← Throughline · holding view Deep analysis ↗ Q4 FY26
PERSISTENT Persistent Systems Ltd · IT services Q4 FY26 · concall
Pattern: demand environment vs 3

Refused to commit on fy27 vertical pecking order.

1 deflection · 2 weak · 4 clean — pushback across 3 of 7 Q&A turns

Focused evidence 3 of 7

Bhavik Mehta · weak

Sandeep, can you talk about how are you seeing the demand environment currently versus, let's say, 3 months ago, given the headwinds from geopolitics as well as how enterprises are adopting to Generative AI. Any color on the demand environment will be useful. And secondly, just from a next year perspective, you had this target of reaching $2 billion by FY27 along with some margin expansion. So, are you sticking to that or do you want to make some changes to it given how the macro is playing out right now?

Yeah. So, as far as the macro is concerned, look, this war situation in the Middle East, there are two parts to it. One, it does not directly affect us from the Middle East perspective because we have zero to very little exposure in Middle East. But as far as the bigger thing is concerned, if it goes on for more time, then obviously, you know, it is an issue because oil prices remaining higher for long will have an impact on inflation, etc. But that will affect the entire sector, not just us. And within that, we are confident with our progress in AI, with the investments that we are doing, we'll continue to gain market share. But we will be cautiously optimistic as far as that is concerned. In terms of your last question, and then I'll come back to the enterprises side, the $2 billion by FY27, that's a run rate. We are marching towards it steadily. And again, look, if the macro goes in a different direction going ahead, we'll tackle it as it comes. But otherwise, the run rate wise, we are confident, we are marching towards it steadily and we'll get there plus minus a quarter at worst. Now, as far as the enterprise adoption is concerned, Nitish talked about how we are taking it in the healthcare sector, in some cases, and in the engineering side where the tech companies, they are the fastest one to adopt. The demand that we are seeing from them in terms of AI -led software development lifecycle is the highest. Healthcare Life Sciences, BFSI, which are the other two segments for us, are regulated industries. It is picking up. Although I will say the POC or pilot to the enterprise-wide adoption, it is going slower than what would be there in a tech sector.

Nitin Padmanabhan · deflection

So one is, I think last year, as we entered the year, we basically called out that growth will be led by BFSI, followed by hi-tech, followed by healthcare. How are you seeing the shape of growth as we get into the next year? The second is, when we look at the OPD business overall, considering SDLC has come down, the life cycles have come down, how should we think about cannibalization rates there and what are the nuances and how are you thinking about that?

So as far as the next year is concerned, the pecking order would be between healthcare life sciences and BFSI at the top. One of these two, they are very close neck to neck from what we see today and things can change. But the other one will be.... so, between one and two will be healthcare life sciences, BFSI followed by tech. And again, this is what we see today. This is no guidance, etc. Please don't read too much into it. We don't give forward looking guidance. This is just directionally what we are seeing. Now, the OPD part, it's an interesting play. The best part here is we are pretty strong in tech and tech is the one which is adopting these technologies because they are also creators of these technologies. And they are not regulated, so they are more amenable to taking these into production and so on. And the learnings from there should be very, very valuable for us. We may see compression in the tech world. And even if that happens to the extent that we will also go and cannibalize our own business, there's enough and more business that is there from a time perspective and we are a very, very small company. At $1.7 billion, roughly we are very, very small in this and there is enough new outsourcing that may happen from these tech companies. And much more than that, there will be market share rotation between people and hopefully we'll be leading the pack. [Follow-up on whether higher net is still seen]: So, look, I don't want to give you forward-looking guidance. All I can say is so far, yes. We have been able to deliver more value and get more in return. But there may be a time when tech for a quarter, 2, 3., and I'm not sure how this will pan out because Anthropic and other people announced so many things so fast. And these are really powerful tools in our hands today. So, it may happen that tech may be compressed. But again, you know, with that compression, if we are able to win more business, given that we are very closely working with many of them, we should be able to come up perhaps. But I don't want to give you any forward-looking guidance more than that.

Vibhor Singhal · weak

Sandeep, from a growth point of view, if I look at FY'26, we probably had 3 challenges this year in terms of a weak US macro, the tariff uncertainty as well as GenAI. Now, standing as we are, when FY'27 is about to start, I think there is an additional overhang of the war that we are seeing at this point of time. So how are we looking at FY'27 versus FY'26? Are there more challenges than we had probably seen last year? Or some of the headwinds that we had seen, let's say, in terms of US macro being weak or the GenAI deflation, those have kind of come down to be able to maybe, let's say, give us some headroom to expand this year. And Vinit, a quick question on the margins front. The margins that we have delivered for this year at around 15.6%. Going forward, do we feel comfortable with the earlier margin guidance that we had said that we will probably look at around 16% margins itself? And over and beyond that, how are we looking at the trajectory from a next 2-year point of view?

