Subex — Q3 FY26 earnings call

Call held 11 Feb 2026

Management summary

Subex reported a steady Q3 FY26, achieving 2.7% sequential top-line growth and robust normalized EBITDA and PAT margins of 13.1% and 10.8% respectively. The company highlighted the rapid commercialization of its AI-led FraudZap product and a strong order book, indicating positive momentum. While acknowledging the need for accelerated top-line growth, management outlined strategic initiatives focusing on AI integration, Managed Services expansion, and market access through tuck-in acquisitions, committing to discuss providing more formal guidance in the future.

Highlights

  • Revenue grew 2.7% sequentially to INR 70.79 crores in Q3 FY26.

  • Normalized EBITDA margin improved to 13.1% and Normalized PAT margin to 10.8%.

  • Successfully commercialized FraudZap, an AI-led product, within a year, demonstrating increased agility.

  • Order book remains strong with new logo additions and renewals, and the pipeline is healthy.

  • Onboarded two independent directors, strengthening governance.

Concerns

  • A one-time exceptional item of INR 4.5 crores was incurred due to new labour code impact for past service liabilities.

  • Top-line growth still 'eludes' the company, though plans are in place for turnaround.

  • No meaningful outcome yet on lost revenue recovery from the Sectrio business, with legal recourse ongoing.

Key financials

  1. Revenue ₹70.79 Cr +2.7%QoQ
  2. Normalized EBITDA ₹9.2 Cr +26%QoQ
  3. Normalized EBITDA Margin 13.1%
  4. Normalized PAT ₹7.68 Cr +96.9%QoQ
  5. Normalized PAT Margin 10.8%
  6. PAT (incl. exceptional item) ₹2.9 Cr +3.6%QoQ
  7. Exceptional Item (Labour Code) ₹4.5 Cr

What they filed

Q1 FY27: revenue up 16.3%, net profit up 24.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue68 69 66 63 64 −7%65 −5%65 −3%73 +16%
EBITDA-5 -4 -17 -3 -0 +91%1 +136%28 +260%9 +393%
Net profit-5 -7 -22 7 -3 +27%-3 +54%6 +128%9 +24%
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.

Order book

medium confidence

Execution

Traditional RAFM/ROC products convert revenue later (3 quarters after deal), while AI-led products like FraudZap convert faster (sometimes same quarter).

Pipeline

deal pipeline tcv

Order bookings and pipeline remain healthy.

Management notes a strong order book and healthy pipeline, with AI-led products showing faster revenue conversion. They are tracking net new pipeline and running roadshows.

Source: Prepared remarks

Capital allocation

medium confidence
  • Liquidity Cash ₹150 Cr Company has surplus cash which it intends to use for tuck-in acquisitions for technology or market access.
    As most of you have noticed, we are sitting with 150 crores or something of cash, and so we do have some surplus.

What to watch in Q4 FY26

FraudZap Revenue Contribution

next quarter or two quarters
Current Early stages, no specific numbers provided
Target More confident estimates on revenue mix and contribution

Why it matters

FraudZap is a key new AI-led product, and its revenue ramp-up is crucial for future growth.

I will be, honestly Abhishek, able to answer this maybe in another quarter much better, you know, another quarter or two quarters, because it just feels a little bit early to comment. I want to see this revenue mix starting to shift, actually, and then I'll be able to and team has to hit my milestones, right.

Risks & concerns

  • Tough Talent Market

    medium

    The talent market is difficult, but the company is adapting by hiring talent where it is located rather than concentrating in one location.

    Management acknowledged

  • Market Readiness for Data Protection Products (PrivaSapien)

    medium

    While data protection policies are emerging globally, explicit demand for products like PrivaSapien from telcos outside India has not yet translated into concrete requirements.

    Management acknowledged

  • Geopolitical Uncertainty and Revenue Realization

    low

    Small, mild exposure to countries like Iran and Venezuela where revenue can get stuck, though exposure is controlled and minor.

    Management acknowledged

Q&A highlights

3 direct, 1 evasive
FraudZap Revenue Potential and Market Sizing Evasive
That's a you've asked a very interesting question. So, for us, I think again, Mahesh to be honest, it's early days, so I'm unable to kind of really answer that question. But what we were wanting to do is, we definitely wanted that said, I wanted to challenge the team to see if they could develop something very, very quickly, which is white coated pretty much. But more importantly, can we commercialize it, take it to market, have a paying customer? All of that has happened within a year.

Analyst pressed for specific revenue estimates for FraudZap by 2030, but management declined to provide numbers, citing early stages, indicating uncertainty or unwillingness to commit to long-term forecasts for a new product.

Asked by Mahesh Kumar

Top-Line Growth and Future Guidance Partial
You're right. Actually, I mean, we have been sharing actually, but I also think that you're spot on. I think I kind of agree that. We'll speak to the board. We'll see what if -- you know if there is more guidance that we can provide. I'll take some care of this.

Analysts challenged management on the lack of double-digit top-line growth over the past decade, prompting a commitment from the CEO to discuss providing more formal guidance with the board.

Asked by Sanjyot Khare

Investor Relations and Market Visibility Direct
Completely agree, Ajay. Actually, I know this has been a long standing ask of the investors. I'm completely aware. I'm very cognizant of that. And I have always kind of also held back a little bit, because I always felt that we need to have the performance before we go to the market. And now I truly feel that we are on our way, well on our way, and we have fixed up our fundamentals to a large extent.

