Persistent Systems shares jump 7% on strong Q2 results; JM Financial sees further upside

Shares of Persistent Systems surged as much as 7.28 per cent to hit the day’s high of Rs 5,712.30 against its previous close of Rs 5,324.25. The rally came after the IT services major delivered a robust second-quarter performance for FY26, surpassing Street estimates and prompting JM Financial to raise its price target on the stock.

In a company update note dated October 14, JM Financial described the performance as "A near-perfect quarter." Persistent Systems (PSYS) reported a revenue growth of 4.4 per cent in constant currency terms quarter-on-quarter (QoQ), ahead of JM Financial’s projection of 3.4 per cent. The growth was broad-based, led by a 7 per cent QoQ rise in the Banking, Financial Services, and Insurance (BFSI) vertical, 2.2 per cent in Hi-tech, and a 3.8 per cent rebound in Healthcare & Lifesciences.

The company’s profitability also witnessed a notable improvement. EBIT margins expanded by 80 basis points to 16.3 per cent, beating JM Financial’s forecast of 16.0 per cent. The margin beat was supported by lower software-license costs (+80 bps), favourable forex movement (+60 bps), and planned offshore transitions (+30 bps). Profit after tax (PAT) for the quarter stood at Rs 471.5 crore, marking a 10.9 per cent sequential rise.

According to the brokerage, the strong quarterly numbers have addressed most investor concerns. A sharp 28 per cent year-on-year (YoY) increase in the Annual Contract Value (ACV) is expected to "build-back confidence in growth sustaining into FY27." The only soft patch, JM Financial noted, was a 10 per cent decline in net new Total Contract Value (TCV), which it attributed to "quarterly fluctuations."

Looking ahead, Persistent’s management said that while the macro environment remains largely unchanged, clients are increasingly adapting to it. The company has implemented wage hikes effective October 1, 2025, expected to impact margins by -180 basis points in Q3. However, management aims to partially offset this pressure by around 80–100 basis points through operational levers. It also reiterated its goal of expanding margins by 200–300 basis points by FY27-end.

Following the robust earnings, JM Financial maintained its "Buy" rating on Persistent Systems and raised its 12-month price target to Rs 6,140 from Rs 5,870, implying a 7.4 per cent upside from current levels of Rs 5,712. The brokerage also revised its constant currency revenue growth estimates for FY26–28 upward by 150–220 basis points, resulting in a 1.5–4.5 per cent hike in its EPS projections. "Such consistency merits premium valuation," the JM Financial report concluded