Sonata Software Ltd (NSE: SONATSOFTW) Q3 2026 Earnings Call dated Feb. 06, 2026
Corporate Participants:
Samir Dhir — Managing Director And Chief Executive Officer
Jagannathan CN — Chief Financial Officer
Analysts:
Unidentified Participant
Dipesh Mehta — Analyst
Amit Chandra — Analyst
Vipul Kumar Shah — Analyst
Presentation:
operator
[Starts Abrupltly] For all participants to ask questions after the Management’s opening remarks. Should you need assistance during the call, please raise your hand from the participant tab on your screen. Please note that this call is being recorded. During the call, please note the Management may make certain forward looking statements that involve risk assumptions and are based on information currently available to the management. Sonata does not undertake any obligation to update any such forward looking statements that may be made. In course of this call. We advise participants to exercise discretion while making any investment decisions. We will begin with opening remarks from the CEO followed by a business overview and financial highlights.
After that we will open the floor for questions. With that, I hand the call to Mr. Sameer Dhir for his opening remarks over to you sir.
Samir Dhir — Managing Director And Chief Executive Officer
Thank you inba. Hello everyone and thank you for joining us today. We truly value your time and appreciate your continued trust and support in Sonata. In today’s session, we’ll walk you through our overall strategy, the progress we have made over the past few quarters and our forward looking roadmap. We’ll also present a detailed view of our financial performance for Quarter Q3FY26 which concluded on December 31, 2025. We are excited to share the progress we are making as we continue to execute our long term vision. To begin, I’ll walk you through our strategic priorities and key objectives followed by highlights from our most recent Q3 performance quarter.
So let’s talk about our strategy and goals. At Sonata, our ambition is clear. We want to be a differentiated modernization engineering firm powered by our proprietary platformation framework. We are covering at scale across three core strategic dimensions. Number one our four focus verticals which is healthcare and life sciences, Banking, financial services and insurance, retail, manufacturing and distribution and technology, media and telecom. Number two Our five priority geographies which are North America, uk, Europe, India and Australia. Number three Modernization Engineering leadership. With sustained investments in ip, our proprietary lightning tools and our robust offerings, we’re enabling continuous modernization for our clients, building digital, AI and data platforms that deliver transformative value for our customers.
We see significant opportunities at the intersection of AI and modernization engineering, driving momentum across the strategic bets we have made, enabling us to consistently secure large deals, gain market share significantly in BFSI and HLS verticals and deepen our capabilities in data, AI and modernization engineering. All this backed by scaling talent across sales, delivery, HR and finance operations to support our growth ambitions. With that, let me turn to our strategic pillars. Our success is anchored on four strategic pillars. Number one Scaling Sonata capabilities and continued investments in AI. Number two Relentless focus on the large deal wins.
Number three scaling across our strategic verticals, geographies and talent and number four our domestic business. Let me take you through updates on all the four pillars scaling Sonata capabilities, specifically update on AI and Modernization. We continue to make meaningful and measurable progress in scaling our AI led business across the company. AI now accounts for 14% of our total order book up from 10% of our previous quarter order book in the most recent quarter, demonstrating yet again a strong market demand and deeper integration of AI in our client solutions. Our go to market strategy is tightly integrated with CSP AI co sell programs, particularly leveraging Microsoft’s new AI consumption model.
This quarter we closed two mid size AI CSP deals which are expected to both drive existing client expansion and net new logo acquisition. Earlier this year we launched AgentBridge, our cloud agnostic agentic AI platform designed to help clients build and deploy next generation agentic AI solutions. We’re Also partnering with IISc in India and WaterSchool in US to further research and innovation in agentic AI. Internally within Sonata we have operationalized AI across our functions as well across functions. We now run production grade agents on AgentBridge, reinforcing our ambition to be a model AI led technology services firm.
We are actively pursuing AI opportunities across 100 plus clients helping them unlock value through operational efficiency gains, faster time to market and transformation of business models on cloud and data. Our opportunities now account for 50% of our total pipeline reflecting strong client demand and for modernization. We are seeing accelerated adoption of Microsoft fabric where Sonata is an official Microsoft Fabric feature partner enabling clients to build data analytics foundations for AI era Microsoft Dynamics. We continue to work closely with Microsoft on programmatic plays across ERP modernization, SaaS, transitions and low code no code compete deals strengthening our leadership in the Dynamics ecosystem.
With that let me provide an update on the large deals. Large Deals pursuits remain a cornerstone of our growth strategy with 40% of our pipeline comprising of large strategic opportunities. I’m pleased to share with you our large deal wins from the most recent quarter. The first win is with a global provider of financial technology and Payment Solutions, a Fortune 500 firm. They awarded Sonata a multi year contract to modernize their core digital wallet platforms to enable faster and secure payments. This is a multi year deal and in this deal we will deliver accelerated time to market for their digital Wallet platform and drive growth in newer customer segments on their digital Wallet ecosystem.
The second large deal is also in the banking space. A leading mortgage provider awarded Sonata a multi year contract to modernize their core platforms, leveraging automation and AI to drive enhance consumer experience, reduce technical debt and AI enablement and data driven insights for their end consumers. In the large deal wins we just announced, Sonata has differentiated to our AI led transformation approach, integrated modernized modern engineering practices and transformation platform driven data modernization to create real outcome driven value for our clients. Let me provide an update on the key AI wins that we had in the quarter.
The first one is for an Europe based digital document management systems and workflow firm. They’re partnering with Sonata to modernize their legacy system to be transformed to agentic AI driven modernization. The strategic engagement modernizes the customer’s core platform, enhances the scalability and sets the foundation for future SaaS transformation for a client. The second win is a strategic AI program with a US based global software provider to modernize their legacy WIN form application to a browser Interface solution using AI. With that, let me provide an update on the third pillar, strategic verticals, GEOs and talent. We remain confident that our investments in verticals like Healthcare and Healthcare, Life Sciences and BFSI are on track to scale.
