1. Executive Summary: The Relentless Compounder
Over the last thirty years, the Indian IT industry has moved through many cycles—Y2K urgency, outsourcing waves, cloud migration, digital transformation, and now the Generative AI era. Many companies grew fast in one phase and slowed sharply in the next. Very few managed to grow quarter after quarter, regardless of global conditions. Persistent Systems has now done something statistically rare: it has delivered 23 consecutive quarters of revenue growth, even as global technology spending remains cautious in FY26.
In Q3 FY26, Persistent reported revenue of $422.5 million, reflecting 17.3% year-on-year growth. This is not just a good quarter; it is part of a long, steady compounding journey. At this pace, the company is firmly on track toward its stated ambition of becoming a $2 billion revenue company by FY27. For a firm that was once labelled a “mid-cap niche player,” this marks a clear transition into the Tier-1 challenger league.
The broader macro environment makes this performance even more meaningful. Global Hi-Tech spending in the US and Europe remains selective. Enterprises are cutting discretionary IT budgets and delaying large transformation projects. In such an environment, traditional IT services companies are struggling to grow. Persistent, however, is benefiting from its deep focus on Digital Engineering, Data, and AI-led modernization, areas where clients are still willing to spend because the return on investment is measurable.
At first glance, the market reacted negatively to a 6.8% quarter-on-quarter dip in net profit. But this reaction misses the real story. The profit decline was not operational. It was driven by a one-time statutory impact related to the implementation of India’s New Labour Codes (2026). Once this is adjusted for, the company’s operating engine is actually stronger than before, with margins expanding even during a wage-hike quarter—something rarely seen in Indian IT.
Persistent Systems – Official Results Source
2. Q3 FY26 Financial Snapshot: The “Hard Numbers” That Matter
When institutional investors evaluate IT companies, they do not stop at reported profit numbers. They look deeper to separate temporary noise from long-term signals. Persistent’s Q3 FY26 numbers look very different when viewed through this adjusted lens.
The company reported USD revenue of $422.5 million, up 4.0% sequentially and 17.3% year-on-year. In rupee terms, revenue stood at ₹3,778.2 crore, showing even stronger growth of 23.4% YoY, helped by deal ramp-ups and currency movement. This consistency across both currencies indicates genuine volume growth rather than accounting effects.
Reported EBIT margin came in at 14.4%, down sequentially. However, this headline figure includes a one-time cost of ₹89 crore arising from labour law compliance adjustments. Once this is excluded, adjusted EBIT margin rises to 16.7%, representing 180 basis points expansion year-on-year and 40 basis points improvement quarter-on-quarter.
Net profit stood at ₹439.4 crore, up 17.8% YoY but down sequentially. Again, the decline is optical rather than fundamental. Without the statutory hit, profit growth would have tracked operating performance more closely. Importantly, cash flow from operations remained strong, allowing the company to raise its interim dividend.
The key takeaway from the numbers is simple: revenue is accelerating, margins are structurally improving, and profit quality remains intact. This combination is rare in a slowing global IT environment.
3. Fundamental Deep Dive: The AI-Led Margin Moat
Persistent’s margin story is no longer about cost cutting. It is about structural efficiency driven by AI. The company has adopted what it calls a “Customer Zero” strategy, where it first deploys its own AI platforms internally before selling similar solutions to clients.
Through internal platforms such as SASVA™ and iAura, Persistent is using Agentic AI to automate software testing, code migration, cloud optimization, and data management. This reduces repetitive human effort and improves delivery speed. The result is higher output per employee, which directly supports margin expansion.
Unlike traditional IT firms that still price contracts based on man-hours, Persistent is shifting toward tool-plus-people pricing models. In this approach, clients pay not just for engineers, but for embedded platforms and accelerators that deliver outcomes faster. This gives Persistent pricing leverage, especially in AI, cloud, and data engineering projects.
Management has indicated that recent large deals contributed roughly 150 basis points to margin improvement as they moved from pilot stages to full-scale execution. This is important because it shows that margins are improving as revenue scales, not despite growth but because of it.
Mathematically, the underlying strength becomes clear when adjusted margins are calculated. Once the one-time regulatory cost is added back, Persistent’s operating margin reflects industry-leading efficiency for a high-growth IT company. This is a strong signal that AI is not just a buzzword here—it is a profit engine.
AI Productivity & Efficiency Validation (McKinsey)
4. Segmental Logic: The Three Pillars of Growth
Persistent’s growth is not coming from a single lucky vertical. It is well distributed across three strong business segments, each aligned with long-term global demand trends.
The BFSI segment, which contributes 35% of total revenue, was the standout performer in Q3 FY26. It grew 29.3% year-on-year, driven by large digital engineering programs for Tier-1 banks in the US and Europe. Projects around data factories, identity access management, and regulatory automation continue to see strong demand as banks invest in security and compliance.
