Summary
Persistent Systems Limited - Q3 FY26 Earnings Call Summary Tuesday, January 20, 2026, 6:00 PM IST
Event Participants
Executives 6 Dr. Anand Deshpande, Mr. Debashis Singh, Mr. Jaideep Dhok, Mr. Sandeep Kalra, Mr. Saurabh Dwivedi, Mr. Vinit Teredesai
Analysts 8 Abhishek Pathak, Bhavik Mehta, Mehta Bhavik, Nitin Padmanabhan, NPN Puranik, Ravi Menon, Sandeep Shah, Sucrit Patil, Vibhor Singhal
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | $422.5 million | +4.0% QoQ, +17.3% YoY; 23rd consecutive quarter of sequential growth. |
| Revenue (CC) | - | +4.1% QoQ growth in constant currency terms. |
| Revenue (INR) | ₹3,778.21 crores | +5.5% QoQ, +23.4% YoY; growth aided by currency tailwinds. |
| EBIT Margin | 14.4% | -190 bps QoQ; impacted by -230 bps due to New Labor Code provisioning. |
| Adjusted EBIT Margin | 16.7% | +40 bps QoQ improvement when excluding one-time labor code impact. |
| PAT | ₹439.45 crores | -6.8% QoQ, +17.8% YoY; impacted by labor code and MTM forex losses. |
| EPS | ₹28.20 | -6.9% QoQ, +16% YoY; decline reflects one-time statutory costs. |
| Order Book (TCV) | $674.5 million | Steady bookings inclusive of a $100 million Tier-1 US bank deal. |
| New Bookings (TCV) | $369.1 million | Strong pipeline conversion with 54.7% of total TCV from new business. |
| Headcount | 26,711 | Net addition of 487 employees during the quarter. |
| Attrition (TTM) | 13.5% | -30 bps QoQ; continued improvement in talent retention. |
| DSO (Billed) | 57 days | +3 days QoQ; increase attributed to holiday season collection spillovers. |
Geographic & Segment Commentary
- North America: Revenue grew 18.6% YoY, driven by stable demand in BFSI and Hi-Tech modernization programs. North America remains the primary engine for the $2B FY27 revenue aspiration.
- Europe: Revenue grew 22.0% YoY, supported by significant wins in the banking sector involving legacy-to-cloud transformations. A major European bank engagement for code refactoring was a key highlight.
- BFSI: Grew 29.3% YoY, outperforming other verticals through large-scale data platform migrations and cybersecurity transformation deals, including a $100M TCV win.
- Software, Hi-Tech & Emerging Industries: Grew 14.7% YoY, focusing on AI-led product engineering and private equity carve-out opportunities. The segment is shifting toward outcome-based models using the SASVA platform.
Company-Specific & Strategic Commentary
- AI Monetization & Productivity: AI platform-driven pricing (SASVA, iAURA) contributed a 150 bps margin tailwind this quarter. Management is shifting toward non-linear models where revenue is decoupled from headcount.
- Customer Zero Initiative: Internally deployed AssistX and P(AI)X agentic platforms have reduced IT incident resolution times from 3 hours to 30 minutes and autonomous resolution of 83% of HR queries.
- “Huddle” Strategic Planning: Leadership reaffirmed the “March to $2 Billion” target by FY27 and a long-term aspiration of $5 billion by FY31.
- IP & Innovation: Filed 105 patents for SASVA to date, with 30 in Q3 alone, focusing on agentic AI and machine learning on edge (Apple Silicon).
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Target | $2.0 Billion by March 2027 | Management remains “firmly on track” based on current TCV and AI-led growth. |
| Long-term Goal | $5.0 Billion by FY31 | Structural foundation being laid via “Huddle” priorities and AI scaling. |
| Effective Tax Rate | 20% - 24% for FY26 | Normal range accounting for seasonal elements. |
| Margin Outlook | Reinvestment Focus | Management stated they are not aiming to “squeeze” another 200 bps; focus is on reinvesting AI gains into growth. |
Risks & Constraints
| Risk | Context |
|---|---|
| Regulatory Changes | The New Labor Code in India caused a one-time 230 bps EBIT impact; while the hit is one-time, future provisioning will follow these higher statutory levels. |
| Collection Spillovers | DSO increased by 6 days (total billed + unbilled) due to holiday season delays, leading to lower OCF/PAT ratio (91% vs 114% last quarter). |
| Macro Demand | While demand is resilient in BFSI/Hi-Tech, management noted the need to hand-hold customers through AI adoption and data readiness before full-scale deployment. |
Q&A Highlights
AI Integration and Margins
- Question: What drove the 150 bps margin improvement from AI tools and is it sustainable? (Nitin Padmanabhan)
- Answer: It is not a single deal but multiple wins across SASVA and iAURA; the model involves upfront IP monetization and harvesting productivity gains from reduced manpower (Sandeep Kalra).
Software License Revenue
- Question: Why did software license revenue grow 40% QoQ while services grew only 2.6%? (Sandeep Shah)
- Answer: This reflects third-party licenses for managed services and the timing of revenue recognition for Persistent’s own IP; eventually, IP and services lines will “blur” (Sandeep Kalra/Vinit Teredesai).
Hi-Tech Vertical Strength
- Question: How is Persistent defying the trend of lower software spend in Hi-Tech seen by peers? (Abhishek Pathak)
- Answer: Peers focus on IT; Persistent works at the “core engine” of product development and private equity carve-outs, helping clients squeeze costs from mature products (Sandeep Kalra).
Capitalization of Intangibles
- Question: Why are intangible assets under development increasing on the balance sheet? (Sandeep Shah)
- Answer: Reflects heavy investment in AI platforms (SASVA, iAURA); these are now reaching maturity, and revenue generation is justifying the capitalization (Vinit Teredesai).
Key Takeaway
Persistent Systems delivered a stable Q3 FY26 with 4.1% CC revenue growth, marking its 23rd consecutive quarter of expansion. While reported EBIT margins (14.4%) were suppressed by a one-time 230 bps impact from India’s New Labor Code, the underlying operational performance was robust, bolstered by a 150 bps tailwind from AI-driven tool monetization. Strategic focus remains on the “Customer Zero” philosophy, using internal AI agent deployments to prove efficacy to clients, particularly in BFSI and Hi-Tech. With a $674.5 million TCV and significant wins in North America and Europe, management reaffirmed its trajectory toward reaching $2 billion in revenue by FY27. Investors should monitor the continued shift toward non-linear pricing models and the impact of sustained AI R&D capitalization on long-term profitability.
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