Digikore Studios Ltd — Q2 FY26 earnings call

Call held 3 Nov 2025

Management summary

Digikore Studios reported a robust H1 FY26, demonstrating significant revenue and PAT growth driven by the post-strike recovery in the VFX industry and strategic diversification. The company is aggressively expanding its global footprint, particularly in Europe, and leveraging high-margin verticals like branded content, AI SaaS, and virtual production to drive future profitability. While VFX margins saw some compression, management anticipates overall PAT margins to improve to 20-22% in the coming quarters, supported by a cautious approach to M&A amidst AI uncertainties.

Highlights

  • Revenue grew 59.6% to INR36.13 crores in H1 FY26 compared to INR22.62 crores in H1 FY25.

  • PAT increased 117% to INR6.11 crores in H1 FY26 versus INR2.82 crores in H1 FY25.

  • Operating expenses as a percentage of revenue fell to 78.6% from 83%, an improvement of 440 bps.

  • Operating cash flow turned positive and strengthened on better profitability and collection.

  • Secured an order book of over INR20 crores and a bidding pipeline of over INR35 crores, with an expectation to convert INR8-10 crores conservatively.

Concerns

  • VFX margins compressed in H1 due to increased competition and rate cutting post-strikes, settling at 16-18% compared to typical 18-19%.

  • Trade receivables increased to INR46 crores from INR39.55 crores (March 31), though debtor days improved from 400 to ~200.

Key financials

  1. Total Revenue ₹36.13 Cr +59.6%YoY
  2. PAT ₹6.11 Cr +116.6%YoY
  3. Operating Expenses as % of Revenue 78.6%

What they filed

Q4 FY26: revenue up 45.5%, net profit up 133.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY24Q4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue25 22 23 13 34 +36%32 +45%
EBITDA9 4 6 -10 11 +22%11 +175%
Net profit6 3 3 -10 6 +0%7 +133%
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.

Capital allocation

high confidence
  • Debt Debt disclosed
    INR20 crores is what we plan to use for debt reduction, which will strengthen our balance sheet, reduce our interest cost substantially, which will then eventually also lead to a PAT increase automatically. All our loans that involve a pledge get over by February 2026. So, under any circumstance, by end of February 2026, we'll be, let's call it pledge-free.
  • Liquidity Liquidity disclosed INR45 crore QIP fundraise in November is designed to give us additional working capital flexibility to scale delivery.
    we will be completing our INR45 crore QIP fundraise in November. So, this is designed to give us additional working capital flexibility to scale delivery, invest in on-ground market presence, accelerate high-margin initiatives, and strengthen balance sheet by certain loan reduction partially from the QIP fundraise.

Guidance & targets

Revenue

  • Revenue CAGR Revenue · next few years · High confidence 30% plus
    We are committed to sustaining 30% plus CAGR over the next few years, supported by industry tailwinds, our sales engine, technology leverage and a sharper client mix.

    — Abhishek More

  • Branded Content Revenue Revenue · this year · Medium confidence INR10 crores to INR12 crores
    So, this year, we should do a revenue, Digikore revenue of around INR10 crores to INR12 crores odd from our branded content shows.

    — Abhishek More

  • fab.com Revenue Run Rate Revenue · by end of December · High confidence INR10 lakhs to INR15 lakhs/month

    From INR5 lakhs to INR6 lakhs/month today

    by the end of December, we should be comfortably touching a revenue rate of INR10 lakhs to INR12 lakhs, maybe INR15 lakhs a month from fab.com.

    — Abhishek More

Client Mix

  • Direct Work Share Client Mix · end of FY '27 · High confidence 80%

    From 50% today

    our goal over the next year, that is by the end of FY '27, is to be at 80% direct work and we are moving in that direction pretty well.

    — Abhishek More

Profitability

  • VFX PAT Margin Profitability · going forward · Medium confidence 16% to 18%

    From 18% to 19% today

    Going forward, I anticipate VFX will settle in the same range of 16% to 18%.

    — Abhishek More

  • Overall PAT Margin Profitability · next three to four quarters · Medium confidence 20% to 22%
    I do think we should be able to start pushing up our margin slowly over the next few quarters, with a target of, you know, touching again, 20%, 21%, maybe 22% PAT margins over the next three to four quarters, backed by the high margin businesses getting traction.

    — Abhishek More

Debt

  • Pledge-free Status Debt · by February 2026 · High confidence Pledge-free
    by end of February 2026, we'll be, let's call it pledge-free.

    — Abhishek More

Geographic Mix

  • Europe Revenue Share vs US Geographic Mix · by the end of this year · Medium confidence equal
    by the end of this year, I would like to think that Europe would be equal in US in terms of revenue mix for us, which is very important.

    — Abhishek More

What to watch in Q3 FY26

Overall PAT Margin Improvement

Next three to four quarters
Current H1 FY26 PAT margin lower than typical 18-19%
Target 20-22%

Why it matters

Indicates the success of diversification into high-margin verticals and overall profitability improvement.

touching again, 20%, 21%, maybe 22% PAT margins over the next three to four quarters, backed by the high margin businesses getting traction.

Risks & concerns

  • AI Disruption to Content Production

    high

    International streaming platforms are averse to generative AI due to potential multi-billion dollar copyright lawsuits, allowing Digikore to use AI for back-end productivity without direct content generation.

    Management acknowledged

  • VFX Margin Compression

    medium

    H1 FY26 VFX margins were lower than typical 18-19% due to post-strike competition and rate cutting, but overall PAT margins are expected to improve to 20-22% in 3-4 quarters through diversification.

    Management acknowledged

  • Trade Receivables Increase

    medium

    Trade receivables increased to INR46 crores from INR39.55 crores (March 31), but debtor days have improved from 400 to ~200, and recovery is expected in 6-9 months.

