Neuland Laboratories Limited (NSE: NEULANDLAB) released its third-quarter earnings for fiscal year 2026 on February 9, presenting a classic case of the “CDMO volatility” that often tests investor patience. While the company posted a healthy 10.5% year-on-year revenue growth, the headline net profit appeared to crash by nearly 60%, a figure that requires significant context regarding last year’s one-off gains and the company’s shifting product mix.
The market, appearing to look past the headline bottom-line optical miss, showed resilience, with the stock seeing volatile but supportive action in recent sessions, acknowledging the structural growth story despite the quarterly air pocket.
The Financial Snapshot
For the quarter ended December 31, 2025, Neuland reported consolidated revenue of ₹439.7 crore, up from ₹398 crore in the corresponding quarter last year. However, sequential performance dipped as the high-margin “lumpiness” of the CMS (Custom Manufacturing Solutions) business normalized after a blockbuster Q2.
| Metric | Q3 FY26 | Q3 FY25 | YoY Change | Q2 FY26 | QoQ Change |
| Revenue | ₹439.7 Cr | ₹398.0 Cr | +10.5% | ₹514.3 Cr | -14.5% |
| EBITDA | ₹77.1 Cr | ₹86.6 Cr | -11.0% | ₹156.9 Cr | -50.8% |
| EBITDA Margin | 17.5% | 21.8% | -430 bps | 30.5% | -1300 bps |
| Net Profit (PAT) | ₹40.6 Cr | ₹101.6 Cr | -60.0%* | ₹96.9 Cr | -58.1% |
The drastic 60% YoY drop in Net Profit is largely optical. Q3 FY25 earnings included a significant exceptional gain of ₹55.8 crore. When adjusted for this one-off item, the normalized profit decline is far more modest, driven primarily by operational deleverage rather than structural weakness.
Analysis: The “Lumpy” Reality of CDMOs
Investors in the Contract Development and Manufacturing Organization (CDMO) space often face “feast or famine” quarters, and Q3 FY26 was a cooling-off period for Neuland after a fervent Q2.
Product Mix Shift
Management highlighted that the revenue mix this quarter skewed towards GDS (Generic Drug Substances) and lower-margin commercial molecules, rather than the high-value, high-margin CMS projects that boosted Q2 margins to over 30%. The absence of these high-margin “campaigns” in Q3 led to a sharp sequential contraction in operating margins from 30.5% to 17.5%.
The “Exceptional” Baseline
The optically “disastrous” 60% profit drop is a statistical artifact. In Q3 FY25, the company recorded a windfall (likely from asset monetization or transfer of rights). Stripping this out, the core business profitability remains under pressure due to higher depreciation and fixed costs associated with new capacity coming online, but it is not collapsing.
Segment Performance
CMS: Witnessed a sequential dip. This segment is project-based; revenues are recognized when batches are shipped, leading to the jagged quarterly profile.
Specialty APIs: Continued to show steady traction, though unable to fully offset the CMS variation.
Generics: Provided the volume base but commands lower margins, dragging the overall blended margin down.
Con Call Highlights & Management Commentary
In the earnings call, the management team, led by Sucheth Davuluri, maintained a “cautiously optimistic” stance, reiterating that quarterly fluctuations should not be extrapolated into annual trends.
Peptide Power: The company is aggressively expanding its Peptide manufacturing capacity. Management noted strong inquiry flows from innovators for peptide APIs, positioning this as a key growth driver for FY27.
Capacity Expansion: The new production block at Unit-III is on track for commercialization in FY26. While this currently adds to depreciation costs, it is essential for handling the projected volume ramp-up.
Guidance: Management refrained from giving specific quarterly guidance but affirmed confidence in the long-term structural uptake, suggesting that Q4 FY26 is expected to be stronger as deferred CMS shipments are realized.
Investor Outlook
Neuland Labs stock has been a multi-bagger over the last three years, leading to premium valuations.
Investors are paying for the “Science” and the “Pipeline.” Neuland is transitioning from a pure-play generic API maker to a high-end CDMO player. For long-term investors, Q3 acts as a reality check on the non-linear nature of CDMO growth.