Coforge Sees Strong Q3 Performance Amid Gradual Rebound in Discretionary Demand

New Delhi: Mid-tier IT services company Coforge has reported a significant increase in its net profit and revenue for the third quarter of fiscal year ending March 2025, driven by a gradual revival in discretionary demand. The company's top executive Sudhir Singh attributed this growth to a change in the nature of technology spend, with allocations shifting outside legacy discretionary spends.

In a statement to the exchange, Singh pointed out that software service providers must adapt to these changes and look beyond traditional sources of business. "We are not waiting for demand in the form it used to come in earlier. Otherwise, we will keep waiting for a long time. Technology spend has not reduced, but the nature of that spend, the allocation of that spend, has changed," he explained.

Coforge's Q3 numbers show a 10.3% year-on-year (YoY) rise in net profit to Rs 268 crore, supported by a 42.8% boost in revenue to Rs 3,318 crore. The company also reported its highest-ever order intake of $501 million in the seasonally weak third quarter.

The mid-sized IT firm's peers, Persistent Systems, have also witnessed strong performance with a 30.3% YoY rise in profit alongside a 22.6% revenue boost to Rs 3,062 crore. Coforge's revenue growth was particularly notable in its key verticals of banking, financial services (BFS) and insurance, which both grew by over 20% each.

North America and Europe drove the company's growth, with over 9%sequential growth, while cloud and infrastructure as well as engineering service lines saw significant year-on-year increases. The recent acquisition of Cigniti contributed around 3.5% sequential growth, while non-Cigniti or organic growth was up by 9.4% during the quarter.

However, Coforge's EBITDA margins dropped to 15.6%, dragged down by rupee depreciation and employee stock costs. The management expects these and integration costs related to Cigniti acquisition to impact margins in the coming quarters.

The company has also announced its acquisition of US-based Xceltrait, a ServiceNow specialist in financial services, for $17.85 million.

Coforge's stock price surged nearly 12% following the announcement of Q3 results, closing at Rs 9,200.80 apiece on Thursday. The Sensex rose 0.15% despite Coforge's strong show.