Together. These verticals now contribute 31% of our total revenue, a sharp rise from 13% just three years ago, a clear reflection of our strategic focus and disciplined execution. Our North America business has also scaled significantly and now represents over 70% of our total revenue, up from approximately 1554% three years ago. This shift reflects our continued success in deepening client relationships and expanding share in North America for talent and workforce metrics. Our LTM attrition stands at 11%. Our gender diversity remains healthy at 31%, underscoring our continued focus on building an inclusive organization. Despite a challenging macroeconomic environment that we are in, we remain committed to the future focused talent investments that strengthen our ability to deliver and growth Upscaling through Sonata University Sonata University continues to power our upscaling and capability building agenda with a strong focus on AI readiness.
Over 92% of our workforce and 80% of our managers are not trained in AI, reinforcing our commitment to building AI future ready skills across delivery, engineering and consulting. We have also rolled out WIPE coding training across the organization with 78% of the employees successfully completing it, reflecting high engagement and adoption. As we announced earlier, we completed our annual compensation revision this year during Q2 and Q3. Despite market headwinds and industry pressures, we continued in our investments in our people, reaffirming our belief in investing in our people and maintaining industry, leading engagement and learning initiatives. With that, let me go to the fourth pillar which is the domestic business.
In that business, we’re making strong progress across three strategic pillars that we talked to you about in prior quarters. Pillar Number one Expand our Microsoft channel with a sharper focus on SMC segment including the incubation of our new Sonata on Cloud soc capability offering. Second partnership with other ISVs such as Oracle, IBM, OpenText and Quest, expanding beyond the three hyperscaler CSP partnership that we have enjoyed over the past many many years. Number three Win large system integration deals that integrate the cloud providers with other platforms like Cisco, IBM, intel and other ISV infrastructure providers. These strategic bets are core to building a more diversified, resilient and future ready domestic business for Sonata.
Let me provide an update on the industry recognition in the quarter. We continue to be recognized for our work, workplace culture and market momentum. In the most recent quarter we recognized as star performer and major contender in Everest Groups Enterprise Quality Engineering Services by Peak Matrix assessment. We were also recognized star performance and aspirant in the Everest Group’s Data and Analytics services by Peak Metric assessment. With that, let me provide you an update on the on the quarter performance. Before I get into numbers, let me provide the Tailwinds summary and the Headwind summary. Let’s talk about the tailwinds first.
During the quarter we benefited from three key growth drivers. Number one, strong momentum from our large TMT and healthcare deal wins that we announced in prior quarters. They ramped up during the quarter with expanding scopes. Number two, our continued strength in healthcare, Life Sciences and BFSI verticals continue to be a significant driver for Sonata. And number three, our robust performance in data and AI led wins reflecting growing client demand for modernization. In addition to the growth momentum, our operational efficiencies driven by AI adoption across functions right shoring and higher utilization delivered a net ebitda accretion of 2.2% quarter on quarter and that’s after absorbing 70bps of impact due to salary increments.
Additionally, we optimized Pyramid. We got price increases and all these levers balanced out the higher CSP and AI related costs as well. So on a gross basis our EBITDA improved by 290bps and we expect EBITDA to continue to be in our earlier forecasted range of high teens and low 20s as we move forward in the coming quarters. Within Citil we had headwinds for one of our large clients which we had talked about in prior quarters. However, based on a three pillar strategy enacted several quarters back, our team will be back to Y and y growth by Q2 of FY27.
With that we would have recovered from the single client issues within about 2 to 3 quarters time. With that let me talk about headwinds and the offsets in the business. Three of the top 10 clients in Sonata have headwinds which have continued in the course of the year while the rest of the business have continued to do extremely well. The three large clients impact has impacted our growth trajectory in the most recent quarter and we believe that will continue in the near term as well. The three clients Number one, our largest BFSI client underwent organization changes and budget constraints leading to ramp downs in the quarter.
Our largest EMT client continued to have experienced budget pressures resulting in moderate near term growth. Within that the largest EMT client. On the engineering side we are back to growth sequentially which is a positive news. On the non engineering side we continue to have budget pressures and number three, very recently there has been an unexpected ramp down in one of our large retail clients. We continue to work with the customer on the revised terms and conditions. We’ll be able to give you a more conclusive view in the coming months and quarters of the impact from this client.
The revenue impact from this client has already been factored in our Q4 numbers. The impact on the three clients of the top 10 clients has largely been offset by a growth in the large TMT and healthcare deals and now the large payment tech deal that we just announced. They will offset some of these negative headwinds. Outside of these three large client impacts, we recorded healthy growth across the rest of our client base reflecting the resilience and diversification of our portfolio. With that, let me get to the numbers Growth and Order Booking our revenue grew sequentially 40bps quarter on quarter.
Our order booking stood at 1.18 times book to bill ratio. We secured two large deals in the quarter. The number of clients with more than 10 million annual run rate is now at 8. We added three enterprise clients and deepened our strategic partnership with Microsoft, AWS, Salesforce and other key partners. Our AI led order booking now continues contributed to 14% of our order wins profitability. Our EBITDA improved significantly to 19.5% up from 17.3% in the previous quarter. Our PAT grew 6.1% sequentially quarter on quarter and 21.4% Y&Y. In the India business our gross contribution grew 10.8% quarter on quarter.
