The fintech major had reported a net profit of around Rs 225 crore in the third quarter, marking its third consecutive profitable quarter. Revenue grew close to 20% year-on-year to about Rs 2,200 crore, while contribution margins expanded sequentially.
EBITDA remained firmly positive, reflecting improved operating leverage and cost discipline. Payments, merchant subscriptions and financial services distribution continued to anchor growth, reinforcing management’s claim that the business has moved beyond survival mode.
The December quarter followed a steady progression over the past three reporting periods. The first quarter of the recovery phase saw Paytm report its maiden profit of Rs 123 crore, driven by sharp cuts in employee costs and a revival in merchant acquisition. The second quarter built on that base, with EBITDA nearly doubling sequentially and adjusted profits materially exceeding estimates.
Q3 extended that trend, albeit at a more measured pace, which analysts say is a healthier signal than an unsustainable acceleration.
Khushi Mistry, Research Analyst at Bonanza Portfolio, said the Q3 numbers indicate that Paytm’s recovery is gaining depth rather than losing momentum. “Revenue growth remained broad-based, while higher contribution margins and disciplined spending supported profitability,” she said, while pointing out that payments GMV growth, expanding merchant subscriptions and improving UPI market share continue to strengthen Paytm’s core franchise.
However, Mistry cautioned that regulatory risks and intense competition remain structural challenges that investors cannot ignore.The market reaction to Q3 was muted. Shares dipped initially before stabilising, signaling that investors are now setting a higher bar. Profitability is no longer enough. The focus has shifted to durability, earnings visibility and growth quality.
Ravi Singh, Chief Research Officer at Master Capital Services, said the stock’s response reflects this transition. “The Street is now looking at what comes next. If Paytm can maintain double-digit revenue growth while keeping costs under control, the business case improves meaningfully. Execution will decide whether the upside sustains from here,” he said.
New verticals to drive growth?
Merchant payments account for roughly 55% of revenue, offering scale and stickiness through QR, UPI, card and device-led transactions. Financial services distribution contributes about 30%, primarily through credit partnerships with banks and NBFCs, while device rentals and other consumer services make up the rest.
Analysts note that the rising share of merchant subscriptions and financial services has improved revenue quality and reduced dependence on pure transaction volumes.
A key variable going forward is artificial intelligence. Founder Vijay Shekhar Sharma has repeatedly highlighted AI as the next growth engine, not just for internal efficiency but for building new merchant-facing products and features. Analysts say if Paytm can successfully deploy AI to deepen merchant engagement, improve credit underwriting and enhance monetisation, it could create a new leg of growth beyond payments.
The management has also talked about becoming a top five player in the wealth management space in less than 5 years, through Paytm Money. Post the third quarter, the company has set long term targets of 15-20% EBITDA margins and 30% revenue growth over the next two to three years. Whether that is ambitious, given the current state of operations, remains to be seen.
Analysts say much of what lies ahead will depend on execution-driven growth, margin defence and regulatory navigation.
What should investors do?
The stock had delivered multibagger returns from lows last year before retreating from the highs amid a broader slump in the market.
If we look past the earnings, Jefferies had cut its price target on Paytm to Rs 1,450 from Rs 1,600, citing the non-renewal of the RBI’s Payments Infrastructure Development Fund scheme. The brokerage said PIDF incentives had accounted for nearly half of Paytm’s adjusted EBITDA in the first half of FY26, and their removal will weigh on profitability over the next two years. As a result, Jefferies lowered its FY27 and FY28 EBITDA estimates, even as it retained a Buy rating.
This downgrade is relevant because it shifts the narrative from “turnaround achieved” to “earnings resilience under stress”. Jefferies believes Paytm can partially offset the loss of incentives by raising device subscription fees, tightening sales and incentive costs, and improving monetisation of non-UPI merchant payments.
But it also made clear that the adjustment will not be painless, and profit growth may moderate before re-accelerating.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)