Newgen Software Technologies Limited

Newgen Software Technologies reported a Q3 FY26 revenue of INR 400 crores, marking a 5% year-on-year growth. This quarter's performance was balanced despite a selective market environment, influenced by a high base from the previous year's strong license revenue quarters. For the first nine months of FY26, the company achieved a total income of INR 1,122 crores, growing 7% YoY, and onboarded 34 new logos, reinforcing global enterprise trust in their platform.

Annuity revenues demonstrated strong growth, reaching INR 250 crores in Q3 FY26, a 20% increase year-on-year. Within this, subscription revenue grew even stronger, achieving INR 134 crores, up 29% YoY. This subscription-led growth was significantly driven by contributions from the U.S. (21% YoY revenue growth), U.K., and Australia, validating the company's geographic expansion strategy.

Despite muted overall revenue growth, Newgen maintained strong margins, with an adjusted profit after tax of INR 90 crores and net margins of 22.5% for Q3 FY26, excluding a one-time^📎 INR 35 crores impact from new Indian labor code changes. This resilience was attributed to operating leverage from AI in engineering and tooling, optimized and flat headcount, variabilization of salary buildup, and the growth of high gross margin revenue streams like AMC and subscriptions.

The company faced challenges with elongated decision cycles for larger enterprise deals, particularly in India and the Middle East, where growth was weaker. Management noted that AI-led uncertainty is causing customers to re-evaluate their technology choices and defer large order bets, impacting the conversion of traditional license deals. This dynamic is contributing to slower revenue recognition for some recently won orders, despite a strong overall pipeline.

Newgen is actively investing in next-generation AI-led products and solutions, with 9% of revenues allocated to R&D for the first nine months of FY26. The company is excited about AI's potential to enhance customer productivity and design intelligence, with initial AI orders already live in India and Singapore. AI is seen as augmenting complex enterprise workflows, rather than disrupting Newgen's core BPM offerings, and is expected to become central to all use cases in the next 2-3 years.

While Q3 FY26 saw 7 new customer logo additions and several key wins totaling approximately INR 142.84 crores, the translation to immediate revenue growth was impacted by the nature of these deals. Many recent orders, especially from mature markets like the US, UK, and Australia, are subscription-led, which involve little upfront realization and longer ramp-up periods for implementation, causing a lag of approximately one quarter in revenue recognition compared to traditional license deals.

The US geography showed strong revenue growth of 21% YoY, and Australia is developing into a self-sustaining territory with potential to cross $10 million in revenue next year. Conversely, India and EMEA regions experienced weaker growth. Management clarified that new H-1B visa rules would not impact Newgen's US revenue or service delivery, as the company operates a product-based model and hires locally, rather than relying on manpower-based assignments.