Q3 earnings growth muted as IT weighs, banks lend support – News Air Insight

ET Intelligence Group: Initial trends in the December quarter results season show aggregate net profit growth restricted to a mid-single digit, bogged down by the weak performance of the top IT companies, while double-digit profit growth posted by banking and finance companies supported the overall numbers.

Growth is likely to pick up in the coming weeks as more companies from consumer-centric sectors and those with domestic exposure report numbers.

For a sample of 159 companies that have declared quarterly numbers for each of the 13 quarters to December 2025, net profit grew by 5.1% year-on-year, the slowest in at least nine quarters. It was also the second consecutive quarter of single-digit profit growth.

IT Cos Hit by Delayed Decisions
Revenue growth at 7.4% remained in single digits for the seventh quarter in a row. The operating margin of the total sample contracted by 230 basis points year-on-year to 21.6%.

Excluding software companies, net profit growth shot to 11.3% while revenue growth at 7.3% was similar to that of the total sample. The 16 IT companies in the sample reported a 9.4% year-on-year decline in net profit, the first drop in eight quarters. Their revenue growth at 7.7% remained in single digits for the ninth consecutive quarter. Their profit share fell to 25.6%, the lowest in at least 13 quarters, from 29.8% a year ago, while revenue share remained at 23.4%.

This reflects the pressure on profitability due to the delayed decision making by clients. This has hampered project execution amid a shift in priority to advanced technologies driven by artificial intelligence (AI) away from traditional digital transformation projects. While top-tier companies have shown agility in striking AI-related collaborations with global partners and have reported a strong deal momentum in the December quarter, the pace of execution will be a key factor that determines future growth trajectory.

For the banking and finance companies in the sample, it was a second straight quarter of double-digit profit growth aided by a gradual stability in net interest margins. Their net profit grew by 10.7% while interest income rose by 3.5% year-on-year. These companies contributed 50% to the sample’s net profit in the December quarter compared with 47.6% a year ago. Excluding them, the sample reported flat net profit.

At the beginning of the current results season, analysts had anticipated double-digit aggregate profit growth, driven by companies from sectors such as automobiles, banking and finance, cement, metals and oil and gas.