Persistent Systems reported a robust Q2 FY27 performance with revenue reaching USD 487.6 million, up 20% year-on-year. While top-line growth remains strong, reported PAT of Rs 351.5 crore was impacted by one-time costs linked to the strategic Nagarro acquisition. Management successfully secured 94.04% of Nagarro's share capital and maintains an aspirational EBIT margin goal of 16-17%, despite current margin headwinds from wage hikes and deal-related expenses.
Persistent Systems Reports Strong Q2 Growth Amid Nagarro Acquisition Integration
Revenue hit USD 487.6 million, up 20% YoY; EBIT margin reported at 15%.
Reader Takeaway: Strong revenue momentum drives growth, but one-time acquisition costs and wage hikes compress short-term margins.
What just happened
Persistent Systems delivered a healthy Q2 FY27 performance, with revenue growing 7.8% sequentially and 20% year-on-year to USD 487.6 million. In rupee terms, revenue touched Rs 4,663.9 crore. The reported PAT of Rs 351.5 crore faced pressure, impacted by approximately 3.1% due to one-time expenses related to the acquisition of Nagarro.
Nagarro Acquisition Update
The company has secured 94.04% of Nagarro’s share capital. Management is planning a squeeze-out of remaining minority shareholders, with deal closure expected by Q4-CY26 or Q1-CY27. Regulatory clearances are pending only from Austria and Spain. To fund this, Persistent is raising USD 1.25 billion, including USD 450 million via equity or QIP instruments.
Profitability and Expenses
EBIT margin stood at 15%, reflecting a 130 bps YoY decline. Margins were hit by wage hikes (180 bps) and amortization from large deal investments (90 bps), partially offset by currency benefits and lower ESOP expenses. Total one-time acquisition costs are estimated at USD 50 million over several quarters. Management maintains an aspirational long-term EBIT margin target of 16-17%.
Order Book and Growth
New booking TCV stood at USD 367.1 million, with total TCV for the quarter at USD 633.5 million. Growth was led by the Software, High-Tech, and Emerging verticals, which expanded 28.5% YoY. The company is currently prioritizing 'Software Reinvention Services' to help clients modernize products via AI.
Risks to watch
Investors should track the integration risk of the Nagarro asset, the timeline for pending regulatory approvals in Europe, and the execution pace of the recent large deal, which is currently 75-80% ramped up.
What to track next
Watch for the completion of the Nagarro squeeze-out process and the company’s ability to improve operating efficiencies to reach the 16-17% margin target as one-time costs fade.