Sonata Software (SONATSOFTW) | News Based Sentiment Analysis

• On September 12, 2025, Sonata Software announced strong Q1 FY2025-26 results, with revenue growing 17.32% year-on-year to ₹2965.18 crore and profit increasing by 3.51% to ₹109.34 crore. While revenue growth was robust, the slower profit increase suggests potential margin pressures that investors should monitor.
• Following the Q1 earnings report, analysts maintained an average share price target of ₹525, representing a 38.19% upside from the ₹379.90 price on September 15, 2025, with a consensus of 4 'Buy', 2 'Hold', and 1 'Strong Buy' recommendations. This positive outlook provides some reassurance despite emerging concerns about growth.
• HDFC Equities cut Sonata Software’s EPS estimates by 7-8% on September 17, 2025, citing client-specific issues with Microsoft and in the BFSI segment, alongside macroeconomic headwinds. Despite this, HDFC maintained an 'ADD' rating with a Rs 400 target price, indicating a belief in the company’s long-term potential.
• Sonata Software’s shares experienced volatility in mid-September, surging 8.02% to Rs 421.50 on September 18, 2025, driven by market optimism and the U.S. Federal Reserve’s rate cut, but then declined 1.60% to ₹394.10 by September 19, 2025, due to profit booking. This highlights the stock’s sensitivity to broader market conditions.
• The company’s employee welfare trust increased its stake by acquiring over 47,000 shares between September 15 and 17, 2025, increasing the trust’s stake to 1.07% at an average price of Rs. 382.6. This insider activity could signal confidence in the company’s future prospects.
• Institutional investor holdings saw a slight decrease in September, with FIIs decreasing their holdings by 1.08 percentage points and Mutual Funds by 0.20 percentage points. Simultaneously, investor interest on INDmoney dropped by -46.77% over the past 30 days, and search interest decreased by -3%, suggesting waning investor enthusiasm.
• On September 18, 2025, Sonata Software reported consolidated revenue of INR 2,965.20 crores, marking a quarter-on-quarter growth of 13.30% and a year-on-year growth of 17.30%, with EBITDA improving marginally to 16.60%. The company also declared its first interim dividend of INR 1.25 per share, signaling a commitment to returning value to shareholders.

The Investment Story: September was a mixed month for Sonata Software, marked by solid revenue growth but tempered by concerns about slowing profit growth, analyst EPS revisions, and decreasing institutional and retail investor interest. The company continues to navigate a challenging macroeconomic environment.

What It Means for Investors: While the company’s revenue performance remains encouraging, investors should carefully consider the headwinds impacting profitability and the potential for continued volatility. The mixed analyst sentiment and declining investor interest suggest caution is warranted.

Looking Ahead: Investors should closely watch the next earnings report on November 05, 2025, for further insights into the company’s performance and future guidance. Monitoring the company’s ability to address the challenges highlighted by HDFC Equities will also be crucial.

The Bottom Line: Sonata Software presents a cautiously optimistic investment picture. The company demonstrates positive revenue momentum, but investors should be aware of the emerging challenges to profitability and the shifting sentiment among institutional and retail investors.