So, from a market perspective, these things like the war, etc., are not in our control. But one hopes that these things settle down soon. And that is good for everyone. And hopefully, this overhang should be behind us in the next few weeks, if things go right from whatever we see in the market. Now, the rest of the things, look, last 5, 6 years or more, we have seen COVID. We have seen bad macro, good macro, and so on. And we as a company have always tried to build capabilities and be closer to our customers to be able to sail through this in a decent manner. From what we see today, we should be able to have a decent growth in the coming year. We are building and investing in capabilities on the AI front and otherwise. We are working very closely with partners, whether it is the NVIDIAs of this world, whether it is the Anthropics, Open AIs, and the partners that matter in the data space like Databricks, Snowflakes, and so on. So, from that perspective, heads down, building capabilities, differentiated, respected in the market, and hopeful that the growth journey will continue with it. [Vinit on margin trajectory]: Yeah. So, Vibhor we have called out our margin trajectory. I think so, right now, we have achieved whatever we had said. Again, that is not a guidance, it's an aspiration. Our aspiration continues to be in the 16 to 17% range. But remember in this environment our first priority is growth, our first priority is investing back into business and developing capabilities. That's more important. On the way if we can maintain or improve our margins, we will do that.

▸ Other Q&A (4)
Abhishek Pathak ·

Firstly, on the top 5 accounts, they were just slightly soft this quarter. If you could just guide us which vertical sort of contributed to the softness amongst the top 5 clients and sort of what's the outlook, whether it's BFSI or healthcare or hi-tech, that would be quite helpful? And the second question, just a clarification on the 2 billion run rate. So essentially, we are talking about a quarterly annualized rate and not necessarily FY'27, $2 billion in revenues. Is that correct? Lastly, wanted to get your thoughts on Salesforce Headless 360. Considering we are actually quite tied with Salesforce, they've kind of come up with this whole sort of Headless 360 framework where the API is the interface. Does this kind of mean that over the long-term value accrues away from, let's say, system integrators or IT services companies towards just the OEMs?

Correct. So, on the last part, FY'27, Q4 exit is where we are looking at the run rate being in the range of $500 million or so. And now coming to your other question in terms of the top 5 accounts, our top 5 accounts have 2 financial services accounts, 1 tech, 1 healthcare life sciences. Now, obviously, you know, these accounts have been ramping up fairly nicely for the last several quarters, if I may say several years. Now, when you do larger deals, when you work with larger customers, you also promise them cost savings. And as a part of that, there is offshoring that we do over a period of time. So, I would not be reading anything much into it. And from a company perspective, we have fairly strong relationships with each of these and they have scaled very nicely. So, nothing to worry about. [On Salesforce Headless 360]: Yeah, so I'll be short given we have only 15 minutes in this call. But if you look at the overall situation, the Headless 360, while it gives the customers the options to use the agents from anywhere through the APIs and so on, it also increases the work. And not every customer is that tech savvy to be able to take advantage of these without having the help from an SI. So, we are pretty closely working with Salesforce. We look forward to the increased time because of that as well, in the current installed base and in the newer customers as well. But happy to have an offline conversation to go into much more details.

Prateek Maheshwari ·

So just on your healthcare vertical, this quarter it's grown very strongly quarter on quarter. But see, some of your larger peers have seen some weakness, especially in their top payor accounts. And so just wanted to understand some of that exposure is also to you guys. I just wanted to understand if you guys would have seen any of such business reductions or is there any risk going on ahead? And just the second question was on just your Geo outlook. This quarter, we have seen India growing very strongly, probably North America grew at the company growth rate. But Europe we had seen decline for the last 2 quarters.

So, look we play in the same ecosystem and some of our larger customers are where we share the customers with a few other strategic Tier ones as well. Now, as far as we are concerned, we have been able to grow in the same set of accounts despite the headwinds that all of us have faced. And so, to that extent, you know, that also shows the strength of the offering, the strength of the relationship. I won't read too much into that from our perspective. [On Geos]: Yeah. The India part is an aberration. The thing that happened there is one of our IT customers in our erstwhile Accelerite business, the renewal happened in rupee (INR) terms through their GCC. So that basically had to be since it was billed in GCC and rupee (INR) terms that had to be classified as India revenue. Otherwise, the North America revenue would have been even higher and the India revenue would not be where it is. So, nothing, nothing to read there in terms of an India. The thing is that it will get corrected in the next quarter and we will see it. As far as Europe is concerned, that's an area where we want to double down. And there are some customer puts and takes that happen. And that is what it is. So that was a decline of 1.8% sequentially. But the India part and the North America part are adjustments.

