1. At a Glance – The Confused Midcap IT Rockstar
Sonata Software today is that IIT topper who cracked a global job, earns well, sends dividends home… but somehow the neighbourhood still thinks he peaked in college. With a market cap of ₹8,578 crore, Q3 FY26 revenue of ₹3,081 crore, PAT of ₹104 crore (post-exceptional), and ROCE flirting at 29%, Sonata is not exactly struggling for oxygen. Yet the stock is sitting at ₹306, down 37.5% over the last one year and 16.8% in just three months. Ouch.
The valuation looks polite rather than drunk: P/E of ~18.6, EV/EBITDA of 11.6, and Price-to-Sales of just 0.8 in a sector where “digital transformation” PowerPoints usually demand a premium. Add a 1.44% dividend yield and a historically generous payout, and Sonata feels like a disciplined CA attending a crypto party.
But here’s the twist: margins are thin (OPM ~6–7%), client concentration is high (Top 10 = 63%), and the market is clearly not buying the $1.5 billion revenue dream just yet. So is this a misunderstood compounder… or a structurally capped IT services company wearing AI makeup?
Let’s open the hood.
2. Introduction – From ERP Guy to AI Evangelist (With Receipts)
Sonata Software is not new money. It has been around long enough to remember when ERP implementations were considered “digital transformation.” Historically, Sonata made its bones as a Microsoft Dynamics and enterprise solutions partner, especially strong in retail and manufacturing. That business paid the bills, generated cash, and kept ROE comfortably north of 25%.
Then the IT world changed. Cloud happened. Data happened. AI happened. And suddenly every IT services company started talking like a Stanford professor with a Midjourney subscription.
Sonata responded with its Platformation™ framework—a buzzword, yes, but also a structured attempt to move clients from legacy IT to cloud-native, data-driven, outcome-based models. Today, Sonata positions itself as a modernization-first IT services firm, not a generic body-shop.
The ambition is loud: $1.5 billion in revenue by FY27, international EBITDA margins in the low 20s, and a $67 million AI pipeline across 110+ customers. The execution, however, is where the market is squinting.
So before we crown this as the
next midcap IT darling, let’s understand what Sonata actually does—and where the money comes from.
3. Business Model – WTF Do They Even Do?
Imagine you’re a global retailer or a bank sitting on 20-year-old systems, Excel sheets held together by prayers, and customers who expect Amazon-level experience. Sonata walks in and says: “Relax. We’ll modernize this mess.”
That’s the business.
The Core Pillars
Modernization Services
This is Sonata’s bread and butter. Migrating legacy systems to cloud platforms, modernizing applications, and making sure the lights don’t go off during the transition. Not sexy, but extremely sticky.
Digital Engineering & Data
Custom software, analytics, data pipelines, and decision intelligence. This is where margins should expand, assuming clients pay for brains instead of hours.
Cloud & Infrastructure Services
End-to-end cloud migration and managed services. Predictable revenue, but margin-sensitive.
Enterprise Solutions (Microsoft Dynamics 365)
Sonata is a 30-year Microsoft partner, and reportedly contributes $650 million in annual revenue to Microsoft’s ecosystem. This vertical gives credibility, scale, and enterprise access—but also caps margins.
AI & Automation
Generative AI, workflow automation, agentic systems. Sonata launched AgentBridge, IntellQA, and keeps announcing AI wins. The opportunity is real, but monetisation is still warming up.
If you had to explain Sonata to a lazy investor:
“They clean up enterprise IT messes, mostly for large global clients, with Microsoft and cloud at the centre—now trying to upsell AI on top.”
Fair? Yes. Exciting? Depends on margins.
4. Financials Overview – The Numbers Don’t Lie, But They