In summary, Sonata delivered a resilient performance in Q3FY26 with 40bps quarter on quarter growth with 21.4% YNY PAT growth and EBITDA improving to 19.5% which is what we have talked about in several previous quarters that are long term aspirations to be high teens and low 20s EBITDA company we secured two large deals, expanded our AI lit order bookings and now have eight clients with an annualized run rate exceeding $10 billion. A long term ambition to be a differentiated modernization engineering firm powered by platformation, AI and modern technologies continues to drive our strategic momentum. I want to thank all the Sonatians for their continued dedication and commitment.
Their efforts form the foundation of our progress and future success and we remain confident in delivering long term value for our clients, partners and shareholders. With that, I’ll turn it over to Jagan for his comments.Jagan
Jagannathan CN — Chief Financial Officer
yeah, thank you Sameer for the overview. Good morning, good afternoon, good evening everyone. Let me walk you through our financial performance for quarter ending 31st December 2025. First, starting with international services in Q3. 26 USD reported revenue stood at 82.3 million growth of 0.4% quarter on quarter. In constant currency terms it represent growth of 0.3% quarter on quarter. Rupee revenue stood at rupees 738.6 crores, growth of 1.1% quarter on quarter. EBITDA before other income and forex for Q3.26 improved to 19.5% up 220 basis point Q1Q from 17.3% in Q2.26. This improvement is on top of 70bps improvement in Q2.
After absorbing the impact of increment of 70bps, the gross EBITDA improvement in Q3 stood at 290bps. This accretion is primarily driven by operational improvement across delivery SD and date reflecting better delivery efficiency cost optimizations to give you specifics, utilization improved to 90% up from 87.3% in Q2. 26. As informed in Q2 our utilization and HC levels were driven by sustainable productivity improvements and operational efficiency and delivery enabled by a adoption differentiated a solution agentic implementation across projects. Our offshore revenue mix improved to 63% from 53% in Q2.26. We also benefited from pyramid optimization and price increases.
All the above levers are partially offset by higher CSPA related costs. EBITDA after other income and forex for Q3.26 stood at rupees 146.8 crore growth of 0.5% quarter on quarter and 23.7% year on year. Q3.26 reported PAT stood at 59.8 crores including one time impact of labor code of INR 28 crore pre tax normalized PAT for Q3 stood at rupees 80.4 crores against 78 crore in Q2.26. Growth of 3% quarter on quarter and 41.2% year on year reported ROCE and RONW for the quarter stood at 18.7% and 23.1% respectively. International Services DSO for Q3.26 is reported as 71 days against 68 days in Q2.26.
Now let me provide you with an update on domestic business. Domestic business revenue for Q3.26 to debt 2344.9 crore with growth of 68.5% quarter on quarter and 11.1 percentage year on year. Gross contribution for Q3.26 to debt INR 76.1 crore with growth of 10.8% quarter on quarter and degrowth of 7.1% year on year. PAT for Q3.26 stood at Rupees 44.6 crore crore including one timer impact of labor code of INR 3.3 crore. Pre tax normalized pact for Q3 stood at 47.1 crores against 42.2 crores in Q2.26 with growth of 11.6% quarter on quarter and a degrowth of 2.1% year on year.
Reported ROC and Ronwood for the quarter stood at 43.1% and 41.8% respectively. Update on Consolidated Business for the Quarterly for the quarter the Consolidated revenue for Q3.26 stood at Rupees 3080.6 crores with a growth of 45.4% quarter on quarter and growth of 8.4% year on year. Pact for consolidated business for Q3.26 showed that INR 104.4 crore including one time impact of labor code of Rupees 31.3 crores pre tax normalized PAT for Q3.26 stood at 127.5 crores against 120.2 crores in Q2.26. Growth of 6.1% quarter on quarter and 21.4% growth year on year. Consolidated EPS for Q2.26 for 3 rupees per share Q2 it was 4.33 rupees per share reported ROC in RO and W for the quarter stood at 23.3% and 27.7% respectively.
The company has declared its interim dividend for the year for the quarter at 1 rupees 25 paisa per share. In line with the commitment made during the Q1 earning call to implement quarterly interim dividend payment starting this year. Company intends to follow A quarterly interim dividend payout policy Update on cash flow, Cash and Cash equivalent gross stood at 564crore in Q3.26 again 323crores in Q2.26. Cash and cash equivalent net stood at negative 12crores in Q3.26 against negative of 280crores in Q2. 26. Update on our Operating Metrics Business Operating Performance total headcount to date 6,404 in Q3.26 again 6,649 in Q2.26 with attrition of 11% on site. Offshore revenue mix at 37 is to 63 in Q3.26 versus Q2.26 of 43 and 57 utilization reported at 90% in Q3.26 versus 87.3% in Q2.26. We added three new customers in Q3.26 which include two large multi year deals. Top 10 clients contributed revenue share of 55% in Q2.26 it was 53%. Number of clients greater than 5 million run rate stood at 13 in Q3.26 same as Q2.26. Number of clients in is greater than 3 million up to 5 million.
Revenue stood at 8 same as Q2.26. Q3.26 order books stood at 97 million with book to bill ratio of 1.18x. In summary, our Q3 performance reflects disciplined execution and impact of sustainable margin levels driven by operational efficiency and AI led productivity gains. We remain confident in our ability to continue improving margins through execution, rigor and delivery excellence. With this, I hand over back to the back for the question.
Questions and Answers:
operator
Thank you very much sir. Ladies and gentlemen, we will now move to the Q A segment to ensure we provide space for as many participants as possible, we request you to limit yourselves to two questions per turn. For participants connecting on Zoom, please click on the Raise hand icon located at the bottom toolbar on your screen. When called upon, you will receive a prompt to unmute for our participants connected via a telephone call. To join the question queue, please press star9 on your telephone keypad. When it’s your turn, you will be prompted to unmute by pressing 6.
