Persistent revenue rises 30%, but profit falls 25%.

Persistent Systems Limited (PERSISTENT) reported Q2 FY27 revenue of ₹4,664 crore, up 30.3% year-on-year. Net profit fell 25.4% to ₹352 crore. At first glance, this looks like a contradiction. A company growing revenue this quickly should ideally be converting more of that growth into profit. But there is an important development behind these numbers. Persistent has secured approximately 94.04% of Nagarro SE's share capital and voting rights through its takeover offer. The acquisition is a major strategic move to expand its digital engineering capabilities and global presence. The company incurred ₹185.34 crore in acquisition-related expenses during the quarter. That significantly affected reported profit. However, I would not attribute the entire profit decline to the acquisition. Persistent's operating profit after tax, excluding the impact of exceptional items, was ₹495.15 crore, up 5% year-on-year. Its operating PAT margin stood at 10.6%. Revenue is growing much faster than this adjusted profit measure. That gap deserves attention, even after accounting for acquisition costs. Persistent has also received shareholder approval to raise up to $450 million through equity, with total equity and borrowing capacity for the transaction capped at $1.25 billion. My view: Nagarro could strengthen Persistent's long-term capabilities, but an acquisition is only successful if the combined business eventually delivers better earnings and returns on capital. The next trigger is the acquisition's expected completion by the end of Q1 CY27, subject to regulatory approvals. I would track integration costs, margins and whether operating profit growth begins to catch up with revenue growth. My stance: The strategic opportunity is interesting, but I want evidence of financial improvement before giving the acquisition full credit.