Persistent revenue grows, but margin falls to a three-year low
Costs grew faster than revenue, while higher interest and depreciation drove a 27.23% sequential fall in consolidated net profit.
Filed 15 Oct 2026, 20:09 IST · after market close · Persistent Systems Ltd (PERSISTENT)
Key takeaways
- Consolidated revenue rose 30.25% year on year, but net profit fell 25.44% as expenses grew 39.09%.
- Operating margin narrowed 5.50 percentage points year on year to 13.58%, its third straight quarterly decline.
- Net profit fell 27.23% sequentially as interest rose 28.93% and depreciation increased 44.57%.
Price around the results
Revenue momentum did not translate into profit growth
Persistent reported 26 consecutive quarters of sequential revenue growth, with consolidated revenue up 30.25% year on year and 8.38% sequentially. Profit weakened because expenses grew 39.09% year on year and 11.76% sequentially, outpacing sales in both comparisons. Net profit consequently fell 25.44% year on year and 27.23% sequentially.
Higher operating costs and fixed charges compressed margins
Operating margin narrowed 5.50 percentage points year on year and 2.61 percentage points sequentially because costs grew faster than revenue. Interest expense rose 108.95% year on year and 28.93% sequentially, while depreciation increased 66.59% and 44.57%, respectively. Other income contributed 5.39% of pre-tax profit, but was down 52.78% year on year and 65.39% sequentially; the 1.05-percentage-point year-on-year fall in the tax rate partly cushioned the profit decline.
Margin is now below every reported sector peer
Operating margin has declined for three consecutive quarters, from 18.93% in Q4FY26 to 16.19% in Q1FY27 and 13.58% in Q2FY27. Persistent's margin was 5.14 percentage points below the 18.72% median for six Information Technology peers that had reported the quarter, placing it lowest among them.
Nagarro financing and integration will shape the next phase
Management said Persistent had secured approximately 94.04% of Nagarro's share capital and voting rights and that shareholders had approved an equity raise of up to USD 450 million, with combined equity and borrowings capped at USD 1,250 million. The company said the combination is intended to strengthen engineering, broaden geographic presence and expand global delivery capabilities. Management also said the combined group is expected to be cash EPS accretive in year one, while approximately USD 50 million of transaction-related expenses will weigh on reported EPS growth.
The market has not yet reacted to the filing
The consolidated results were filed after market close, so there is no reported reaction yet. After the previous eight results, the stock rose five times and fell three times, with a median absolute move of 7.24%, providing a wide historical range for the eventual response.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹4,664 cr | ₹4,303 cr | +8.38% | +30.25% |
| Other income | ₹24 cr | ₹71 cr | -65.39% | -52.78% |
| Expenses | ₹4,030 cr | ₹3,606 cr | +11.76% | +39.09% |
| Operating profit | ₹633 cr | ₹697 cr | -9.10% | -7.26% |
| Operating margin (%) | 13.58% | 16.19% | — | — |
| Interest | ₹38 cr | ₹29 cr | +28.93% | +108.95% |
| Depreciation | ₹167 cr | ₹115 cr | +44.57% | +66.59% |
| Profit before tax | ₹454 cr | ₹623 cr | -27.19% | -26.45% |
| Tax | ₹102 cr | ₹140 cr | -27.05% | -29.71% |
| Net profit | ₹352 cr | ₹483 cr | -27.23% | -25.44% |
| EPS (₹) | ₹22.42 | ₹30.88 | -27.40% | -26.03% |
Operating margin of 13.58% compares with a Information Technology sector median of 18.72% across 6 peers that have reported Q2FY27.
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 reported its 26th sequential quarter of revenue growth in Q2 FY27.
- Persistent secured shareholder approval for the Nagarro transaction financing during Q2 FY27.
Guidance & outlook
- Persistent expects the combined Persistent-Nagarro group to be cash EPS accretive in the first year.
- ESOP vesting is conditional on 12% revenue growth and 12% EPS growth.
Expansion
- Persistent secured approximately 94.04% of Nagarro's share capital and voting rights, excluding treasury shares.
- Shareholders approved an equity raise of up to USD 450 million for the Nagarro transaction.
- Combined equity and borrowings for the Nagarro transaction are capped at USD 1,250 million.
- The proposed Nagarro combination is intended to strengthen engineering, diversify geographic presence and expand global delivery capabilities.
New initiatives
- Persistent is strengthening AI capabilities through its 3C framework and AI-driven platforms.
- Persistent is developing Enterprise Context within client environments to grow in value as models, platforms and agents change.
Problems & risks
- Transaction-related expenses of approximately USD 50 million will weigh on reported EPS growth.
What to watch
- Whether operating margin holds above 13.58% after three consecutive quarterly declines.
- Whether expense growth narrows from 11.76% sequentially against revenue growth of 8.38%.
- The reported EPS impact of the approximately USD 50 million transaction-related expenses.