Please state your name and company name before asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from Dipesh Mehta of MK Global. Please go ahead sir.
Dipesh Mehta
Thanks for the opportunity. Can you hear me now?
operator
Yes sir. Please go ahead.
Dipesh Mehta
Yeah, thanks for the opportunity. A couple of questions first. Just want to clarify I think in the prepared remark you indicated YOY growth to return by quarter to FY27. That is what you indicated or I misinterpreted it.
Jagannathan CN
Domestic business right?
Dipesh Mehta
No international side IITs
Jagannathan CN
no, no we. We mentioned about domestic business.
Dipesh Mehta
Okay. So for international business we have not made any comment about growth trajectory.
Samir Dhir
So the best. Let me take this summary. So there’s two parts. So the comment that we made was for the domestic internal, sorry domestic business which was to say that by Q2 will revert back after the large client impact by Q2 will come on Y and Y basis on growth positive basis. On the on the international side we talked about three client impacts and we believe the current trajectory that we delivered in the most recent quarter will probably continue in the near term as well. We are not able to give you a firm indication as to how long will it take to come back to our old growth rates, but at least for the next one or two quarters we expect the trajectory to continue.
Dipesh Mehta
Okay so to just to understand this domestic business this is for gross contribution level or we are referring on revenue.
Samir Dhir
Perspective gross contribution level.
Dipesh Mehta
Now on the international side there is a very sharp decline in BFSI which you partly alluded about large BFSI where you are seeing some challenges considering that these three things. Do you think things have largely bottom out or you think incremental impact to play out in quarter four and quarter four. We used to see let’s say usual seasonality earlier this time. Obviously we have not benefited even quarter three. So considering no benefit do you think quarter four to be relatively more stable quarter for us?
Samir Dhir
Yeah. So I think the the headwinds from the large BFSI customer dipesh have been now absorbed in the in the Q3 quarter. And because we just announced two large deals in BFSI which are different deals, I think Q4 onwards will pick up growth in the BFSI segment as we move forward. So yes we have we are back to growth 1 before segment now I think the impact of the large client is is behind us and absorbed.
Dipesh Mehta
No, my question was for IITs overall, not one overall.
Samir Dhir
Okay. Overall I think like I said the, the trajectory that you’ve seen in the last one or two quarters will probably continue for at least next one or two quarters. We are not able to guide beyond that because we’re just absorbing the impact from the large tech client and the large detail client as well. So we’ll probably in coming time but you should expect the same growth trajectory that we’ve been on at least for next one or two quarters.
Dipesh Mehta
The large retail client impact was there in quarter three or it will be now in quarter four kind of thing.
Samir Dhir
It was largely absorbed last quarter and partially will get absorbed in the current Q4 quarter.
Dipesh Mehta
So if I look your RMD now that segment we were not that positive on growth trajectory but last two quarter it did fairly well. So can you provide some sense on retail manufacturing how it is shaping up?
Samir Dhir
Sure. So RMD segment as we have talked about earlier has been in stress because of the tariffs earlier on and continuing issues that have been going on in the industry in general. The segment did not grow just because our banking business shrank significantly in the last two quarters. So the percentages looked higher but as a absolute number the business did not grow as much. But with the now large retail client impact you would probably see a decline in our retail business relatively more in the in the Q4 quarter. But then from Q4 Q1 onwards we’ll be back on growth in the retail segment as well.
Dipesh Mehta
If my calculation is right, your RMD segment has grown 36 percentage yoy in absolute revenue perspective in dollar terms in quarter on quarter it grew almost 10%. Nine and a half ten percentage.
Jagannathan CN
Yeah. It is because of the large customer. The amount of the impact was divided between Q3 and Q4. You will see the impact more more visible in Q4 than in Q3.
Dipesh Mehta
Now the question is quantum of growth is very strong when we are saying it is under some kind of stress. 30 percentage growth is very strong in my opinion considering the overall company average growth. So just want to understand how whether it is now sustainable trajectory or we. Are still skeptical on growth
Jagannathan CN
are talking about rmd.
Dipesh Mehta
That’s right.
Jagannathan CN
Rmd. We had last year a good amount of recovery happening towards the last two quarters. We will have the similar kind of range of revenue for at least couple of more quarters to observe the impact of the large customer.
Dipesh Mehta
Understood. Maybe I can take comment follow up. Thanks.
operator
Thank you. We move to our next question from Sachin Sehgal of Anikode Infotech. Please go ahead Mrs. Sehgal. You may ask your question now.
Unidentified Participant
Yes. So which sectors in India are growing. Like our domestic business? Which sectors are growing? That is like year on year it. Has grown like quarter on quarter it has grown to like almost doubled its digits. Which are all sectors that are consuming our technology. In India.
Jagannathan CN
You want to know which which segment is doing well?
Unidentified Participant
Yes, yes. In the domestic segments.
Jagannathan CN
Yeah. BFSI is doing well and we have also expanded it to conglomerates and manufacturing companies now.
Unidentified Participant
Okay. And the international business, what are the impacts of that AI into our into. Our system like are we adopting it or.
Jagannathan CN
Till now AI has been beneficial to us. So if you see the commentary given by Sameer also called out that AA has given a benefit to us and it has helped us to improve the margin and improve the utilization. Also with almost lesser addition of manpower, it has helped us to get more benefit in margin.
Unidentified Participant
Okay. So like I have seen that in. The international business one last deal has. Been gone in the quarter and quarter. Like the European deals are coming into the picture. Like how much is the business in the Americas in the different specifics of the world. It’s not been the clear idea about it. While reading the financial things,
Jagannathan CN
America still is leading. We are growing more in America than Europe.
