Revenue Beat: Sonata Software Limited Exceeded Revenue Forecasts By 56% And Analysts Are Updating Their Estimates

It's been a mediocre week for Sonata Software Limited (NSE:SONATSOFTW) shareholders, with the stock dropping 11% to ₹657 in the week since its latest quarterly results. Revenue of ₹25b beat expectations by an impressive 56%, while statutory earnings per share (EPS) were ₹11.10, in line with estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Sonata Software

Taking into account the latest results, the most recent consensus for Sonata Software from six analysts is for revenues of ₹100.7b in 2025. If met, it would imply a meaningful 10% increase on its revenue over the past 12 months. Per-share earnings are expected to surge 77% to ₹18.78. In the lead-up to this report, the analysts had been modelling revenues of ₹97.2b and earnings per share (EPS) of ₹19.92 in 2025. So it's pretty clear consensus is mixed on Sonata Software after the latest results; whilethe analysts lifted revenue numbers, they also administered a minor downgrade to per-share earnings expectations.

There's been no major changes to the price target of ₹687, suggesting that the impact of higher forecast revenue and lower earnings won't result in a meaningful change to the business' valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Sonata Software at ₹780 per share, while the most bearish prices it at ₹600. This is a very narrow spread of estimates, implying either that Sonata Software is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Sonata Software's revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 14% growth on an annualised basis. This is compared to a historical growth rate of 22% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.0% annually. Even after the forecast slowdown in growth, it seems obvious that Sonata Software is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Sonata Software analysts - going out to 2027, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 5 warning signs for Sonata Software that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com