Stories
ESDS Software Plunges 5% for Second Day: What's Driving the Stock's Decline?
- •ESDS Software Solutions Ltd. shares fell by 5% for the second consecutive day after announcing disappointing quarterly results.
- •The company reported a 20% sequential revenue drop and a 56.7% decline in profitability for the June quarter, significantly missing analyst estimates.
- •Management revealed a one-off design services revenue in Q4 FY26 and a delay in the anticipated Australia deal, pushing revenue accrual to Q3 FY27.
- •Choice Broking downgraded ESDS from "buy" to "sell" due to revised revenue expectations and the company's lack of future guidance.
- •Concerns arose as nearly 20% of FY26 revenue and profitability were attributed to one-off components not disclosed during the IPO.
Key Questions Answered
ESDS Software shares hit a 5% lower circuit following its quarterly results announcement, which showed a sequential 20% revenue drop and a 56.7% decline in profitability for the June quarter. Additionally, the company's anticipated revenue from an Australia deal faced delays, moving from September to the first week of November with revenue now expected in the third quarter of fiscal year 2027.
Following the earnings call and financial results, Choice Broking downgraded ESDS Software from a buy rating to a sell rating while keeping its price target unchanged at ₹1,550. The brokerage also revised its financial year 2027 revenue estimate downward from ₹2,263 crore to ₹1,876 crore.
During the earnings management call, it was revealed that nearly 20% of the company's financial year 2026 revenue and profitability stemmed from one-off components, specifically a design services revenue booked in a subsidiary. These components were not previously disclosed by the company at the time of its IPO.