Unidentified Participant
Okay. And how much is the percentage of the Americas and the Europe?
Jagannathan CN
About 70 percentage in Americas now.
Unidentified Participant
Okay. Yeah, that’s it.
operator
Thank you. A reminder to our participants, if you wish to ask a question, you may click on the raise hand icon from your zoom tab. Participants connected via telephone may enter Star9 to ask a question. We’ll take the next question from Manit Chandra of HDFC Securities. Mr. Chandra, please could you unmute your microphone and ask your question?
Amit Chandra
AM audible.
operator
Yes, sir.
Amit Chandra
Yeah. Yeah. Thanks for the opportunity. My question is the continuation and clarification on the retail softness in in a. Specific client that you said. So in BSSI we saw that one. Specific client issues. Impacted our revenues heavily. In terms of HLC YOY, it’s a 60% decline. 15 million kind of a drop from a single client. So is it fair to assume that is all the decline is from a single client or is it we are seeing in bfsi, Is it like other plans also where we saw this?
Samir Dhir
Yes, let me take this. So in BFSI it was a single client impact which started sometime in summer. And by the most recent quarter we fully absorbed the impacts. All the impact impact was one client and it’s not fully absorbed. And like we made the comment earlier, as we move forward from Q4 onwards, we’ll be back on growth in BFSI.
operator
Mr. Chandra, do you have any more questions? Thank you. There’s no response from this connection. We’ll move to our next participant. That’s Vipul Kumar Shah from Sumangal Investments. Mr. Shah, please go ahead with your question.
Vipul Kumar Shah
Am I audible?
operator
Yes, sir.
Vipul Kumar Shah
Hello.
operator
We can hear you sir. Please go ahead.
Vipul Kumar Shah
Yeah. So my question is regarding the strategy. Mr. Samir, before you took over we were a platformation company and we were con. We were focusing more on IP LED products. So that strategy has been discarded or it is Continuing. So can you make some broad comments regarding that?
Samir Dhir
Sure, happy to. If you, if you go back to the original, in my prepared comments I talked about, and let me reiterate, our ambition is to be a differentiated modernization engineering firm powered by a proprietary platformation framework we talked about in the prepared comments as well. So platformation actually continues, was and will continue to be a core part of our thesis and our DNA. And it has actually become more important now given the relevance of AI. We are really building out and expanding the scope of platformation and redefining and extending the boundaries of platformation to incorporate the impact and the benefits of AI as well.
So some of the wins that we have talked about are foundational in nature because we’re able to win those contracts because of our platformation thesis. Because as we move forward, customers are looking for providers who can bring in engineering best practices as well as IPs and platforms that can help them accelerate time to market. So in summary, platformation was, is and will be a core part of our DNA and will continue to differentiate Solana.
Vipul Kumar Shah
So what percentage of revenue we are getting from this Platformation. Right.
Samir Dhir
So platformation is really not an sku. It’s not a, it’s not a measurable unit. It’s a, it’s a concept that we apply across all our deal wins. In some deals which are more migrate or modernization type deals, it is very much a core part of it. In some deals it is probably slightly lesser. It depends on the nature of the project. So it’s not something that we track as a percentage of revenue. It’s a solution vector. As we solution our deals or, or problems for our customers, we apply the platformation principles into our solution tenants.
Vipul Kumar Shah
Okay, couldn’t Got mint, got a very clear reply. But is it possible to take it offline, sir?
Samir Dhir
Absolutely. So while you’re at it, let me give an example. So if, let’s say you’re building a a front office call center platform. So of course we’ll leverage the technology from Microsoft or AWS or any other third party software provider. But as you implement the platform, you use the Sonata platformation techniques to implement in a more efficient and simpler way. That’s how we do it. But happy to take it offline.
Vipul Kumar Shah
Thank you sir.
operator
Thank you. We take the next question from Dipesh Mehta of MK Global. Please go ahead.
Dipesh Mehta
Thanks for the opportunity for follow up. Two question first about the EBITDA margin. I think when you indicated about margin work you indicated some of the offsetting factors. I missed it. Can you help us understand that part Positive. I understood. I think you said some negatives were there. I could not understand that part. Second question is about the EBITDA margin trajectory. Considering we deliver significant improvement this quarter quarter 220 bips kind of improvement do you think is now here to sustain and further improvement in coming quarters or how one should expect it. Thanks.
operator
Management team, are you still connected? Management team, are you still connected to the meeting?
Jagannathan CN
There’s some technical challenges. Hold the line for 30 seconds.
operator
Sure sir, sure. Ladies and gentlemen, please remain connected while the management will unmute the connection again. Please do not disconnect. Thank you. It. Ladies and gentlemen, we request you to please remain connected.
Samir Dhir
We are back now. Hopefully you can hear us now.
operator
Yes, thank you sir.
Samir Dhir
Okay. Sorry for the incubation. I think there’s some technical glitch. So I think the question was on the offsetting factor and the guidance for EBITDA go forward. So as we do the cloud deals there is an element of cloud consumption as well as services component and some of these deals have dealt with dilutive effect in the first few years. So what I was talking about was that there’s a balancing of CSP and AI related costs in the first part of the deals for the first part of the years of these deals and that is partly offset by the levers that we talked about.
So that was the offsetting factor we were talking about. Dipesh, as far as your question about the forward looking EBITDA guidance, as you know we have always guided that we want to be a high teens and Low 20s EBITDA company. In the most recent quarter we announced about 19.5 or 19.6% EBITDA. I think you can calibrate us to be in the 18-21% type company range go forward as well. That said, we don’t expect a sharp decline or sharp increase go forward we’ll be in the same zone or what we have seen in the most recent quarter from an EBITDA performance perspective.
