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    Nucleus Software Exports Limited

    NUCLEUSMixed
    Information Technology·10 Nov 2025
    Management Summary

    Nucleus Software reported a challenging Q2 FY26 with a slight QoQ revenue decline and significant drops in EBITDA and Net Profit, primarily due to increased operating expenses. While product development, including AI features, is a key focus, the company faces slower-than-expected customer conversions to its new FinnOne Neo platform and a tough market for new client acquisition. Management highlighted efforts in sales restructuring and strategic alliances to drive future growth, but explicitly stated they do not provide financial guidance.

    Highlights

    8

    • Consolidated revenue for Q2 FY26 was ₹213.51 crores, a 1.93% decline QoQ and 5.60% increase YoY.

    • EBITDA for the quarter stood at ₹23.09 crores, down 31.56% QoQ and 26.74% YoY, with an EBITDA margin of 10.81%.

    • Net Profit for Q2 FY26 was ₹26.29 crores, decreasing 25.29% QoQ and 20.48% YoY.

    • EPS for the quarter was ₹9.99, a 25.28% decline QoQ and 19.11% YoY.

    • The order book position as of September 30, 2025, was ₹671.10 crores, a 4.56% QoQ decline.

    • Total cash and cash equivalents were ₹961.66 crores, slightly down from ₹965.93 crores QoQ.

    • Cost of delivery as a percentage of revenue increased to 73.9% in Q2 FY26 from 70.1% QoQ.

    • The company added one new logo in Q2 FY26, bringing the half-year total to two.

    What Changed2

    vs Q3 FY26

    Guidance items6 → 0 (-6)Q&A highlights8 → 3 (-5)

    Key financials

    Single quarter

    08 metrics
    1. 01Consolidated Revenue₹213.51 Cr+5.6%YoY
    2. 02Product Revenue₹181.02 Cr+5.6%YoY
    3. 03Projects & Services Revenue₹32.5 Cr+5.5%YoY
    4. 04EBITDA₹23.09 Cr-26.7%YoY
    5. 05Net Profit₹26.29 Cr-20.5%YoY

    Risks & concerns

    6
    RiskSeverity

    Slow conversion of existing customers to FinnOne Neo

    The journey to upgrade existing customers from FinnOne to FinnOne Neo is not as fast as expected due to customer inertia, preference for existing customizations, and regulatory changes slowing decision-making. — Management acknowledged

    medium

    Increased employee costs impacting margins

    Employee costs have risen across the industry due to mass attrition and critical hiring, leading to higher cost of delivery as a percentage of revenue. — Both acknowledged

    medium

    Tough market for new customer acquisition and conversions

    While there is good market traction, conversions are taking time, especially in the US market, due to regulatory changes and global factors. — Management acknowledged

    medium

    Competition in product development cycles due to AI

    An analyst raised concerns about increased competition and shorter product development cycles due to AI, which management acknowledged by discussing R&D investments in AI but did not directly confirm as a significant competitive risk. — Analyst acknowledged

    low

    Areas of Evasion(2)

    • Medium-term profitability band/guidance
    • Long-term growth aspirations (5, 7, 10 years)

    Q&A highlights

    3

    “So, yeah employee additions, I don't know if you especially if you look at over the years, may not be so much because we have been talking about it, we had a serious impact when the mass attrition was there, and, essentially, we have filled those up and, off course, there are some critical hiring we have done and my costs certainly have gone up across the industry because of what happened during the period of the mass attrition, so we are definitely not at same levels where we were earlier.”

    Explains the increase in employee costs and its impact on productivity, linking it to past attrition and critical hiring across the industry.

    asked by Rushabh Shah

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 FY26 Financial Performance Highlights

    Nucleus Software reported consolidated revenue of ₹213.51 crores for Q2 FY26, a slight QoQ decline of 1.93% but a YoY increase of 5.60%. Product revenue contributed ₹181.02 crores, while projects and services added ₹32.50 crores. However, profitability saw a significant downturn, with EBITDA falling by 31.56% QoQ and 26.74% YoY to ₹23.09 crores, resulting in an EBITDA margin of 10.81%. Net Profit also decreased by 25.29% QoQ and 20.48% YoY to ₹26.29 crores, with EPS at ₹9.99.

    02

    Order Book and Cash Position

    The company's order book stood at ₹671.10 crores as of September 30, 2025, reflecting a 4.56% QoQ decline from ₹703.16 crores. This includes ₹579.67 crores from the products business and ₹91.43 crores from projects and services. Despite the order book decline, Nucleus Software maintains a strong liquidity position, with total cash and cash equivalents at ₹961.66 crores, comprising various investments and current account balances.

    03

    Product Development and AI Integration

    Management expressed excitement about the upcoming General Availability (GA) release for FinnOne Neo, which will introduce numerous new features and AI-enabled use cases. The company is actively enhancing its product portfolio to include co-lending offerings and new business lines such as gold loan financing. A key technological focus is the concept of embedded AI, aiming to integrate AI use cases directly into product offerings to improve customer experience.

    04

    Challenges in Customer Conversion and Top-Line Growth

    A significant challenge highlighted was the slower-than-expected pace of converting existing customers from the older FinnOne platform to the new FinnOne Neo. This is attributed to customer inertia, their preference for existing customizations, and regulatory changes that prolong decision-making processes. While market traction is positive, the conversion of this pipeline into revenue is taking more time than anticipated, impacting the reacceleration of top-line growth.

    05

    Sales and Marketing Initiatives

    To counter conversion challenges and drive growth, Nucleus Software has implemented a new sales structure, including onboarding six regional sales heads and actively recruiting global sales representatives. The company is also increasing its marketing investments, participating in various industry events, and forming strategic partnerships, such as with GFDM, to expand its market reach and generate more leads, particularly in India, the Middle East, and the US.

    06

    Employee Costs and Productivity

    The cost of delivery, including product development, increased to 73.9% of revenue in Q2 FY26, up from 70.1% in the previous quarter. Management attributed this rise to the impact of past mass attrition, subsequent critical hiring, and a general increase in costs across the industry. The company's strategy to improve employee productivity involves continuous investment in product development and new releases, aiming for better financial reflection in the future.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.