Girish Pai ·

So, PE channel has been one critical channel for you. What is the company's exposure to this channel? Now, with all this talk of SaaS apocalypse, how does this impact demand outlook from this channel for FY'27 and beyond? My second and last question, how much was the license fee booked in the 4th quarter and how much has been the incremental capitalization of spending on building platforms in the current quarter, in the 4th quarter of FY'26? This is a question for Vinit.

Yeah. So, the company exposure to PE and again, you know, PE channel gets the business in some cases. And the other part which we classify in PE is the customer is owned by it. And the fact is that there are more PE owned companies in the US today than public companies. And if you look historically, especially in the enterprise software space, in the last 4 or 5 years, many companies have been taken from public to private by private equity. So that doesn't mean that they are small or they are financially weak or anything like that. Now, as far as SaaS -pocalypse is concerned, there is, that's an opportunity for people like us. If we can partner with the PEs and their portfolio companies and improve their margins by using our platforms like SASVA, whether we use our open source LLMs tuned by us or we use Anthropics of this world and otherwise, it's a very big opportunity. And that's the reason we have invested in bringing a senior leader to lead that who has dealt with enterprise software at scale in the past. So, we are actually looking at this as a positive for us, helping our customers reduce cost while delivering more and using technology to do that. Lesser of headcount, more of technology. So that's where it is. And in our mind is a good growth market for us. [Vinit on license fee / intangible spend]: Yeah. So, license fee, we have called, we don't specifically call it out, you know, in terms of because it is a combination of both our own internal IP as well as the external IP that has been routed as part of the larger services contract. So, but we can tell you that our own developed IP does definitely get a lot of attention and momentum in terms of the benefits that it provides to our client. So, it is definitely on track. And as far as the intangible sort of spend that we do on an annual basis, it's in the range of around $8 to $9 million a year.

Kumar Rakesh ·

Sandeep, my first question was on the revenue mix or revenue model for your billing to clients. I understand it would be a combination of your own IP SASVA platform and other platforms, some of the third-party platforms and the employees. How does the mix between our own platform and third-party platform moves quarter on quarter? The reason I'm asking this is that for the last couple of years, we hadn't seen much of seasonality in the revenue growth of the company. But should we expect, given the base where we have reached, that there could be some seasonality which may start coming in, especially when I'm looking at third party software in this quarter was higher than the last quarter. And should we start preparing for some of the seasonality, especially how the mix between third party platform and our platform moves from one quarter to another? And from the third-party platform, which you referred to, say from Anthropic, if we start using some of their platform, how does that changes our growth profile and more importantly, the margin profile for the business? Are we largely neutral from that perspective or we are confident that our own platform would be good enough?

Yeah. So, look, you know, Persistent historically, our seasonality was also due to some of the outcome-based pricing that we had with one of our top customers. And that top customer today, from that perspective, has come down in percentage revenue and we work very hard to get out of that seasonality. Now, as far as the forward-looking things are concerned, whether it is SASVA or our other IP like iAURA, GenAI Hub or using, let's say, an Anthropic under the hood for delivering programmes or Open AI or something else, you know, those will be part of services engagement. So, we do not expect much of a seasonality because of that. It will be basically a part of our scaling up the AI initiative. So, I wouldn't read too much into this. [On margin profile vs third-party platforms]: Yeah. So, see, the reason you have your own platform and you partner with third parties and adopt the third-party platforms, whether for software development lifecycle, that could be Anthropic, that could be an OpenAI (Codex), that could be Gemini, that could be Copilot, etc., etc. It's to basically work with customers who choose these platforms. And we as a software services or tech services provider have to be able to offer those choices, work with customers who have already invested or have other reasons for using these platforms. So, from that perspective, if we get a free hand, we work with, let's say, an enterprise software company, we are allowed to use whatever we use. We may use open source. In other cases, we may use these. We pay for the tokens for what we consume. At times, they may be given by the customers. At times, we may be paying for that. Depends on what the business model is. And most of these things should be margin neutral or accretive because if we use technology, we should be able to do more work with lesser people and more technology. That's the entire promise of AI. And with that, it should not be margin decretive. So, don't worry about the margin going down. It will be the same or better as we use more of this technology to deliver to others.