Dipesh Mehta
Understand. Can you help us understand this CSP and AI related cost, how it plays out and what would be the contour to understand this part. Thank you.
Samir Dhir
So this is the cloud consumption cost that many clients want us to take as part of the engagement. Some customers work with the cloud providers directly and some customers want to bundle it as part of services deal. So that’s the cloud compute cost that we’re talking about. So it’s very client specific. So this is pass through in a way. Well not really because this has a managed services component as well, so it is baked into that aspect.
Dipesh Mehta
Understand. Thank you.
operator
Thank you. We’ll take the next question from Ashish Dash from Mirai Asset Securities. Please go ahead. Sudarsh.
Unidentified Participant
Yeah, Am I audible?
operator
Yes sir.
Unidentified Participant
Okay, thanks for the opportunity. So a question. I just want to understand about the outlook of the TMT vertical. See what I see that data and dynamics revenue has declined quarter on quarter. So is the, is this because of the softness in your top client?
Samir Dhir
See you. I. I’m sorry, I’m struggling to say you’re asking about data or you’re asking about TMT vertical. I just didn’t understand the question. Sorry.
Unidentified Participant
Yeah, I combined both the what the things. So I wanted to understand the TMT verticals outlook and also I see that your dynamics and data service line revenue growth has declined quarter on quarter. So is there any relation and because you mentioned in your prepared comments that you are executing a lot of data related projects.
Samir Dhir
Sure, we can answer that. So let’s talk about the data and data related ramdown. So the data related overall growth is very solid. But the banking plan that we talked about Ashish earlier, the work ramp down that happened in that single client was largely data work. So we’re seeing that impact of that one single client come through in the data practice as well. But if you back out one single client impact, I think overall the bank, the data practice has done very, very well for us as far as the TMT is concerned. I think we’ve seen significant growth momentum in the TMT vertical.
We’ve seen a resurge in the most actually full fiscal year. If you keep out the large account, one large account out because that’s the one big account that changes the metric significantly. But if you back that out, non one large account, I think we’ve done very well in the TMP vertical. In fact the deal that we announced last year which was I think the 73 million dollar deal for five years was part of the TMT vertical as well. And in the course of the year we’ve seen a pull through effect of the deal which gave us a significant lift overall.
Unidentified Participant
Okay. And you also talked about some engineering segment of your large account where you see a lot of traction. So could you just highlight what kind have you started seeing growth or have you got any deals or you expect any deal going ahead on that engineering segment?
Samir Dhir
Yeah, absolutely. So if you think of the large client, they have two bodies of work. One is the engineering body of work and loosely speaking the other, let’s call it non engineering body of work in the engineering side which is where bulk of the investments are going from this client which is largely AI driven and they are trying to modernize their platforms and their products and bring in AI elements in those. So Sonata is right in the middle of those transformation projects to bring the power of AI into all their products and that’s really what is driving the growth.
So yes we have won several mid sized deals in that nature and engineering side and year on year we have done well on the engineering. Like I said earlier we believe we are we are back on growth engineering side for the last two three quarters and as we move forward we’ll continue to see that having said that the non engineering side is where the reductions have been and that will continue with the offsetting factor of this Good news.
Unidentified Participant
Okay. Yeah. So my last question on the domestic business, so what I see that this quarter we saw strong year on year growth despite you lose one of your largest client in that segment and also you are giving the outlook that after two quarters you’ll see year on year growth. So what is the reason for the growth during the quarter? And second I just want to understand like after two quarters when you are showing your confidence that you’d back on growth. So what kind which strategy is going to play out to drive your growth on after 2/4?
Samir Dhir
Sure, if you go to my prepared comments and I’ll repeat earlier so we have instituted a three pillar strategy. Sujith is on the call, I’ll request his comments as well. But the three pillar strategy is fairly simple which we instituted about I would say four quarters back. First one was to expand in the SMC segment from our channel partners perspective which was the first strategy we instituted about 3 4/4 back. Then we issued a second strategy which was to go after the is the the VAR business which is the integrated deals. So when we implement cloud we also want to implement integrated deals along with the with the providers.
And the third one was to go after more OEMs beyond the three cloud providers and all these three strategies are unleashed and unpacked in the last three to four quarters. So what you saw, the recovery is largely offset by these three strategies that have been at play for some time. So we saw the impact coming. Our teams are proactive and hence we are able to recover in about 2 to 3 quarters time. So Jayth, if you’re on call please feel free to make any additional comments.
Jagannathan CN
Thanks Samit, but I think I’ve covered it. So essentially we have increased our coverage and as Samir mentions we are taking not just the platform. Now we are also, wherever possible we are getting into the system integration business around the platform. And as Samir mentioned as the third point, beyond these hyperscalers now we have also started focusing on some of the other OEM partners business and that is giving us some good results. Thank you.
Unidentified Participant
Yeah, thanks a lot for taking my questions. All the best.
operator
Thank you. We have Mr. Amit Chandra from HDFC Security who would like to ask a question. Please go ahead sir. Mr. Amit Chandra Audible now management team. Can you hear Mr. Chandra?
Samir Dhir
Yes, we can hear you now. Okay, please go ahead.
Amit Chandra
Yeah, so thanks for the opportunity. I don’t know if you have heard my last question but you know just some clarification on the you know, retail manufacturing vertical. Obviously you mentioned that you know we have seen like know ramp up of some deals there and obviously you have absorbed the impact of the ramp down in one of the clients there. So if you can just assure us that the ramp down there will be not as severe as what we saw in the bfsi. Because in BFSI the ram down has been very severe and there has been huge reliance on like one client.
