Allied Digital Services Limited — Q2 FY26 earnings call

Call held 10 Nov 2025

Management summary

Allied Digital reported a strong Q2 FY26, with consolidated revenues reaching Rs. 234 crore, marking a 15% YoY and 7% QoQ growth. Profitability also saw significant improvement, with PBT up 32% and PAT up 33% YoY. The company secured new orders worth Rs. 698 crore, largely driven by net new wins, and successfully completed the Pune Smart City project. However, management anticipates continued margin pressure for the next 3-4 quarters due to strategic investments in global expansion and ongoing pricing challenges.

Highlights

  • Consolidated revenues of Rs. 234 crore, up 15% YoY and 7% QoQ.

  • PBT grew 32% YoY to Rs. 21 crore, and PAT increased 33% YoY to Rs. 15 crore.

  • EBITDA grew 23% YoY to Rs. 28 crore.

  • Strong order intake of approximately Rs. 698 crore, with 85-90% being net new.

  • Successful completion and handover of the Pune Smart City Command and Control center (Drishti).

Concerns

  • Margin pressure expected to continue for the next 3-4 quarters due to upfront investments and hiring in Europe and the U.S.

  • Persistent customer pricing pressure in the IT services environment.

  • Delays in government projects (e.g., Noida Smart City) due to budget constraints.

Key financials

2 periods

Headline

  • Revenue
    ₹234 Cr
    YoY +15% QoQ +7%
  • PBT
    ₹21 Cr
    YoY +32%
  • PAT
    ₹15 Cr
    YoY +33%
  • EBITDA
    ₹28 Cr
    YoY +23%

TTM

  • Revenue
    ₹878 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

  • Rest of the World Operations
    17% Revenue Growth
  • India Operations
    12% Revenue Growth
  • Services Business
    17% Revenue Growth
  • Solutions Revenue
    8% Revenue Growth
  • Nongovernment Customers
    18% Revenue Growth
  • Government Segment
    7% Revenue Growth
  • Overall Revenue Mix - US
    65% Share of Total Revenue
  • Overall Revenue Mix - India + Rest of World (ex-US)
    35% Share of Total Revenue

Order book

high confidence

Inflow this quarter

₹698 Cr

Execution

Large orders are typically for a period of 3 to 5 years. The first 12 months for smart city projects are usually the implementation phase, followed by the O&M phase. Full revenue from a large European deal is expected in Q1 of next year.

Composition

  • Net New (contract type) ₹628.2 Cr 90%

Pipeline

deal pipeline tcv

Large Mumbai project renewal, additional Pune project revenue, 2-3 new smart cities, Noida RFP underway.

Management reported a strong order intake for the quarter, with a significant portion being net new business, and highlighted a robust pipeline for future growth, including major smart city projects and renewals.

Source: Prepared remarks

Capital allocation

high confidence
  • Liquidity Liquidity disclosed The company maintains a strong cash position on its books, diversified banking relationships, and access to multiple sources of funding to support ongoing projects and new order wins.
    In addition to the strong cash position on our books, we have diversified banking relationships and access to multiple sources of funding, keeping us well placed to support both ongoing projects and new orders win.

Guidance & targets

Revenue

  • Quarterly Revenue Run Rate Revenue · Q4 FY26 or Q1 FY27 · High confidence Rs. 250 crore
    We are targeting to end this year, if not, then maybe probably next year that we should be on the way for a Rs. 250 crore kind of a quarter, which will help us to achieve Rs. 1,000 crore revenue. Yes, that is the target. If not Q4, then Q1, depending upon when the billing happens and stuff.

    — Nehal Shah

  • Annualized Revenue Revenue · by end of current FY or next FY · High confidence Rs. 1,000 crore
    achieving our next milestone of Rs. 1,000 crore in annualized revenue. We are targeting to end this year, if not, then maybe probably next year that we should be on the way for a Rs. 250 crore kind of a quarter, which will help us to achieve Rs. 1,000 crore revenue.

    — Gopal Tiwari, Nehal Shah

Margin

  • EBITDA Margin Margin · after 3-4 quarters · Medium confidence 12-13%
    But once we are set and up and going, we should be coming back to our margins about 12% to 13%.

    — Nehal Shah

What to watch in Q3 FY26

European Deal Revenue Realization

next quarter (Q3 FY26 for go-live progress, Q1 FY27 for full revenue)
Current Go-live phased from Dec-Feb
Target Full revenue contribution in Q1 FY27

Why it matters

This large deal is expected to significantly contribute to revenue, and its full realization is key to achieving growth targets.

Q1 of next year should be having the full revenue because until the February of next year, we would be still doing the go-live for different countries. So, the full revenue for the whole quarter will be coming in from the first quarter of next year.

Risks & concerns

  • Margin pressure from investments and pricing

    medium

    Margin pressure is expected to continue for the next 3-4 quarters due to upfront investments in Europe/U.S. expansion and persistent customer pricing pressure.

    Management acknowledged

  • Government project delays

    low

    Minor delays (2-4 weeks) in government projects can occur due to budget constraints, as seen with the Noida Smart City project.

    Management acknowledged

Q&A highlights

7 direct
Subcontractor costs increase Direct
Okay. So there, you can see it depends on the Solution activities. In any quarter, if Solution piece is a little heavy or we have more supply of equipment for the projects for the smart city projects. So, then this figure goes a little high.

Clarified that the increase in subcontractor costs is tied to the nature of solution activities and material supply for smart city projects, indicating it's not a structural issue but project-dependent.

