Persistent's margin falls to 16.19% as costs outpace revenue
Revenue grew +29.09% YoY, but higher costs and interest limited net profit growth to +13.67%; management reported record quarterly TCV of $1.15 billion.
Filed 02 Aug 2026, 14:41 IST · after market close · Persistent Systems Ltd (PERSISTENT)
Key takeaways
- Consolidated revenue grew +29.09% YoY, but expenses grew +32.49%, pulling operating margin down 2.16 percentage points.
- Net profit rose +13.67% YoY as interest expense increased +70.81% and other income contributed 11.34% of pre-tax profit.
- Operating margin fell 2.74 percentage points QoQ to 16.19%, marking a second consecutive quarterly decline from Q3FY26's 19.40%.
Price around the results
Revenue growth converted poorly into profit
Persistent's consolidated revenue growth remained high at +29.09% YoY, but operating profit increased only +13.95% because expenses rose faster at +32.49%. Net profit growth was similarly restrained at +13.67%. Other income accounted for 11.34% of pre-tax profit, making reported earnings less dependent on operating profit alone.
Higher costs and interest drove the margin squeeze
Sequentially, revenue grew +6.10% while expenses rose +9.67%, causing operating margin to narrow 2.74 percentage points. Interest expense increased +56.00% QoQ and +70.81% YoY, while depreciation also rose +6.22% QoQ and +22.94% YoY. The YoY tax rate declined 1.01 percentage points, which partly cushioned the pressure on net profit; QoQ, it increased 1.01 percentage points.
Margin is below the IT peer median
The 16.19% operating margin is the second consecutive quarterly decline after the 19.40% recorded in Q3FY26. It was 1.76 percentage points below the 17.95% median for 24 Information Technology peers that had reported the same quarter. Persistent stood eighth from the bottom on this measure.
Management highlighted Nagarro and large contract wins
Management said Persistent had signed a Business Combination Agreement with Nagarro, with closing expected by Q4 CY26 or Q1 CY27. The company said the combination is expected to create a business with about $2.9 billion of revenue run rate and over 46,000 professionals across 40-plus countries. Management also reported record quarterly TCV of $1.15 billion, including a six-and-a-half-year services agreement worth more than $650 million, and said it is investing in its 3C framework and AI-driven platforms.
No immediate market reaction after the late filing
The results were filed after market close, so this note does not assign a post-results market reaction. Across the past eight result announcements, the stock rose four times and fell four times, with a median absolute move of 7.24%.
Q1FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹4,303 cr | ₹4,056 cr | +6.10% | +29.09% |
| Other income | ₹71 cr | ₹33 cr | +110.93% | +29.24% |
| Expenses | ₹3,606 cr | ₹3,288 cr | +9.67% | +32.49% |
| Operating profit | ₹697 cr | ₹768 cr | -9.22% | +13.95% |
| Operating margin (%) | 16.19% | 18.93% | — | — |
| Interest | ₹29 cr | ₹19 cr | +56.00% | +70.81% |
| Depreciation | ₹115 cr | ₹109 cr | +6.22% | +22.94% |
| Profit before tax | ₹623 cr | ₹674 cr | -7.55% | +12.19% |
| Tax | ₹140 cr | ₹145 cr | -3.22% | +7.35% |
| Net profit | ₹483 cr | ₹529 cr | -8.73% | +13.67% |
| EPS (₹) | ₹30.88 | ₹33.83 | -8.72% | +12.58% |
Operating margin of 16.19% compares with a Information Technology sector median of 17.95% across 24 peers that have reported Q1FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- Persistent delivered 3.8% quarter-over-quarter and 16.1% year-over-year revenue growth in Q1 FY27.
- Persistent recorded quarterly Total Contract Value of $1.15 billion in Q1 FY27.
Expansion
- Persistent signed a Business Combination Agreement with Nagarro, a European digital engineering company.
- The Nagarro combination is expected to create a company with about $2.9 billion revenue run rate and over 46,000 professionals across 40-plus countries.
- The Nagarro transaction is expected to close by Q4 CY26 or Q1 CY27.
New orders
- Persistent signed a 6.5-year strategic services agreement with a leading global technology company worth more than $650 million.
- Persistent reported Q1 FY27 key wins across software, hi-tech, banking, financial services, healthcare and life sciences.
New initiatives
- Persistent has established a 3C framework covering Coordination, Context and Core to power enterprise AI outcomes.
- Persistent is investing in its 3C framework and AI-driven platforms to help clients build intelligent enterprises.
What to watch
- Whether operating margin recovers from 16.19% after its second consecutive quarterly decline.
- Whether expense growth moderates from +32.49% YoY relative to revenue growth of +29.09%.
- Progress on the Nagarro transaction against management's stated Q4 CY26 or Q1 CY27 closing window.