    Analyst acknowledged

Q&A highlights

8 direct
FY26-28 Revenue Guidance & H2 Outlook Direct
if H2 is better than H1, which is already anticipated, FY '26 guidance will definitely be better, results will actually be better than our guidance.

Clarifies management's confidence in exceeding current FY26 guidance and indicates strong H2 performance.

Asked by Garvita Jain

AI's Role and Impact on VFX Industry Direct
As of today, international streaming platforms, international production companies like Netflix, Amazon, Disney, Warner, Marvel, they are yet averse to using AI in content production... So, it is yet some time for content to be generated in AI.

Addresses a key industry concern, clarifying that major clients are not adopting generative AI due to copyright, thus mitigating immediate disruption risk for Digikore.

Asked by Garvita Jain

Order Book and Bidding Pipeline Direct
our order book currently, like I said, is around INR20 crores... in bidding, we have over INR35 crores worth of projects in bidding. Obviously, we don't expect to get all of that... at least INR8 crores to INR10 crores on a very conservative side of this INR35 crores that's currently in bidding.

Provides quantitative insight into current and prospective business, indicating strong future revenue visibility.

Asked by Garvita Jain

Margins Outlook and Drivers Direct
VFX will settle in the same range of 16% to 18%... But our other divisions, which are extremely high margin divisions of brand jingles, or SaaS-based platforms, or VP sets monetization, I do think we should be able to start pushing up our margin slowly over the next few quarters, with a target of... 20%, 21%, maybe 22% PAT margins over the next three to four quarters

Explains the H1 margin compression and outlines the strategy for future margin expansion through diversification into higher-margin verticals.

Asked by Shaurya Punyani

Trade Receivables and Debtors Days Direct
our debtor days, if you look at it, has come down from 400 to 200 approximately... So, that gives you a sign that a trade receivable has improved, not gone up.

Addresses concerns about rising trade receivables by highlighting improved collection efficiency and reduced debtor days.

Asked by Pradeep

QIP Utilization and Promoter Shareholding Direct
INR20 crores is what we plan to use for debt reduction... and the balance towards working capital, primarily towards expanding our European and US presence... post-promoter warrants, the promoters would be around 56%, 57%.

Details the strategic use of QIP funds for debt reduction and growth, and clarifies the long-term promoter commitment and shareholding.

Asked by Garvita Jain

Acquisition Strategy Amidst AI Volatility Direct
we are going to be doing a wait and watch game for the next six months to a year, especially on the acquisition side, before we take any wrong decisions, which could impact us negatively after two years' time.

Reveals a cautious approach to M&A due to AI uncertainty, prioritizing organic growth and strategic greenfield expansion over potentially risky acquisitions.

Asked by Rahil S.

Geographic Expansion Strategy (Europe vs. China/South Korea) Direct
Europe is a much larger pie when it comes to VFX than China, for sure... Our next sprint is going to be Asia, which is not really just China, because if you ask me, bigger than China, the opportunity for India lies in South Korea.

Explains the rationale behind the aggressive focus on Europe and identifies South Korea as a key future market in Asia due to better margins compared to China.

Asked by Prabhat Kumar

2 min read 6 chapters

Detailed narrative

Strong H1 FY26 Performance Driven by Post-Strike Recovery

Digikore Studios delivered a robust H1 FY26, with total revenue growing 59.6% to INR36.13 crores compared to INR22.62 crores in H1 FY25. PAT saw an even more significant increase of 117% to INR6.11 crores from INR2.82 crores in the prior year. This performance was largely attributed to the strong comeback of the VFX industry following the Hollywood strikes, which had previously impacted business.

Strategic Diversification into High-Margin Verticals

The company is actively diversifying beyond core VFX into high-margin verticals including AI SaaS platforms, branded content, and virtual production asset monetization. Management expects these segments to drive overall PAT margins from the current compressed levels (VFX at 16-18%) to 20-22% over the next three to four quarters. Branded content shows like 'Kaise Banta Hai' are projected to generate INR10-12 crores in revenue this year, while fab.com revenue is targeted to reach INR10-15 lakhs/month by December from INR5-6 lakhs/month currently.

Global Expansion and Client Strategy

Digikore is aggressively expanding its global presence, with Europe being a top priority, aiming for its revenue contribution to equal that of the US by the end of this year. A new subsidiary in New York is planned to anchor North American growth. The company boasts approvals from major studios like Disney, Marvel, and Netflix, and is focused on increasing direct work to 80% by the end of FY27, up from the current 50%.

QIP and Capital Structure Strengthening

A QIP fundraise of INR45 crores is underway in November, with INR20 crores earmarked for debt reduction to strengthen the balance sheet and reduce interest costs, thereby boosting PAT. The remaining funds will be allocated to working capital and market expansion. Additionally, promoters intend to infuse INR20 crores via convertible warrants, signaling strong confidence and increasing their stake to 56-57% post-warrants.

AI Strategy: Productivity Focus, Generative AI Caution

Digikore is investing in AI-assisted tools for back-end productivity tasks like roto, clean-up, and tracking, aiming to improve efficiency. However, the company maintains a cautious stance on generative AI for content creation, especially for major international clients, due to significant copyright concerns and potential multi-billion dollar lawsuits. Management believes this approach allows them to lead the AI curve without immediate disruption to their core business.

Improved Collection Efficiency and Debt Management

Despite an increase in trade receivables to INR46 crores, management highlighted an improvement in debtor days from 400 to approximately 200. They anticipate recovering the majority of past trade receivables within the next 6-9 months as client cash flows normalize. Furthermore, the company expects to be 'pledge-free' by February 2026, indicating a strong commitment to improving financial health and reducing leverage.

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