Shares of midcap information technology (IT) companies, including Coforge, Persistent Systems, Cigniti Technologies, and Zensar Technologies, experienced significant rallies of up to 11% on the stock exchanges today, following the release of promising quarterly earnings for Q3FY25.
As of 09:37 AM, the BSE IT index, the top gainer among sectoral indices, surged 1.4%, in stark contrast to the 0.17% decline in the BSE Sensex, highlighting investor optimism surrounding midcap IT stocks.
Cigniti technologies leads the rally
Cigniti Technologies witnessed a remarkable 11% surge in its stock price, reaching Rs 1,650 per share in Thursday’s intra-day trading. This rally was driven by a significant improvement in the company’s earnings before interest and tax (EBIT) margin, which rose 335 basis points year-on-year (Y-o-Y) and 136 basis points quarter-on-quarter (Q-o-Q) during Q3FY25.
The company’s profit after tax (PAT) jumped 32.3% Y-o-Y and 20.1% Q-o-Q to Rs 63.6 crore, while gross revenue grew 10.3% Y-o-Y and 3.5% Q-o-Q, reaching Rs 516.40 crore. Additionally, Cigniti reported a strong order intake of $82.9 million in Q3FY25, up from $67.1 million in Q2FY25 and $78.3 million in Q3FY24, signalling continued business momentum.
Coforge sees robust growth
Coforge’s stock price also experienced a significant rally, climbing 10% to Rs 9,034 per share. This surge was driven by impressive revenue growth of 40% Y-o-Y and 8.4% Q-o-Q in constant currency terms. Adjusted profit rose 10.3% Y-o-Y to Rs 268 crore.
CEO Sudhir Singh expressed confidence in Coforge’s growth trajectory, attributing it to a large and robust deals pipeline. The company’s order book for the next 12 months is 40% higher Y-o-Y, reinforcing optimism for sustained growth. The Cigniti acquisition, which contributed 3.5% Q-o-Q growth, helped bolster margins, with Cigniti’s EBITDA margin reaching 17.3%, up 100 basis points Q-o-Q.
Despite core margins being under pressure, the company remains confident in its growth potential, bolstered by synergies from the Cigniti acquisition and a strong order book.
Persistent systems reports broad-based growth
Persistent Systems’ stock price surged 8% to Rs 6,163.45 per share, following the announcement of broad-based growth across geographies and business segments. The company remains on track to meet its ambitious FY27 revenue target of $2 billion, reflecting a 19% compound annual growth rate (CAGR) from FY24 to FY27.
The management has also set an even more ambitious FY31 target of $5 billion, which implies a 22.8% CAGR over FY24-31. Analysts are particularly excited about Persistent’s growth potential, with Motilal Oswal Financial Services (MOFSL) projecting it to be one of the fastest-growing companies in the industry.
While healthcare ramp-down and short-term headwinds may cause some slowdown, the BFSI and Hi-Tech verticals are expected to be the key growth drivers. Persistent’s superior earnings growth trajectory and strategic focus on key clients and emerging technologies position the company well for future expansion, according to MOFSL.
Zensar technologies joins the rally
Shares of Zensar Technologies also saw an 9% increase, reaching Rs 819.90 per share, driven by a five-fold jump in average trading volumes. The company reported solid revenue growth in Q3FY25, with significant contributions from the BFSI and Healthcare sectors. Zensar’s order book reached a record $205 million, with a book-to-bill ratio of 1.3x, supported by broad-based deal wins.
Zensar’s management expressed optimism about improving discretionary spending, particularly in emerging technologies such as Generative AI (GenAI) and Agentic AI, areas where Zensar has been investing heavily. This optimism is in line with broader trends observed across its larger peers, who have also reported signs of recovery in discretionary spending.
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Despite some near-term challenges, including the impact of fewer working days in Q4 and a slowdown in the TMT vertical, Zensar remains focused on reducing dependency on TMT, increasing annuity-based revenues, and targeting long-term growth through its investments in emerging technologies.
Outlook for midcap IT sector
The strong performance of midcap IT companies in Q3FY25 reflects the resilience of the sector, with many companies experiencing broad-based growth across multiple geographies and verticals. The positive earnings reports and strong order books from Cigniti, Coforge, Persistent, and Zensar have generated optimism about the future growth potential of midcap IT stocks.
Analysts remain bullish on the sector, citing the continued demand for technology services, especially in areas such as cloud computing, AI, and digital transformation. With a robust pipeline of new deals, strategic acquisitions, and increasing investments in high-growth sectors, midcap IT companies are well-positioned to deliver sustained growth in the coming quarters.
Investors are encouraged to monitor the evolving earnings trends and strategic initiatives of these companies as they continue to execute their growth plans and navigate the challenges of a dynamic and competitive market environment.