▸ Prepared remarks (5 blocks)
Good evening, good morning and good afternoon to all the folks depending on where you are joining from. I hope all of you are doing well. Let me start with a quick financial summary of the quarter gone by. We achieved a healthy revenue growth of <strong>3.2%</strong> quarter-on-quarter and 16.2% year-on-year, delivering USD 436 million in Q4 FY26. This marks our 24th sequential quarter of revenue growth. In rupee terms, the growth for the quarter came in at 7.4% quarter-on-quarter and 25.1% year-on-year. In constant currency terms, the growth for the quarter was 3.4% quarter-on-quarter. The EBIT margin for the quarter came in at 16.3%, translating to an EBIT growth of 21.4% and 30.4% QoQ and YoY respectively. The Profit After Tax for the quarter came in at 13.1%, translating to a PAT growth of 20.4% QoQ and 33.7% YoY. Coming to the full FY26. FY26 revenue came in at USD 1.65 billion, translating into 17.4% YoY. In rupee terms, this translates to 23.5% YoY growth. The EBIT margin for FY26 came in at 15.6%, a 31.1% YoY growth.
Profit After Tax for the full year came in at <strong>12.6%</strong>, an increase of 33.2% YoY in absolute terms. Coming to the order book for the quarter. The Total Contract Value for the quarter stood at USD 600.8 million, with Total Contract Value of the new bookings coming in at USD 428.9 million. The Annual Contract Value of bookings for this quarter is USD 445.1 million, out of which Annual Contract Value from new bookings contributed to a healthy USD 272.7 million. The Total Contract Value for the year came in at USD 2.4 billion, while the corresponding annual contract value came in at USD 1.8 billion. Given that 80% of our revenue comes from the US, we normally see peak renewals and hence overall bookings in the December quarter, which coincides with our customers' fiscal year. The sequential moderation in bookings this quarter is consistent with this normal seasonality seen in prior years as well.
Top 5 customer revenue growing by <strong>20.7%</strong>, Top 10 by 19.4%, Top 20 by 20.0%, Top 50 by 20.9% and Top 100 by 19.5%. Customers with annual revenues greater than US$75 million remained stable at 4 on a year-on-year basis. Those with US$50 million plus annual revenue remained stable at 4. US$20 million plus increased from 10 to 12. US$10 million plus increased from 21 to 29. Those in US$5 million plus category saw a significant increase from 55 to 62 over the last one year. The customers on US$1 million plus category increased from 191 to 201. In terms of year-on-year growth this quarter in dollar terms, North America revenue grew by 17.4%, Europe grew by 12.3%, India by 4.2%, and the rest of the world grew by 41.4%, although on a smaller base. For the full year, North America grew 17.2%, Europe grew 26.7%, India 9.5%, and the rest of the world by 27.5%. This quarter's growth was led by Banking Financial Services vertical with 24.3% growth year-on-year followed by Healthcare, Life Sciences and Software, High-tech and Emerging verticals, which grew by 14.1% and 11.2% respectively on a year-on-year basis. For the full year FY26, Banking Financial Services vertical led the growth by 28.4% followed by High-tech and Emerging verticals, which grew by 13.8%, and Healthcare, Life sciences, which grew by 10.1%. Dividend: the Board of Directors has recommended a final dividend of Rs.18 per share on face value of Rs.5 per share.
This brings the total dividend for FY26 at Rs.40, including the interim dividend, and this compares to Rs.35 in FY25. In the quarter gone by we saw significant announcements on the AI roadmap by various ecosystem players such as Anthropic, OpenAI, NVIDIA, Microsoft, Google, Snowflake, Databricks and others. We do expect the pace of adoption in both the tech companies and enterprises to accelerate significantly in the coming quarters, with tech companies leading the way. We are steadily making progress on our AI journey and as a part of our capability build and workforce transformation, we recently concluded our Persistent AI huddle in Pune. As a part of our huddle, 1700 plus of our team members, including business leaders, delivery heads, delivery partners, technical architects and senior engineers participated. We also intend to host our AI Investor Day in early June timeframe at our offices in Pune to showcase our AI capabilities, our AI partnerships as well as some of the marquee customer case studies. Organizational updates: we have further strengthened our leadership team with the addition of two leaders, Ruchi Kulhari and Hari Abhayankar. Ruchi joined us as an Executive Vice President, Enterprise Strategy and Execution. Hari joined us as Executive Vice President and Global Head of Private Equity and Professional Services spearheading our company's global strategy and growth across private equity investors, their portfolio companies and professional services organizations.
Let me update you all on the progress of our AI journey as we continue to help our clients adopt and scale AI with measurable outcomes. As you know, our AI strategy is anchored on three key pillars - engineering hyperproductivity, business hyperproductivity and enterprise data readiness along with responsible AI. While AI can take enterprises a long way on their transformation journey, the true challenges lie in overcoming the last mile. Our platforms, SASVA, iAURA, and GenAI Hub bring all these things together. We have filed over 120 patents and published research to strengthen the depth of our platforms and deliver enterprise-grade results. In engineering hyperproductivity, SASVA continues to be the central driver for our clients. Over the last several quarters we have seen progression from individual productivity to team intelligence and execution at enterprise scale through the SASVA platform bridging the last-mile gap of AI adoption. We also expanded SASVA to run as a native layer on the core foundation that integrates with partners' platforms like Claude, GitHub Copilot and OpenAI Codex.
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