The Healthcare & Life Sciences segment, accounting for 25.4% of revenue, showed steady momentum. Demand remains strong for cloud-native platforms in diagnostics, pathology, and lab sciences. With healthcare providers under pressure to reduce costs and improve turnaround time, digital transformation in this space remains non-negotiable.
The Software & Hi-Tech segment, which forms 39.6% of revenue, deserves special attention. While many IT firms are reporting weakness here due to cuts in tech spending, Persistent grew this segment by 14.7% YoY. This was achieved by focusing on AI-led digital commerce, SaaS modernization, and R&D engineering, areas where clients continue to invest despite macro uncertainty.
Together, these three pillars provide balance, resilience, and long-term visibility.
5. Deal Momentum & Order Book: The Visibility Engine
One of the strongest signals of future growth in IT services is the deal pipeline. Persistent reported record Total Contract Value (TCV) of $674.5 million in Q3 FY26. More importantly, the Annual Contract Value (ACV) stood at $501.9 million, which directly supports near-term revenue visibility.
A rising ACV means that the minimum revenue floor for upcoming quarters is increasing. This reduces downside risk and improves planning confidence. It also reflects client willingness to commit to long-term partnerships rather than short-term pilots.
The number of large clients contributing more than $5 million annually increased to 61, up from 55 last year. This indicates successful cross-selling and upselling within existing accounts. Instead of chasing new logos at low margins, Persistent is deepening relationships with strategic clients, which is both profitable and sustainable.
This deal quality explains why revenue growth has remained consistent across 23 quarters, regardless of global conditions.
6. Geopolitics & Policy: The North American Fort
Persistent derives 81.5% of its revenue from North America, primarily the United States. This geographic concentration brings both opportunity and risk. On the positive side, the US remains the largest market for digital engineering, AI, and cloud transformation. Enterprise demand for efficiency-driven technology spending continues despite political noise.
However, US trade policy volatility and election-year uncertainty do introduce risks. Changes in immigration rules, outsourcing policies, or corporate tax structures can impact Indian IT companies. Persistent mitigates this risk through local hiring, near-shore delivery models, and outcome-based contracts, which reduce dependency on visa-heavy models.
The company’s decision to declare an interim dividend of ₹22 per share, up from ₹20 in FY25, sends a strong signal. It shows management’s confidence in cash flow sustainability, even after absorbing a one-time statutory profit hit. In uncertain times, such capital allocation discipline matters to long-term investors.
Digital India & IT Policy Context (MeitY – Government of India)
7. Conclusion: The Analyst’s Verdict
Persistent Systems’ Q3 FY26 results are a textbook example of why headline numbers should never be read in isolation. The temporary profit dip distracted many, but the fundamentals tell a very different story. Underlying EPS grew by around 16% year-on-year, revenue momentum remains strong, and margins are structurally improving through AI-led efficiency.
With a projected USD revenue CAGR of approximately 18% between FY25 and FY27, Persistent stands out as one of the few Indian IT companies combining high growth with rising profitability. Its focus on AI-driven enterprise modernization—internally referred to as the “Orbit 6” strategy—positions it well for the next decade of digital transformation.
At current valuations, the stock clearly trades at a premium. But this is not accidental. It reflects execution consistency, deal quality, and strategic clarity. For long-term investors building a 2026 digital-first portfolio, Persistent Systems remains a “Quality-at-a-Premium” compounder.
Fundamental Rating: Strong Accumulate.
In an industry facing disruption and uncertainty, Persistent is proving that disciplined strategy, AI-first execution, and client-centric growth can still deliver exceptional results—quarter after quarter.
Indian IT Industry Outlook (NASSCOM)
❓ Frequently Asked Questions (FAQ)
1. What are Persistent Systems’ Q3 FY26 financial results?
Persistent Systems reported revenue of $422.5 million in Q3 FY26, recording 17.3% year-on-year growth. This marked the company’s 23rd consecutive quarter of revenue growth, highlighting strong execution despite a challenging global IT environment.
2. Why did Persistent Systems’ net profit decline quarter-on-quarter?
The quarter-on-quarter decline in net profit was due to a one-time statutory impact from the implementation of India’s new labour codes. This was not due to business weakness. After adjusting for this cost, the company’s operating performance actually improved.
3. What is the adjusted EBIT margin of Persistent Systems in Q3 FY26?
The adjusted EBIT margin stood at 16.7%, after excluding a one-time regulatory expense of ₹89 crore. This reflects improving efficiency and strong operational control.
4. How is Artificial Intelligence helping Persistent Systems grow?
Persistent Systems is using AI and automation internally to improve productivity, reduce delivery time, and increase efficiency. It is also offering AI-led digital engineering solutions to clients, which helps the company command better pricing and improve margins.
5. Which business segment performed the best in Q3 FY26?
The BFSI (Banking, Financial Services, and Insurance) segment was the strongest performer, growing 29.3% year-on-year, driven by demand for data platforms, digital security, and regulatory technology solutions.