So in terms of concentration, how the concentration is there in the retail vertical? So that is the first question. And secondly in terms of the utilization, obviously we have scaled up the margins, we have offshored and we are running at almost peak numbers in terms of utilizations. So what’s the view there in terms of able to operate at such high utilization levels? What’s the view there?
Samir Dhir
Sure, I got your questions now Amit. So let me just take the first one and before I answer a specific question, we paint a broader picture so that if there’s any confusion we can remove that. So if you look at the more sectoral view for us Amit, clearly our banking, financial services and healthcare verticals have done well overall minus the effect of one single banking client. So we feel very good about the momentum in these two businesses in the TMT sector minus the large account. We have done well. I think the momentum is still very strong in the retail in general.
It has been soft for us. We’ve had Some 1¾ of growth but we don’t expect to be in a solid growth trajectory in any time in the next one or two quarters as well. I think retail will continue to be under pressure for us it will have 1/4 impact because of the large deal. The ramp down for the client that we just talked about. The large account we just talked about, we absorbed a bulk of it in Q3. But some residual impact will come in Q4 as well for sure. But despite, and in spite of that, we believe the growth rate overall at a company level in the international business that we have will continue the trajectory.
So we’ll be able to absorb the impact of the large, of the large client even in Q4 quarter. So that’s a broader commentary from this client perspective. As far as this client is concerned. Like I said earlier, they had an, we had an unexpected RAM down in the course of the quarter from, from this client. We continue to work with the customer on the revised terms and condition and we’ll give you a more conclusive view in the coming months as to what is happening with this customer. By the time we come back in May, we’ll give you a more conclusive view.
That’s our current, current information that we have. As far as your point utilization is concerned, given our practice spread right now, as you know, we have been trying to focus the company on fewer practices and go deeper in them. And of course AI is a significant part of it. We believe the utilization level that we have will probably continue to be in the high 80s range. That’s a sustainable model for us. The current quarter and maybe one or two quarters that you’re seeing right now might be touching maybe 89, 90%. So we might dilute by a percentage or two but we still think we are a high 80s utilization company.
In odd quarter we might touch 90%. So that’s really how we, how we think about it.
Amit Chandra
Okay. And so obviously in BFSI vertically you have clarified but if I see over the last say 8, 10/4 we scaled up from say 1011 million to 26 million and then again scaled back to 10 million. So the growth came, came from the single client and again you know it, we are back to the levels where we were, you know, seven, eight quarters back. So is it and you have always been saying that BFSI is the focus vertical for us. So. But apart from the top line we are not seeing any material growth in the clients X of the top client.
So is it, you know that the drawdown has been across the clients or is it only top line?
Samir Dhir
So I can confirm it’s been a single client impact in the banking sector for sure. It’s not a broad based impact. As you know, BFS has a very regulated industry and it takes many, many years to scale this business out. If you recall, if you recall when I prepared comments I talked about two large deal wins. Both of them are in BFSI sector. One of them is with a Fortune 500 client which is a multi year deal which will continue to scale for us largely from Q1 onwards. So we think that is a fairly large scalable deal for us.
And the second deal also which announced which is relatively small, not as big as the first one that will also continue to scale for us. So these BFS sector is a regulated sector, it has a lot of competition. But with our differentiated AI proposition we believe we have now a secret sauce to scale and win more large accounts so that we are at a tipping point. Hopefully we can scale from here. We just had an unfortunate event with one large client. That’s why we, we had to shrink back.
Amit Chandra
Okay. And on the TMT vertical the largest client obviously said that you’re seeing traction on the engineering side. So within the large client what would the mix of engineering and like non engineering work if you can get.
Samir Dhir
We don’t, we don’t disclose that candidly but that’s a customer specific centric data. We cannot disclose that but we just want to give you a color that it’s not. The full account or full relationship is not growing. There are parts of the relationship which is actually going quite well now and the other part which is still under budgetary pressure.
Amit Chandra
Okay. And on the domestic business obviously we have seen in terms of GC slight decline. But just want to understand it better in terms of the strategy of Microsoft here in terms of going direct, is it now, was it confined to only one large client or is it a full fledged strategy in terms of they’re going across most of the larger clients or is it just they’re trying and test trying and testing it in terms of what additional benefits they are trying to derive? If they are not seeing any additional benefits and the complexity increases, they might go back to the usual course of business which was there earlier.
So is it fair to assume it’s a temporary impact or is it going to be more structural?
Samir Dhir
Look, I cannot comment on Microsoft strategy. I can comment on our strategy and our strategy is simple to focus on. The three pillars that I talked about to expand in the SMC sector, in the channel business, to go after the new OEMs that going after and to win large SIDS. That’s really what we are focused on and I think that strategy is working well for us because despite a large account hit that we had, we’re confident about two to three quarters. We’ll, we’ll bring the business back on Y and Y growth basis. Having said that comment Sujith, if you want to make any additional comment please feel free So I just want to just make sure I pull in.
Sujith.
Jagannathan CN
Thanks Amir. See actually there is, there is no very, you know, is there no very clear cut written communication saying okay these are the accounts which will be now going forward will be built directly and things like that. So the initial indications which had been given that there are few accounts which Microsoft is planning to build directly and we are not the only partner in India. There are multiple partners of Microsoft in India. So for each partner there can be 1, 2, 3 some accounts which are there as of today. You know one of our large account got impacted and they have already gone ahead and Microsoft is billing them directly.
Now how it is going to span out and what will happen that obviously it’s very early to say. We have, you know it is just 2/4 back this has happened and we are also watching the situation going forward, how things are going to span out. What as Sameer mentioned, we are more concerned and we are more focused on how we are going to make sure that our business growth and trajectory are maintained and that is what we are more focused at. There is something on which we don’t have control and we have to be just very agile and aggressive to make sure that if and when it happens or if it happens then we should be ready to face it.
