Newgen Software Surges with AI Strategy and H2 Growth Hopes

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Stock rebounds sharply after recent downtrend; Analysts cite strong turnover, resilient fundamentals, and AI-led product push as key catalysts

By S JHA

MUMBAI, August 5, 2025 — Newgen Software Technologies Ltd. staged a powerful rally on Tuesday, soaring 12.08% intraday to end among the top gainers on the NSE, even as the broader market remained rangebound. The surge came after the company posted its Q1 FY26 results, which, while muted, reaffirmed investor faith in its long-term AI-led growth strategy.

The rally was backed by turnover of ₹1,797 crore and unusually high trading volume of over 2 crore shares, suggesting strong institutional or high-conviction buying interest. Analysts noted that delivery-based volume in the coming sessions would be key to confirming whether this is a genuine trend reversal or a technical bounce.

Muted Quarter, Yet Long-Term Story Intact

Newgen reported ₹321 crore in revenue and ₹50 crore in PAT, with operating margins at 15.5%. Cash flow from operations stood at ₹81 crore, though Days Sales Outstanding (DSO) remained elevated at 123 days.

While Q1 performance was impacted by global macro headwinds and deal delays, company watchers like Ameya (@Ameyafied) pointed out that Q1 historically accounts for just 20% of annual sales, with the real momentum building up in Q2 through Q4, once enterprise and government clients finalize IT budgets.

AI Bets and Product Pipeline Keep Hopes Alive

Despite the short-term softness, Newgen is doubling down on AI and global expansion. The firm recently launched four new AI agents, invested 10% of its revenue into R&D, and secured 10 large U.S. orders in Q4 FY25, as part of its global scaling efforts. The company’s flagship NewgenONE Low Code platform, along with tools like OmniDocs and IDP Studio, continue to anchor its product suite.

According to Equitymaster, the company has delivered a 24% revenue and net profit CAGR over the last three years, with a return on equity (ROE) of 22% — numbers that underpin continued investor optimism.

Analysts and Market Sentiment Turn Cautiously Positive

While the company’s valuation and margin profile remain under watch, several market participants believe Newgen is well-positioned in a winner-takes-all AI software environment, provided it can execute consistently and roll out breakthrough products ahead of the competition.

“Today’s rally may just be the beginning if the company delivers in H2,” said market analyst Ujjwal Sehgal. He stated that “sustainability depends on follow-through action and clarity from the upcoming earnings call.”

As of now, all eyes are on delivery data and management commentary to assess the durability of today’s surge. The stock from the high of ₹1755 in January this year came crashing to the low of ₹818 on August 1. The PE valuation of the stock also has crashed to the low of 42. The face value of the shares of Newgen is ₹10.

Disclaimer: This article makes no recommendation for buy or sell of shares of any company.

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