Asked by Kunal Bajaj

U.S. direct sales strategy and pricing pressure Direct
So, for the direct sales update, let me tell you that we have hired a Chief Revenue Officer for our U.S. subsidiary, who is going to be working directly for acquiring large direct clients. ... And from a pricing pressure perspective, yes, we have started getting some good deals in the U.S., which we have announced also, and there are good deals in the pipeline as well. But you rightly mentioned that there is still some pricing pressures due to the environment that is there in the U.S. and I think it will continue for a couple of quarters more.

Provided an update on the U.S. market strategy, including new hiring, and confirmed that pricing pressure in the U.S. is expected to persist for another 2 quarters, impacting near-term margins.

Asked by Kunal Bajaj

Go-live and revenue realization for large European deal Direct
the go-live is phased out in the month of December, January and February. So, as we move forward, the go-live dates are coming in the next 3 months. Post that, we should be able to bill out completely. The transition is getting built currently. Q1 of next year should be having the full revenue because until the February of next year, we would be still doing the go-live for different countries. So, the full revenue for the whole quarter will be coming in from the first quarter of next year.

Gave a clear timeline for revenue ramp-up from a significant European deal, indicating a material impact on Q1 FY27 financials.

Asked by Kunal Bajaj

Smart City projects pipeline and large Mumbai renewal Direct
The pipeline there is strong. ... There is a project in the Pune city itself where there is some additional revenue expected. There are 2 or 3 more smart cities coming up. ... Apart from that, there is a large project which is due for renewal in Mumbai. ... It is a very large project, close to about Rs. 2,100 crore.

Highlighted a robust future pipeline for smart city projects, including a substantial Rs. 2,100 crore Mumbai renewal, which is a key growth driver.

Asked by Kunal Bajaj

Government project delays due to budget constraints Direct
Yes, there could be some delays, maybe 2 weeks, 3 weeks, 4 weeks here and there. But apart from that, if something is budgeted for, we do not see a challenge of them not giving out the money on-time... Noida, which got delayed a bit since the budgets were not in place for the last quarter.

Acknowledged minor delays in government projects due to budget issues, providing transparency on a potential operational risk.

Asked by Jyoti Singh

Drivers for achieving 12-13% EBITDA margins Direct
So typically whenever we go in a large deal in the second or the third year, we are able to optimize our cost and get better margins. ... Even from a smart city perspective, if you see the first 12 months are typically the implementation phase. Once we go from the implementation phase to the O&M phase, where we are just doing the operations and maintenance of the project, that is where we get another leverage of improving our margins.

Explained the cyclical nature of margins in long-term projects, where initial implementation phases are lower margin, but subsequent O&M and service phases drive higher profitability.

Asked by Nishita Shanklesha

Overall revenue mix by geography Direct
The portion is generally 65:35. Our 65% revenue comes from U.S. market and balance 35% is India and Rest of the World. That is the revenue mix.

Provided a clear breakdown of the company's geographical revenue mix, indicating a significant reliance on the U.S. market.

Asked by Nishita Shanklesha

2 min read 6 chapters

Detailed narrative

Strong Q2 FY26 Financial Performance

Allied Digital reported robust financial results for Q2 FY26, with consolidated revenues reaching Rs. 234 crore, marking a 15% year-on-year and 7% quarter-on-quarter growth. This quarter represents the highest-ever quarterly revenue for the company. Profitability also saw significant gains, with PBT growing 32% YoY to Rs. 21 crore and PAT increasing 33% YoY to Rs. 15 crore, while EBITDA rose 23% YoY to Rs. 28 crore. The trailing 12-month revenue now stands at Rs. 878 crore, compared to Rs. 807 crore for the full year FY25.

Robust Order Intake and Pipeline

The company secured new order intake of approximately Rs. 698 crore during the quarter, with 85-90% of this being net new business. Management highlighted a strong future pipeline, including a large Mumbai project renewal valued at Rs. 2,100 crore expected in December/January, for which they are seeking a strategic partner. Additionally, there is anticipation for additional revenue from Pune Smart City, 2-3 new smart city projects, and the Noida RFP is currently underway following budget clearances.

Strategic Global Expansion and Investments

Allied Digital is actively expanding its global footprint, particularly in Europe and the U.S., with plans to hire 120-130 people in Europe to strengthen operations in countries like Germany and Switzerland. These strategic investments in hiring and building operational capabilities, along with upfront costs for new large contracts, are expected to exert margin pressure for the next 3-4 quarters. The company aims to leverage these investments for long-term growth and diversified global revenue.

Margin Trajectory and Operational Efficiency

While current margins face pressure from initial project implementation phases and persistent customer pricing, management anticipates an improvement to 12-13% after 3-4 quarters. This recovery is expected as long-term contracts (typically 3-5 years) mature into their O&M/service phases, where operational optimization and value-added services, including application support and AI-based technology management, contribute higher margins. The company's strategy focuses on value-added solutions and services to enhance profitability.

Smart City Project Milestones and Expertise

A significant milestone was the successful completion and handover of the Pune Smart City Command and Control center, Drishti, in August 2025. This project, aggregating Rs. 510 crore, features over 2,800 cameras, automated alerts, and mobile command units equipped with drones, setting a benchmark for urban surveillance. Allied Digital believes this project will open similar opportunities as India continues to upgrade its security infrastructure, showcasing their ability to execute at scale.

Geographical and Segmental Growth Drivers

Growth was broad-based across geographies and segments. Rest of the World operations grew 17% YoY, driven by improved traction in the U.S. business, while India operations saw standalone revenues rise 12% YoY. From a segmental perspective, the Services business grew 17% YoY, and Solutions revenue increased by 8%. Nongovernment customers increased 18% YoY, outpacing the government segment's 7% YoY growth, reflecting strengthening engagement from enterprise clients. The overall revenue mix is 65% from the U.S. market and 35% from India and the Rest of the World (excluding U.S.).

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