India Inc’s Q1 Earnings Lose Steam: Net Profit Growth at 6-Quarter Low, Revenue Softens

India Inc has begun the fiscal year on a muted note, with first-quarter earnings revealing broad-based weakness across industries. According to an analysis of 1,335 listed companies (excluding banking, financial services, insurance, oil and gas), both net profit and revenue growth have slipped to multi-quarter lows, raising concerns over the sustainability of corporate profitability amid a shifting macro environment.

Profit and Revenue Momentum Stalls

Net profit for Q1 FY26 rose just 8.3% year-on-year, the slowest growth since Q3 FY24. On a quarter-on-quarter basis, profit declined 11%, marking the steepest contraction since Q2 FY23. Revenues, too, rose only 8.4% year-on-year, the lowest in three quarters, while sequential growth dipped 2.2%—also the sharpest drop in over a year.

Operating profit (EBITDA) was under similar strain, increasing only 10% year-on-year, and falling 3.3% sequentially. These figures suggest that the earnings uptick seen through most of FY25 may be losing steam as high-base effects, sluggish demand, and cost pressures begin to weigh more heavily.

IT, Autos, FMCG Lose Ground; Metals Hold Firm

The earnings slowdown was broad-based. IT services sector firms struggled with weak discretionary tech spending from global clients, particularly in North America. Consumer-facing sectors, including FMCG and discretionary retail, cited muted volume growth and sustained input cost inflation.

Automobile companies, which had previously benefitted from pent-up demand and easing supply chains, witnessed margin pressure as sales volume plateaued. On the other hand, metals and mining companies managed to hold up, supported by better commodity prices and leaner cost structures.

These trends echoed in the performance of Nifty 50 companies, where aggregated net profit rose just 7.5% year-on-year, according to separate brokerage data.

A Telling Start to FY26

The first quarter’s performance signals that India Inc may be entering a period of moderation, especially after the resilience shown during FY25. With global macro uncertainty, elevated input costs, and tightened capital expenditure plans, companies could face persistent earnings headwinds in the near term.

Analysts are now closely watching whether the RBI’s neutral stance on interest rates—as announced in the August MPC meeting—will offer enough breathing room for firms to recalibrate strategies without macroeconomic shocks.

Investor Sentiment May Turn Selective

With headline earnings losing momentum, investors may increasingly pivot towards stock-specific fundamentals and defensive sectors. Sectors with pricing power, low leverage, or direct policy support—such as capital goods, defence sector, and renewables—are expected to remain in favour.

Broader equity markets may require stronger corporate guidance and visible demand revival before regaining their bullish momentum.