Allied Digital Services Limited — Q1 FY26 earnings call

Call held 6 Aug 2025

Management summary

Allied Digital reported a strong Q1 FY26 with consolidated revenues of ₹219 crore, up 22% YoY, driven by robust growth in India and encouraging recovery in international markets. The company secured significant new orders, including a ₹420 crore multi-year deal, enhancing its order book and long-term growth visibility. Despite facing margin pressures from competitive pricing and product-heavy Smart City implementations, management is cautiously optimistic about sustained growth, leveraging AI-driven solutions and strategic acquisitions.

Highlights

  • Consolidated revenues grew 22% year-on-year to ₹219 crore in Q1 FY26.

  • India operations standalone revenues rose 27% year-on-year in Q1 FY26.

  • Services business grew 20% year-on-year, and Solutions revenue rose 32%.

  • Order intake of ₹185 crore was recorded this quarter, including a significant ₹420 crore multi-year deal with a global pharma company.

  • Profit after tax increased 44% year-on-year to ₹14 crore.

Concerns

  • Margin pressures are expected to persist over the next three to four quarters due to customer cost control and competitive pricing.

  • Macroeconomic uncertainties continue to impact client decision-making and project delays.

  • EBITDA margins were lower this quarter at 10.05% due to product billing in Smart City implementation phases.

Key financials

  1. Revenue ₹219 Cr +22%YoY
  2. EBITDA ₹22 Cr +16%YoY
  3. Profit after tax ₹14 Cr +44%YoY
  4. Trailing 12 months revenue ₹850 Cr

What they filed

Q1 FY27: revenue down 4.3%, net profit down 17.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue91 100 100 95 101 +10%95 −5%97 −3%91 −4%
EBITDA10 10 -14 9 9 −11%12 +18%-27 −95%14 +57%
Net profit6 6 -4 8 6 +10%4 −35%-19 −339%7 −17%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Services business
    20% Growth
  • Solutions revenue
    32% Growth

Order book

high confidence

Inflow this quarter

₹185 Cr

Pipeline

deal pipeline tcv

Pipeline is still stronger, with more order wins expected in the near future.

The company's order book is strengthened by new wins and renewals, with increasing average ticket sizes, enhancing long-term growth visibility.

Source: Prepared remarks

Capital allocation

medium confidence
  • M&A Deal Acquisition · Announced

    To strengthen capabilities in Cybersecurity and Cloud space.

    Yes, so that's correct. Jyoti, we are looking at possible acquisitions in the Cybersecurity and the Cloud space. However, we are shortlisting some of them. As and when it reaches the next stage of finalizing someone, we will be announcing it. So, right now the search is on. And that is one of the reasons that we have kept cash in hand, so that whenever we need to acquire, when the market is down, we are in a strong position to do that kind of acquisition.

Guidance & targets

Revenue

  • Annualized Revenue Revenue · future · High confidence ₹1,000 crore
    This represents a meaningful increase from Rs. 807 crore reported for the full year FY 2025 and indicates the solid progress we are making towards our goal of achieving Rs. 1,000 crore in annualized revenue.

    — Gopal Tiwari

  • Quarterly Revenue Run Rate Revenue · next couple of quarters · High confidence ₹250 crore
    Top line, Rs. 250 crore, we should be ideally be moving towards that in a couple of quarters.

    — Nehal Shah

Margin

  • EBITDA Margin Margin · next couple of quarters · High confidence 11-12%
    We are targeting to be in the steady state of 11% to 12%. Hopefully, we should be reaching there in a couple of quarters.

    — Nehal Shah

  • EBITDA Margin Margin · 3 years down the line · Medium confidence 13-15%
    If the way Al is going and is doing work easier for us, and if the way we are forecasting that it will help us in bettering our bottom line, if all of that happens, then yes, we can surely look at a higher number, maybe in the tune of 13%, 14% or even 15%.

    — Nehal Shah

What to watch in Q2 FY26

Quarterly Revenue Run Rate

next couple of quarters
Current ₹219 crore
Target ₹250 crore

Why it matters

Achieving this run rate is key to reaching the annualized ₹1,000 crore revenue target.

Top line, Rs. 250 crore, we should be ideally be moving towards that in a couple of quarters.

Risks & concerns

  • Customer Pricing Pressure

    medium

    Customers are seeking highly competitive pricing and changing vendors due to budget scrutiny and inflationary pressures, expected to persist for 3-4 quarters.

    Management acknowledged

  • Macroeconomic Uncertainties

    medium

    Global uncertainty is causing delays in client decision-making and project commitments, impacting growth.

    Management acknowledged

  • Margin Compression from Product Billing

    medium

    During Smart City implementation phases, product billing (which has lower margins than services) can put pressure on overall EBITDA margins.

    Management acknowledged

Q&A highlights

7 direct
India vs. International Growth & Order Book Size Direct
So, currently, if you look at, in the current top line for India, I think about 15% to 20% would have been coming in from Pune City and this will keep on happening for the next two quarters as well... However, the large deals that we are closing globally also is going to push us to the revenue growth in the U.S. as well.

Clarifies the current drivers of India's growth and the company's balanced approach to global vs. domestic revenue, indicating large deals will drive international growth.

Asked by Jyoti Singh

Acquisition Plans Direct
Yes, so that's correct. Jyoti, we are looking at possible acquisitions in the Cybersecurity and the Cloud space. However, we are shortlisting some of them... So, right now the search is on. And that is one of the reasons that we have kept cash in hand, so that whenever we need to acquire, when the market is down, we are in a strong position to do that kind of acquisition.

Reveals strategic M&A focus areas and the company's readiness to execute acquisitions when market conditions are favorable.

