PERSISTENT Q2 FY26 earnings call.
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Revenue
₹3,581 Cr
verified against source
Revenue YoY
23.6%
reported change
EBITDA
Pending
latest reported figure
Source
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record provenance
Actual signal trajectory
Where this quarter sits.
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What the record says.
Persistent Systems delivered a strong Q2 FY26 with revenue of $46.2 million (17.6% YoY in USD; 23.6% in INR terms) and PAT growth of 45.1% YoY to ₹471.47 crore. EBITDA margin expanded 230 basis points YoY to 16.3%, ahead of the 200-300bps improvement trajectory outlined two years ago. Management attributed margin gains to an 80bps benefit from eliminated software license costs for a large customer, 60bps favorable currency tailwind, and 30bps from planned offshoring in healthcare—partially offset by 50bps DSO provision and 50bps utilization decline to 88.2%. TCV of $690M and ACV of $447.9M provide solid forward coverage. BFSI led growth at 30% YoY, while Europe accelerated 37.9%. The company reiterated its $2 billion revenue target by FY27 and expects ~100bps margin improvement in both FY26 and FY27 to complete the 200-300bps expansion goal, after which growth becomes the primary focus. Key risks include healthcare vertical headwinds from US government spending cuts and wage hike impact of 180bps on Q3 margins with only 80-100bps offset expected.
Colored figures show movement against the previous available record.
Guidance to track
- The company reiterated its aspiration to reach $2 billion in revenue by the end of FY27, driven by continued deal wins, ramp-ups from recent large engagements, and AI-driven transformation opportunities across verticals.
- Management indicated approximately 100 basis points of EBITDA margin improvement for FY26, building on the 230bps expansion already achieved in Q2. Q3 will face 180bps headwind from wage hikes with 80-100bps offset expected.
- Following FY26's ~100bps improvement, the company targets another ~100bps in FY27, completing the 200-300bps expansion trajectory announced two years ago. Post-FY27, growth becomes the priority focus.
- The company filed 20 new patents for its SASA generative AI digital engineering platform this quarter, bringing the total to 75 patents. SASA enables on-premise deployment for regulated industries and optimized GPU infrastructure.
Risks flagged
- Management acknowledged the healthcare sector has been impacted by decisions under the new US administration, particularly affecting scientific instruments, medical devices, and research-oriented customers with grants. While pipeline remains good, execution risk exists as customers optimize costs in response to funding pressures.
- Merit increments effective October 1, 2025 will impact Q3 margins by 180 basis points, with only 80-100 basis points expected to be offset through offshoring, utilization management, subcontractor rationalization, SG&A optimization, and ESOP cost reduction. This leaves a net ~80-100bps margin headwind for Q3.
- Software license costs surged to ~6-7% of revenue from historical ~2.5-3% due to a large multi-year customer commitment that is now ending. Management noted the industry shift toward 'service as software' bundling makes future normalization unclear—rates could stay at 6% or increase further depending on AI transformation deal structures.
- An analyst raised concern about potential pricing deflation as clients demand productivity benefits from AI implementations. Management responded that the issue is 'scope inflation/deflation' rather than per-unit pricing pressure, and noted billing rates are 'fairly consistently moving up.' However, the AI monetization model remains nascent.
Key quotes
- I think we are at end of hours. So from our perspective, look, we are confident of delivering the growth that we have done over the last several years and we look forward to giving you the updates as we go along.
- At some point in time, you know, we have to obviously not try to optimize beyond a certain percentage. We have grown very well. We need to continue the growth. The growth happens, everything else, you know, comes along with it. And this is a changing environment. AI will need investments.
- This is all of our profits are basically getting converted and getting realized also. I don't foresee as of this point in time any major change for persistent per se.
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