An analyst from Subex itself highlighted the need for increased investor visibility and engagement with brokerage houses, which management acknowledged and committed to addressing with planned roadshows.

Asked by Ajay Desai

Lost Revenue Recovery from Sectrio Partial
In terms of recovery, we are pursuing recovery right now. You know, actions have been taken, but I don't have any meaningful outcome, in the sense that, I've not recovered anything yet. So, we are in the market. We are taking legal recourse. So, we are in that process right now.

Management confirmed ongoing legal recourse for lost revenue from Sectrio but stated no recovery has been made yet, indicating a pending financial resolution.

Asked by Abhishek Kale

Revenue Contribution from UAE Subsidiary Partial
So, from an order booking side, I can just say the -- it can take another, let's say, four to five quarters and the real business will start flowing into that, and it will obviously result into the top line growth eventually after a few more quarters.

An analyst inquired about the revenue contribution from the recapitalized Middle East subsidiary, with management clarifying that revenue flow from new deals typically takes 4-5 quarters after order booking.

Asked by Jitendra Bhutoria

Growth Initiatives Beyond New Products Direct
The second one that we have done is, we have also gone after MS actually as a business, Managed Services. And we have a team whose job it is to expand our MS file and get us newer MS. ... The third one is we also have set up almost like an innovation lab. I think I've spoken about it in one of the calls, but we have an innovation lab, which what we are trying to do is, I almost think of our strategy.

Management detailed a multi-pronged growth strategy including expanding Managed Services and a 'Horizon 1 & 2' approach for product development and innovation, providing insight into future growth drivers.

Asked by Mahesh Kumar

Acquisition Strategy and Cash Utilization Direct
So, we will look at some tuck-in acquisitions. But the point is that if you make a smaller tuck-in acquisition, it's unlikely to give you the top line, right. That's not a top line acquisition, really, because top line acquisitions are a lot more expensive. So, what tuck-in's can do is, it can give you -- I think the newer technologies or bolt-on products that you are so your own development cycle of products can reduce, or it gives you a Rolodex into a market that you are trying to crack.

Management clarified its M&A strategy, stating that its INR 150 crores cash will be used for tuck-in acquisitions focused on technology or market access, rather than expensive top-line boosting deals.

Asked by Mahesh Kumar

PrivaSapien Market Uptake and Data Protection Partial
That is correct. So, we are constantly doing that. In DPDP they have really done -- they have started doing very well because of DPTP in India. But for whatever reason, we are not seeing it from the other regions yet.

Analyst highlighted the global trend of data protection policies as a market for PrivaSapien, but management noted that while it's successful in India, explicit demand from telcos in other regions is not yet materializing.

Asked by Mahesh Kumar

2 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

Subex reported a sequential top-line growth of 2.7% in Q3 FY26, with revenue reaching INR 70.79 crores, compared to INR 68.9 crores in the previous quarter. The company demonstrated strong operational discipline, achieving a normalized EBITDA margin of 13.1% and a normalized PAT margin of 10.8%. PAT, including an exceptional item of INR 4.5 crores related to new labour code impact for past service liabilities, stood at INR 2.9 crores, showing a slight increase from INR 2.8 crores in the prior quarter.

Strategic Shift Towards AI and FraudZap Success

A significant highlight of the quarter was the successful commercialization of FraudZap, an AI-led product, within just one year of its conception, reflecting increased agility. Management is prioritizing AI investments, with several AI use cases already live in production environments, and a European customer funding a proof of concept for GenAI agents. This strategic shift is underscored by the company's rebranding to an 'AI native operating model,' aiming for faster revenue conversion compared to traditional products.

Order Book Health and Revenue Conversion Dynamics

Subex reported a strong order book, bolstered by new logo additions and renewals, and a healthy pipeline. Management clarified that traditional RAFM/ROC products typically see revenue conversion around three quarters after a deal is announced, following implementation. In contrast, AI-led implementations like FraudZap offer more immediate, straight-line revenue gains, sometimes within the same quarter, which is a key driver for accelerating the AI line of business.

Multi-pronged Growth Initiatives

Beyond new product development, Subex is aggressively expanding its Managed Services (MS) offerings, with many recent deals, including a $6 million contract, incorporating a strong MS component. The company is also pursuing a 'Horizon 1 & 2' strategy: Horizon 1 involves reinstituting MS, building new products, and integrating AI into older ROC stacks, while Horizon 2 focuses on an innovation lab exploring new fraud vectors like account takeover, relevant to telcos and OTTs.

Investor Engagement and Future Outlook

Management acknowledged investor concerns regarding top-line growth, stating that while 'growth still eludes us a little bit,' a solid plan is in place for turnaround. Nisha Dutt committed to discussing with the board the possibility of providing more specific guidance in future calls to enhance investor confidence. The company also plans to host an Investor Day within the financial year to further engage with the investment community and provide updates on its strategic direction.

Capital Allocation Strategy and Investments

Subex currently holds approximately INR 150 crores in cash, which it plans to deploy for 'tuck-in acquisitions' aimed at gaining new technology or market access, rather than large top-line acquisitions. Existing investments, such as OnGrid and PrivaSapien, are performing well; OnGrid is noted as cash-rich, profitable, and recently issued bonus shares, with its fair market valuation to be conducted in Q4.

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