Asked by Jyoti Singh

Revenue & Margin Targets, Sales Team Update Direct
So, we are still sticking to the revenue top line growth of Rs. 1,000 crore in the next 4 to 5 quarters. Top line, Rs. 250 crore, we should be ideally be moving towards that in a couple of quarters... We are targeting to be in the steady state of 11% to 12% [EBITDA margins]. Hopefully, we should be reaching there in a couple of quarters.

Provides specific short-term revenue and margin targets and confirms commitment to previous guidance, along with updates on sales team expansion.

Asked by Kunal Bajaj

US Pipeline Order Update Direct
I think the 50 million order pipeline that we are talking of is what we announced today morning which we won. And while we are talking, the pipeline is still stronger, and we will have more order wins coming up in the near future.

Confirms the conversion of a previously discussed large pipeline into a firm order and indicates continued strong pipeline health for future wins.

Asked by Santosh

Pricing Pressure & AI Impact on Margins Direct
The pricing pressure is due to a lot of uncertainties the businesses see today... mainly on the Services side because they are all long-term operations services... From the Solution point of view, there is a big adoption on Al-based solutions and technologies. And we see quite a good margin there.

Explains the source of current margin pressure and how AI-driven solutions are expected to mitigate it, differentiating impact across segments.

Asked by Pratik Dedhia

Smart City Project Pipeline & Margins Direct
Pune is going to be a little better than the previous ones because it is the same team that we are utilizing for Phase-2 as well. ... there is a strong pipeline. There are a couple of smart cities, safe cities that we are bidding for, which should be concluded by September end.

Gives insight into the profitability of ongoing Smart City projects and the near-term pipeline for new wins in this segment, highlighting the bidding timeline.

Asked by Pratik Dedhia

Auditor Change & Internal Controls Direct
That change of auditor was not because of the choice. It was as per the regulator's requirement... And new auditors, when they onboarded, and they did thorough checking... came out certain adjustments and corrections and reclassifications which were implemented into Q4 FY '25... Now, hardly anything is going to be there further.

Addresses concerns about financial restatements and assures investors that the audit process is complete and internal controls are being strengthened for future growth.

Asked by Pratik Dedhia

Long-term Margin Targets & AI Impact on Workforce Partial
If the way Al is going and is doing work easier for us, and if the way we are forecasting that it will help us in bettering our bottom line, if all of that happens, then yes, we can surely look at a higher number, maybe in the tune of 13%, 14% or even 15% [EBITDA margins]... Yes, so being a Services Company, that is one of the optimization where workforce reduction, in fact, that could happen.

Provides a long-term aspirational margin target linked to AI adoption and acknowledges potential workforce optimization due to AI-driven productivity gains.

Asked by Pratik Dedhia

3 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

Allied Digital reported consolidated revenues of ₹219 crore for Q1 FY26, marking a 22% year-on-year growth. This is the fourth consecutive quarter with revenues exceeding ₹200 crore, with trailing 12 months revenue now at approximately ₹850 crore. Profit after tax saw a significant increase of 44% year-on-year, reaching ₹14 crore, partly due to the recognition of deferred tax assets. EBITDA for the quarter stood at ₹22 crore, growing 16% year-on-year.

India Operations and Smart City Momentum

India operations were the primary growth driver, with standalone revenues increasing 27% year-on-year in Q1 FY26. The Pune City Surveillance project contributed 15-20% to India's current top line and is expected to continue for the next two quarters. The company is actively bidding for new smart and safe city projects, with conclusions expected by September end, leveraging the monsoon season for vendor shortlisting and budgeting.

International Business Recovery and Key Deal Wins

The international business showed encouraging signs of recovery, particularly in the U.S. with enterprise clients re-engaging. Allied Digital secured a significant multi-year deal worth ₹420 crore (equivalent to $50 million) with a leading global pharmaceutical company for digital transformation services. Other key international wins include a three-year contract with a global investment bank and a digital workplace services contract for a large e-charging company across multiple geographies.

Segmental Performance and Order Intake

The Services business grew 20% year-on-year, while the Solutions revenue saw a 32% increase. Total order intake for the quarter was approximately ₹185 crore, comprising new wins and annual renewals. Management noted an increase in the average ticket size of new wins, indicating a stronger value proposition and client trust, contributing to a more diversified portfolio and enhanced long-term growth visibility.

Margin Dynamics and AI Strategy

EBITDA for Q1 FY26 was ₹22 crore, representing a 10.05% margin. Management noted that margin pressures are expected to persist for the next three to four quarters due to customer cost control, competitive pricing, and the higher proportion of product billing during Smart City implementation phases, where product margins are typically lower than services. The company is leveraging its AI-first strategy, including its indigenous Agentic AI platform and Digital Desk tool, to drive efficiencies and improve margins, with an aspirational target of 13-15% EBITDA margins in three years.

Capital Allocation and Strategic Acquisitions

The Board declared a 30% dividend for FY24-25, consistent with the previous year. Allied Digital is actively pursuing strategic acquisitions in the Cybersecurity and Cloud spaces, maintaining a strong cash position to capitalize on market opportunities. This inorganic growth strategy aims to enhance capabilities and diversify the service portfolio, aligning with the company's focus on becoming a global IT transformation architect.

Regulatory Compliance and Internal Controls

Following a regulatory-mandated change of auditors, a thorough review of financial statements led to certain adjustments and reclassifications in Q4 FY25. Management assured that these exercises are complete, and no further significant adjustments are expected. The company is implementing new SOPs and control measures, including at the Board level, to ensure robust internal controls and maintain compliance as it scales operations.

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