6. How strong is Persistent Systems’ deal pipeline?
Persistent Systems reported a Total Contract Value (TCV) of $674.5 million and an Annual Contract Value (ACV) of $501.9 million in Q3 FY26. This provides strong revenue visibility for future quarters.
7. What does a rising ACV indicate for investors?
A higher ACV means more recurring and predictable revenue. It indicates that clients are signing long-term contracts, which reduces earnings volatility and improves business stability.
8. Which geography contributes the most to Persistent Systems’ revenue?
North America contributes over 80% of total revenue. While this creates some exposure to policy and economic changes, it also gives the company access to the world’s largest digital transformation market.
9. Is Persistent Systems considered a mid-cap or large-cap IT company?
Persistent Systems is still classified as a mid-cap IT company, but its scale, deal size, and execution quality increasingly place it in the Tier-1 challenger category.
10. What is Persistent Systems’ revenue growth outlook?
The company is expected to deliver a USD revenue CAGR of around 18% between FY25 and FY27, supported by strong deal wins, AI-led services, and enterprise modernization demand.
11. Why do analysts call Persistent Systems a “quality-at-a-premium” stock?
Persistent Systems trades at a premium because of its consistent growth, strong margins, AI-driven strategy, and high-quality client base. Investors are paying for reliability and long-term visibility.
12. Is Persistent Systems a good long-term investment in 2026?
For long-term investors, Persistent Systems is considered attractive due to its steady revenue growth, improving margins, strong cash flows, and focus on future-ready technologies like AI and cloud engineering.
13. Does Persistent Systems pay dividends?
Yes. The company declared an interim dividend of ₹22 per share in FY26, reflecting confidence in its cash flow position despite one-time statutory costs.
14. What risks should investors watch in Persistent Systems?
Key risks include heavy dependence on North America, global IT spending slowdown, and changes in technology regulations. However, strong execution and diversified service offerings help manage these risks.
15. What makes Persistent Systems different from other IT companies?
Persistent Systems focuses on digital engineering, AI, data platforms, and cloud-native solutions, rather than traditional manpower-based IT services. This allows faster growth and better margins.
🔍 People Also Ask (Google PAA Section)
Why is Persistent Systems growing faster than other IT companies?
Persistent Systems is growing faster because it focuses on digital engineering, AI-led solutions, and data platforms, where client spending continues even during global IT slowdowns. Its strategy is based on efficiency and outcomes, not just manpower.
Is the profit decline in Persistent Systems a cause for concern?
No. The profit decline in Q3 FY26 was caused by a one-time labour code adjustment. Core business performance remained strong, and adjusted margins actually improved.
How does AI improve margins for Persistent Systems?
AI helps automate repetitive tasks, reduce project delivery time, and improve productivity per employee. This allows Persistent Systems to deliver more value at lower incremental cost, leading to higher margins.
What is Persistent Systems’ revenue target for FY27?
Persistent Systems is aiming to reach $2 billion in annual revenue by FY27, supported by strong deal wins and consistent execution.
Which clients drive Persistent Systems’ growth?
Growth is driven mainly by large enterprise clients in BFSI, healthcare, and software sectors, especially in North America and Europe.
How strong is Persistent Systems’ order book?
The company reported a Total Contract Value of $674.5 million and a high Annual Contract Value, indicating strong visibility for future revenues.
Does Persistent Systems depend too much on the US market?
While over 80% of revenue comes from North America, Persistent Systems mitigates risk through local hiring, diversified client base, and long-term contracts.
Is Persistent Systems a mid-cap or large-cap stock?
Persistent Systems is officially a mid-cap stock but operates with Tier-1 execution quality, competing with larger IT companies in digital engineering.
How is Persistent Systems different from traditional IT services companies?
Unlike traditional IT firms that rely heavily on billing hours, Persistent Systems uses platform-led and AI-driven delivery models, allowing better pricing power and faster scaling.
What is the outlook for Indian IT companies in 2026?
Indian IT companies focused on AI, cloud modernization, and digital engineering are expected to outperform those dependent on legacy outsourcing models.
Should long-term investors consider Persistent Systems in 2026?
Many analysts believe Persistent Systems remains attractive for long-term investors due to its consistent growth record, strong margins, and future-ready technology focus.
Does Persistent Systems pay regular dividends?
Yes. The company pays dividends regularly and increased its interim dividend in FY26, reflecting confidence in its cash flow generation.
What are the key risks for Persistent Systems investors?
Key risks include global economic slowdown, changes in US tech spending, and currency volatility, although strong execution helps reduce these risks.
Why is Persistent Systems considered a premium IT stock?
It is considered a premium stock due to high revenue growth, stable margins, strong deal visibility, and AI-driven differentiation.
Can Persistent Systems maintain growth if global IT spending slows further?
Its focus on cost-saving and efficiency-driven projects gives it resilience, as companies continue to invest in technology that improves productivity.
