of TMT vertical upturn — Management expressed caution on the recent upturn in the TMT vertical, noting that it may not be sustainable and needs to be monitored.; Domestic business margin pressure from new customer acquisitions — New customer wins in domestic business may initially come at low or zero margins, though management believes this is manageable through mix and upselling..

Promise ledger

Scorecard data is being built as historical quarters are processed.