Q3 earnings: Profit growth holds, but cracks are showing
Subscribe to enjoy similar stories. A persistent slowdown in revenue growth was evident in the December quarter (Q3FY25) earnings, reflecting subdued demand even as profit growth accelerated, a Mint analysis of 3,577 BSE-listed companies showed. Year-on-year revenue growth sharply decelerated to 4.4% in Q3, down from 7.3% and 9.1% in the previous two quarters.
In contrast, net profits for the sample surged 12.4%, outpacing the 8.7% growth seen in the preceding quarter, widening the disconnect between topline and bottomline performance. Read this | What India Inc’s Q3 show reveals about the state of the economy This growing gap between sluggish revenue and rising profitability raises concerns about whether the current profit momentum is sustainable. Despite subdued revenue growth, companies improved profitability through favourable input costs and disciplined cost management.
Raw material expenses as a share of revenue dropped to 37%—the lowest in six quarters—down from 38.2% in the previous quarter. While this provided some relief, employee costs remained steady. A breakdown of expenses shows that raw material costs remained benign in Q3, rising just 1% year-on-year, compared to an 8% and 6% increase in Q1 and Q2, respectively.
However, for profit growth to be sustainable, companies will need to strengthen their topline. “Such favourable input cost dynamics cannot last indefinitely," warned Feroze Azeez, deputy chief executive officer, Anand Rathi Wealth. “At some point, global commodity prices will turn, or wage pressures will rise, putting renewed pressure on corporate margins." While large and mid-sized companies experienced subdued revenue growth but strong profit gains, small- and micro-sized firms saw the
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