Allied Digital Hits Record Revenue, Audit Issues Cloud Q3 Outlook

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AuthorAnanya Iyer|Published at:
Allied Digital Hits Record Revenue, Audit Issues Cloud Q3 Outlook
Overview

Allied Digital Services achieved record quarterly revenue of Rs. 247 crore in Q3 FY26, a 12% YoY jump, propelled by robust international operations. Despite strong growth drivers like AI and digital transformation, persistent audit qualifications on inventory and receivables remain a concern. Management guides for mid-teens revenue growth in FY27, but resolution of audit issues is key.

📉 The Financial Deep Dive

Allied Digital Services Limited has reported its highest-ever quarterly revenue, reaching Rs. 247 crore in Q3 FY2026, a significant 12% increase year-on-year. For the nine-month period ending December 31, 2025, the company posted revenues of Rs. 700 crore, up 16% YoY. EBITDA saw a healthy 11% YoY rise to Rs. 26 crore, translating to an approximate margin of 10.5%. Profit Before Tax (PBT) climbed 13% YoY to Rs. 22 crore.

However, the reported Profit After Tax (PAT) of Rs. 14 crore was impacted by exceptional items totalling approximately Rs. 6.1 crore, including a Rs. 1.3 crore provision for New Labour Codes and a Rs. 4.8 crore provision for prior year taxation. The adjusted PAT, excluding these one-offs, stood closer to Rs. 20 crore.

Geographically, international operations were the star performers, surging by 26% YoY, largely driven by the US market's focus on network modernization, digital workplace, and cybersecurity. This strong overseas performance contrasts with a 5% YoY de-growth in India operations, which the company attributes to the absence of major project milestones, with an expected resumption of activity in the next quarter. Segment-wise, Services revenue grew 16% YoY, while Solutions revenue remained flat. Non-Government customer revenue also outpaced Government segment growth, rising 13% YoY compared to the Government segment's 12%.

🚩 Risks & Outlook

A significant overhang for investors remains the audit qualifications concerning inventory, receivables, and unbilled revenue. The company has committed to resolving these issues by March 31, 2026, with the consolidation of its US subsidiary via loan-to-equity conversion also slated for the same date to remove a qualification. While management is optimistic about leveraging government initiatives in digital infrastructure, AI, and data centers, the successful resolution of these audit concerns is critical for sustained investor confidence.

Looking ahead, Allied Digital has guided for mid-teens revenue growth in FY27, with the potential to reach the mid-20s if large contracts are secured. The company also targets margin expansion, aiming for 11-12% in the next 3-4 quarters and progressing towards mid-teens margins within 2-3 years. Key growth drivers identified include AI-enabled infrastructure services, Smart Cities, technology management, and data center solutions. Order flows in Q3 exceeded Rs. 250 crore, signalling a healthy pipeline with improved quality in terms of deal size and tenure.

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