SASVA And Hyperscalers Will Fuel Future Digital Engineering

Key Takeaways

• Deployment of proprietary AI and platform-driven solutions is strengthening revenue growth, expanding margins, and boosting offerings in resilient, high-growth verticals.
  
• Deepening client relationships and strong tech partnerships support a robust deal pipeline and position the company for sustained long-term expansion.
  
• Exposure to sector concentration, talent retention risk, and rising competitive pressures could jeopardize Persistent's margin stability, revenue growth, and industry relevance.

Catalysts

Provides software products, services, and technology solutions in India, North America, and internationally.

• Persistent's rapid development and deployment of its proprietary AI platform SASVA, which enhances software engineering productivity, enables faster project delivery and opens new capabilities for clients across regulated industries, positions the company to capture a larger share of digital engineering budgets, likely accelerating revenue growth and enhancing operating margins as customer adoption increases.
  
• Strong multi-year client growth across top revenue buckets, including significant additions in $1M+, $5M+, and $20M+ client categories, signals Persistent's deepening customer relationships and an expanding addressable market, which provides resilience and underpins sustained long-term revenue expansion.
  
• Ongoing investments and proactive wins in high-growth verticals such as BFSI, Healthcare & Life Sciences, and Hi-Tech, supported by platform-based, AI-driven offerings and deep domain expertise, help the company benefit from increasing digital, cloud, and AI adoption across recession-resistant sectors, likely supporting both revenue visibility and earnings stability.
  
• Strategic focus on transitioning engagements from on-site to offshore (especially in Healthcare), disciplined cost management, and delayed wage hikes are expected to normalize cost structures and drive gradual EBIT margin improvement over the next several quarters.
  
• Persistent's strong partnerships with technology hyperscalers (e.g., Salesforce, Microsoft, AWS) and growing traction in large, platform-led transformation deals position it to ride the enterprise wave of cloud migration, AI/ML, and end-to-end digital modernization, translating into a robust deal pipeline and multi-year revenue and earnings growth opportunities.

Persistent Systems Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Persistent Systems's revenue will grow by 18.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.7% today to 13.5% in 3 years time.
• Analysts expect earnings to reach ₹26.5 billion (and earnings per share of ₹166.19) by about July 2028, up from ₹14.0 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ₹29.3 billion in earnings, and the most bearish expecting ₹21.1 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 52.2x on those 2028 earnings, down from 59.8x today. This future PE is greater than the current PE for the IN IT industry at 30.1x.
• Analysts expect the number of shares outstanding to grow by 1.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.36%, as per the Simply Wall St company report.

Persistent Systems Future Earnings Per Share Growth

Risks

• Heightened global macroeconomic and geopolitical uncertainty-including delayed client decision-making, tariff volatility (especially affecting clients with China-based supply chains), and a more cautious IT spending environment-could slow Persistent's revenue growth, particularly in Healthcare & Life Sciences and prolong the sales cycle, impacting revenue visibility and trajectory.
  
• Rising employee attrition (13.9% TTM vs. 11.9% YoY) and the postponement of wage hikes can contribute to talent retention risks and rising wage costs, further pressuring net margins if Persistent needs to increase compensation to remain competitive.
  
• Persistent's significant client concentration in BFSI and Healthcare & Life Sciences, coupled with vendor consolidation trends and shifting work offshore at top clients, heightens vulnerability to client-specific slowdowns or budget cuts, potentially impacting both revenue growth and earnings stability.
  
• Competitive pressures in IT services, including the potential for commoditization from rapid AI/automation tool adoption and the rise of no-code/low-code platforms, could lead to margin compression, muted earnings growth, or revenue deflation if Persistent is forced into price competition.
  
• The company's relatively modest scale in proprietary platforms and IP, compared to global peers, may limit sustainable differentiation; if industry demand shifts toward end-to-end, full-stack providers, Persistent risks being sidelined or losing market share, directly affecting long-term revenue and profit growth.

Valuation

• The analysts have a consensus price target of ₹5848.0 for Persistent Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹7637.0, and the most bearish reporting a price target of just ₹3675.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹196.3 billion, earnings will come to ₹26.5 billion, and it would be trading on a PE ratio of 52.2x, assuming you use a discount rate of 15.4%.
  
• Given the current share price of ₹5605.5, the analyst price target of ₹5848.0 is 4.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.