Persistent Systems shares fell more than 3 percent on Friday, after the IT services company's fiscal second quarter earnings disappointed on profitability, despite strong revenue growth. The stock declined 3.4 percent to Rs 5,640 in afternoon trade, after falling as much as 6 percent intraday. It was among the top midcap losers and one of only two declining constituents of the Nifty IT index, which gained 3.1 percent.

Persistent Systems shares have declined 10.2 percent so far in 2026, compared with an 11.7 percent fall in the Nifty 50. The company had a market capitalisation of approximately Rs 89,000 crore.

The company's consolidated net profit fell 27 percent sequentially to Rs 351.5 crore in the September quarter, partly affected by a one-off expense of Rs 185.34 crore associated with the Nagarro deal. Revenue increased more than 8 percent sequentially to Rs 4,664 crore.

EBIT margin contracted by 100 basis points to 15 percent, missing estimates of 15.5 percent, due to wage hikes, lower utilisation and deal-related amortisation. The company expects margins to recover towards its aspirational range of 16-17 percent.

CLSA maintained its 'high-conviction outperform' rating with a target price of Rs 6,488, implying 11 percent upside from Thursday's close. The brokerage said revenue beat consensus estimates by 2 percent, while EBIT and adjusted profit missed expectations by 2 percent and 12 percent, respectively. Higher interest expenses and foreign exchange losses weighed on earnings.

Despite cutting its earnings estimates, CLSA projected revenue, EBIT and EPS compound annual growth of 16 percent, 19 percent and 22 percent, respectively, over FY27-29.

The brokerage said the Nagarro acquisition, not yet incorporated into its estimates, could help the combined business achieve $5 billion in revenue by FY31. It also sees potential for Persistent Systems' market capitalisation to double in four years, assuming a valuation of three times EV/sales and repayment of debt through internal accruals.

JPMorgan maintained its 'overweight' rating with a target price of Rs 6,400, highlighting constant-currency revenue growth of 7.8 percent sequentially, which exceeded expectations. Growth was driven by large technology deal ramp-ups and vendor consolidation at a major banking and financial services client. However, deal TCV grew just 4 percent year-on-year as some closures slipped into the December quarter amid macroeconomic uncertainty.