Newgen Software shares rally 35% in 3 days amid strong volumes; what's next for it?

Shares of Newgen Software Technologies Ltd jumped more than 16 per cent during the trading session on Thursday, extending the three-day winning run to 35 per cent as the IT counters rebounded from AI concerns led jitters, which wreaked havoc in the previous week.

Shares of Newgen Software gained 16.45 per cent to Rs 618 during Thursday's trading session, with its market capitalization hitting close to Rs 8,600 crore. The stock had settled at Rs 530.75 on Wednesday, but hit its 52-week low at Rs 459 on Tuesday. The stock has rebounded as much as 35 per cent from those levels.

Despite this rise, the stock is still down 55 per cent from its 52-week high at Rs 1,379.15, hit in May 2025. According to the data from BSE, nearly 3.45 crore shares of Newgen Software worth Rs 2,040 crore exchanges hands during the session as of 11.40 am, while BSE data showed that 45.25 lakh shares worth Rs 268.40 crore were traded as of the same time.

Newgen Software Solutions reported a 23.2 per cent fall in the net profit on a year-on-year (YoY) basis to Rs 63 crore in the December 2025 quarter, impacted by new labour code. The company reported a flat revenue at Rs 400 crore for the quarter. Its Ebit grew 3.1 per cent YoY to Rs 97 crore, while margins expanded 70 bps to 24.2 per cent for the quarter.

Newgen Software's India business declined to Rs 115.4 crore from Rs 117.8 crore on a quarter-on-quarter (QoQ) comparison, while the EMEA business topline remained flat at Rs 123.6 crore. APAC revenue saw a small increase to Rs 65.32 crore from Rs 63.45 crore QoQ, while the US business revenue inched up to Rs 96 crore from Rs 95 crore on a sequential basis.

Following the prolonged delay in closure of large licence deals, which led to Newgen missing its benchmark 20 per cent YoY growth, we expect revenue growth to normalise to 14–15 per cent YoY over the medium term. We introduce FY28E estimates and cut our FY26E/FY27E revenue and earnings estimates by 4.1 per cent/7.7 per cent and 3.6 per cent/6.9 per cent, respectively, said ICICI Direct.

However, the recent share price correction factors in near-term execution concerns, and we therefore maintain our BUY rating, albeit with a reduced target price of Rs 770 (earlier Rs 1,180) with reduction in valuation multiple to 25 times FY28E EPS," it added in its report released a month ago.

Newgen Software delivered a steady but mixed Q3FY26 performance in a challenging demand environment. It continues to invest aggressively in R&D and sales while embedded AI-products (document understanding and process automation) are strengthening the long-term competitiveness, said IDBI Capital.

"While near-term growth may stay uneven due to deal deferrals, SaaS revenue ramp-up, strong order pipelines, sticky customers, and rising subscription mix support medium-term recovery. Given near-term uncertainties, we maintain a neutral stance with a positive medium-term outlook. We reiterate our rating to 'hold', with a target price of Rs 680," it adds.

Newgen reported subdued revenue growth, impacted by lower large license deal wins in key markets, said ICICI Securities. AI is leading to longer deal cycles, especially in the Indian market. Management expects continued traction in AMC revenue; it aims to increase AI-led productivity gains. It targets better Q4 on recovery in key markets and license deals, it said with a 'hold' rating and a trimmed target price of Rs 660 (Rs 1,010 earlier).