So having said that our assessment is not that Microsoft has decided to completely come out of partner led business and going to do business directly. I think those are not the concern what we have. I hope I have answered your question.
Amit Chandra
Yeah, but just one clarification on this. So is it easier for Microsoft to go directly or it increases the complexity in terms of their engagement with the clients because it’s not a single billing or no single entity billing it. There is complexity in terms of handling multiple small organization within large organizations. So how complex is the billing process in terms of going direct?
Samir Dhir
Just one, you seem to know our business very well. I can only give you my view which will not be right here. But see it all depends how Microsoft is looking at it. And that’s what I said that you know these are multi year contracts, two quarters. It’s very short time to figure out what will happen or how it will pan out. I think so. We are also in a wet and watch mode and we are observing the whole thing. I’m sure you know in next few quarters we’ll have some sense in terms of how things are.
Amit Chandra
Okay sir, thank you. And all the best sir. Thank you.
Samir Dhir
Thank you.
operator
Thank you. We take the next question as a follow up from vipul Kumar Shah from Samangal Investments Please go ahead.
Vipul Kumar Shah
Hi, thanks for the opportunity. So my question is regarding the turmoil in software stocks globally since last few days due to release of Entropic Cloud. So what are your comments? So this will be deflationary for our business in the long term, short term or is it beneficial to you? Or are you really worried that you may lose a sizable business due to AI over medium term? So your investors are really very worried about the impact of AI on soft IT services company. So your broad comment will be highly welcome sir.
Samir Dhir
Sure we will have happy to provide and I think this is important question but before I answer the question people let’s just give you a little bit comments about the business that we run. So as you know we are a modernization engineering firm. We primarily focus on consumer facing regulated industries. Both healthcare, life sciences, banking, financial services, they’re heavily regulated industries. Our core business is for complex legacy modernization which is inherently protected by regulatory constraints, data sensitivity and deep legacy code. Based on our understanding of the tools out there right now, the AI tools are not very impactful as the technology exists today in these areas right now.
So to answer your question, are we losing sleep over it today? The answer is probably no. But are we keeping a watchful eye for the future because it’s an innovation that can change anytime? We are definitely keeping a watchful eye and we’ll keep continue to do that. Having said that, is there a marginal impact on our business? Absolutely there’s a marginal impact on the business. Probably partly positive and partly negative. Positive because we are gaining market share in the business because with AI it gives you label playing field to other larger IT services companies. So we believe we can be nimbler and faster and hence gain market share.
And that’s what is probably reflecting in our order book numbers. You’ve probably seen our order book for AI Go from 5% of the total order book to about 10% and the most recent quarter we announced about 14% and that’s because we believe we are a relatively smaller company so we can be faster and nimbler and agile. Having said that, the negative head is that customers do expect more productivity now, which I think is fair. So we are catching up with the productivity angle. We are different delivering that productivity to the customers. We have made investments in agentbridge, We’ve made investments Harmony AI.
If you go back two years we talked about the investments in Harmony AI go back a year, we talked about investments in Agent Bridge. So those are all things that we are doing to catch up on the productivity side and that’s something we continue to work upon. Have we solved that puzzle fully? I don’t think we have fully solved it, but we’re making incremental progress towards that aspect. But in the whole, are we losing sleep over it? We are not losing sleep over it. We believe the business model that we have created is resilient. But we’re keeping a watchful eye in the future.
Vipul Kumar Shah
But are you forced to share the benefits of productivity improvement with the clients?
Samir Dhir
So I would say think of our business in two parts. 80% of our clients and this is just rough numbers. Just to give you a sense, think of the 8020 rule. VIPUL 8020 rule wise, most customers want faster delivery than efficiency. They want projects to be delivered faster. Price is not a constraint for them. 20% customers do expect on the 8020 rule basis again, efficiencies. So yes, in the 20% cases we share partly the gains with them, partly we keep ourselves and that’s partly reflective in our margin accretion as well. But largely it is can you help Solana deliver the project faster? And that’s really the journey that we are on most in most of the cases.
Vipul Kumar Shah
Very helpful sir. Thank you so much.
operator
Thank you. We will take that as our last question for today. I’ll turn the call back to Mr. Deer for a brief summary and closing comments. Over to you, sir.
Samir Dhir
Thank you operator. And we just want to thank the all of you to join us today and your interest. The questions are very engaging. I’m sure you do a lot of work to think about these questions and we do a lot of preparation. Our teams do a lot of preparation to up with the answers. Hopefully we answer all of your questions. If not happy to take those questions offline through Jagan, we’ll be happy to answer but we are delighted with the progress we’re making especially on the on the profitability front. That was something that we we talked to you guys about.
That will get to high teens and low 20s EBITDA. We’re glad that we have gotten there and we believe we’ve gotten in a sustained manner. We’re glad that we had two large deals win in BFSI. We’re very proud that we are order book on AI is at about 14% of our total order book. There’s work in front of us on growth. Given the three large account impact that we have seen, we’ll continue to work on that. I think the next one or two quarters we believe will continue the current growth trajectory. But hopefully coming out of it, we’ll be able to give you better guidance as to how quarters beyond that will pan out.
So thank you very much for joining today. We appreciate all the support. Thank you. Operator
operator
thank you. On behalf of the leadership team, I would like to thank you for your time and for your continued interest in Sonata Software. Should you have any follow up queries that were not addressed, feel free to reach out to the Investor relations team@investorsonata software.com. you may now click on the Leave button to exit the meeting. Goodbye.