Aarti Pharmalabs Limited (NSE: AARTIPHARM, BSE: 543748) reported a sequential improvement in operating performance in the quarter ended Dec. 31, 2025, as margins recovered quarter on quarter despite a year-on-year decline in revenue, according to the company’s Q3 FY26 results presentation.
Key Q3 FY26 highlights:
- Operational revenue stood at ₹4,253 million, up 1.9% quarter on quarter and down 9.7% year on year.
- EBITDA rose 39.0% quarter on quarter to ₹1,030 million.
- EBITDA margin expanded to 24.22%, up 646 bps sequentially.
- Profit after tax increased 41.7% quarter on quarter to ₹438 million.
- CDMO/CMO revenue was impacted by ₹49 crore of goods in transit that could not be booked in Q3 FY26.
- Xanthine expansion project remained on track, with mechanical completion targeted by March 2026.
Q3 FY26 financial performance
On a standalone basis, operational revenue declined year on year due to lower volumes in certain API segments and deferred revenue recognition in CDMO/CMO. Operating expenses fell 6.1% quarter on quarter, supporting margin recovery.
EBITDA of ₹1,030 million reflected improved operating leverage and cost control, while profit after tax of ₹438 million rose sharply sequentially. Year on year, PAT declined due to a higher base in Q3 FY25 and softer API margins. Depreciation and finance costs increased year on year, reflecting ongoing capacity additions and higher borrowings.
Segment trends
Xanthine derivatives continued to be the largest contributor to quarterly revenue, accounting for 48.9% of sales in Q3 FY26, up from 44.1% in Q3 FY25. The company is executing a capacity expansion program to raise Xanthine capacity from 5,000 MTPA to 9,000 MTPA, with phased commissioning expected in the second half of FY26. Management targets increasing global market share from 15%–20% to 20%–25% post-expansion.
API & intermediates faced margin pressure despite early signs of demand recovery, while CDMO/CMO revenues were temporarily impacted by revenue recognition timing. The company said ₹49 crore of CDMO shipments were in transit at quarter-end and are expected to be recognized in subsequent periods.
Nine-month FY26 performance
For the nine months ended Dec. 31, 2025, standalone operational revenue declined 1.9% year on year to ₹12,179 million. EBITDA fell 4.0% to ₹2,720 million, with the EBITDA margin at 22.33%. PAT declined 25.2% to ₹1,260 million, reflecting weaker year-on-year performance in APIs and higher finance costs.
On a consolidated basis, 9M FY26 operational revenue stood at ₹12,368 million, while PAT was ₹1,254 million. The company noted that consolidated numbers are not directly comparable year on year due to a change in accounting for a joint venture effective April 2025.
Capacity expansion and capex
The company is advancing two major capex programs. The Atali greenfield site in Gujarat (Phase 1 capacity ~450 KL) is expected to ramp up by Q4 FY26, although operational challenges impacted the pace of ramp-up in the quarter. The Tarapur brownfield expansion will lift Xanthine capacity to 9,000 MTPA, with commissioning targeted for Q4 FY26. Management said the Atali site is scalable to 8–10x of Phase 1 capacity over time.
Outlook
Management expects sequential improvement in CDMO/CMO revenue as in-transit shipments are recognized and ramp-up issues at Atali are resolved. Xanthine capacity additions are expected to support volume growth and market share gains, while API margins remain under pressure in the near term.
Summary
Aarti Pharmalabs delivered a sequential recovery in margins and profit in Q3 FY26, despite lower year-on-year revenue due to deferred CDMO recognition and API margin pressure. Capacity expansions in Xanthine and CDMO/intermediates remain key growth drivers for the second half of FY26 and beyond.