Sonata Software Falls Two Spots in Indian IT Rankings Amid Shrinking Microsoft Reseller Revenue

Due to a sharp dip in second-quarter revenue, which was mostly brought on by Microsoft Corp. selling its software licences directly to major clients, Sonata Software Ltd. has fallen two spots in the Indian IT hierarchy. Previously, over 60% of Sonata's revenue came from this type of software reseller company. Similar to other major software firms, Microsoft had previously sold a considerable portion of its licences through Sonata and other third parties. These days, it wants to sell directly to big customers. Although this has happened before, Sonata's management claims that this is the first time it has happened in Asia.

Due to its topline contraction, Bengaluru-based Sonata is currently the thirteenth-largest IT outsourcer in the nation. Following a dismal July–September 2025 period, it lost ground to L&T Technology Services Ltd (LTTS) and Firstsource Solutions Ltd.

Revenue Declined to 30%

quarter of $242.8 million, a 30% decrease from the previous quarter. Lower revenue from the domestic business, which mostly comes from the sale of software licences, was the main source of this reduction. On the other hand, LTTS and Firstsource, the latter of which was the most recent member of the Indian IT one billion club, had $337 million and $265 million in revenue at the end of the second quarter, respectively.

Given that investors are assessing the risks associated with macroeconomic uncertainty and automation techniques that could result in job losses in the $283 billion Indian IT sector, a fourth shift in the industry's hierarchy within a year could exacerbate investor anxiety.

Because fewer licences are sold in the second quarter, Sonata has historically experienced a seasonally difficult quarter; nevertheless, the current fall transcends seasonal problems. For starters, the company's sales fell 6.3% annually, the lowest level in at least three years. Last quarter's sequential revenue decline was more than twice as large as it was a year earlier. Sonata's revenue during the second quarter of the previous fiscal year was $259 million, a 14.5% decrease from the previous quarter.

Sonata’s Business Operations

About 40% of Sonata's revenue comes from maintaining back-end IT infrastructure for international businesses, with the remaining 40% coming from licensing software products to businesses. The majority of that business is made up of Microsoft's operations. Additionally, Sonata offers software licences for Google and Oracle. Samir Dhir, the CEO of Sonata, had warned Mint on June 26 that Microsoft's new strategy posed a threat to the business.

The management of the company pointed to Microsoft's continued ambiguity during the September quarter. In a post-earnings analyst call on November 14, Sonata's chief financial officer, Jagannathan C N, said that while Microsoft has not yet provided any written statement, "our guess is that worldwide they are trying to have some direct contracts with a limited number of very, very large accounts of theirs or large customers…. Therefore, a small number of items on that list can be in India and end up in our customers' baskets."