Key Takeaways
- Revenue doubled, AI tripled: Revenue grew 102% YoY to ₹301.2 crore, with the AI segment surging 300% YoY to contribute 29% of operating revenue.
- Margins held above guidance: EBITDA margin at 14.9% beat the ~14% target, helped by a favorable mix of small orders and a medium-size AI deal.
- Pipeline supports 40% CAGR ambition: A ~₹4,000 crore pipeline with ~60% conversion ratio underpins confidence in sustaining the growth trajectory, though the order book itself closes in 8-12 weeks and offers limited forward visibility.
- Deliberate margin ceiling: Management chooses to operate at ~14% EBITDA to show value for money and deepen market share, even though AI could command higher margins.
- What to watch next quarter: Whether the IndiaAI mission and NSM 2.0 actually enter the pipeline as orders, the pace of working capital normalization from the elevated Q1 receivables position, and any disclosure on quantum computing strategy.
Revenue Performance & Mix
- Broad-based growth: Revenue of ₹301.2 crore represented 102% YoY growth, driven by strong demand across core segments and disciplined execution.
- Space & Defense spike: The segment grew 283% YoY to ₹83.4 crore, driven by a large AI order executed in the critical defense sector during Q1; management cautioned against extrapolating from one quarter.
- Government-enterprise split: Overall revenue was 60% government, 40% enterprise; within AI systems, government contributed ~23-24% with the rest from enterprise; HCI was mostly enterprise while HPC was mostly government.
- Non-annuity business model: Every order is a unique solution deployment; refresh orders may come in future but there is no repetition of the same order, so revenue must be continuously re-won.
- Seasonality pattern: March is the heaviest quarter because government and corporate CAPEX buying peaks at fiscal year-end; Q1 is not weak on a YoY basis but is weaker than the March quarter historically.
Lodha: "Our kind of company, really, the order book will not be able to give you the visibility of our growth, actually, because as you know that our order book gets closed between 8-12 weeks."
AI Segment & Product Launches
- AI revenue share raised: Management lifted the AI revenue share guidance from ~20% to ~22% of total revenue by end of FY26, while noting that other segments are also growing.
- Skylus.ai traction: Recent disclosed orders all include a contribution from Skylus.ai, the unified composable GPU orchestration platform launched in FY2025; it is sold as an appliance (hardware plus unified software layer), not as standalone software.
- Skylus.ai licensing: The platform uses a perpetual license model, not subscription; customers are not charged separately for the software, and the software does not stop working after warranty though support ceases.
- Skylus.ai integration: The platform already has plugins to integrate with Kubyts, TPS and other utilities; Kubyts and Skylus.ai are well integrated in the complete stack.
- Enterprise AI adoption: Management sees strong traction as enterprises want AI infrastructure and LLM companies receive funding to work on newer AI models.
- GPU pricing dynamics: Falling H100/H200 spot prices are not a concern because availability itself is a problem; new GPUs like B200/Blackwell drive demand shifts.
Lodha: "I would like to raise that guidance to maybe 22%, because you will have to understand my other segments also growing."
Margins & Investment Philosophy
- EBITDA margin beat: Margin at 14.9% exceeded the ~14% guidance due to a favorable mix of small-size orders and a medium-size AI deal.
- Deliberate margin ceiling: Management is comfortable operating at ~14% EBITDA and chooses to show value for money to customers, which helps increase market share and deepen penetration; AI could command higher margins but market share is prioritized over margin expansion.
- R&D as competitive moat: The company spends ~3% of turnover on R&D (75 software plus 22 hardware people); management attributes the ability to achieve 14% EBITDA margins while competitors operate at single-digit margins to this R&D investment.
- PAT guidance maintained: PAT guidance held between 10% and 10.5%.
Lodha: "Today, if we are able to take 14% EBITDA margin, whereas my competition is all on single-digit margin that is because of my R&D. I personally feel so."
Working Capital & Balance Sheet
- Receivables-driven current asset spike: Net current assets rose 48% QoQ to ₹445 crore primarily due to an increase in receivables, as sales occurred in the later part of the quarter.
- Elevated cycle is a timing issue: The working capital cycle appeared elevated in June because robust Q1 sales momentum meant a large portion of sales sat in receivables; the cycle typically operates around 90-100 days.
- Forward expectation: Working capital is expected to range between 80-100 days; management found it difficult to predict the exact year-end cash cycle.
Pipeline & Growth Catalysts
- Pipeline supports growth ambition: A pipeline of ~₹4,000 crore with a ~60% conversion ratio underpins confidence in sustaining 40% CAGR, though individual quarters can be higher or lower.
- NSM 2.0 imminent: The National Supercomputing Mission 2.0 is on the verge of rollout, expected to bring new allocations and large ticket-size projects.
- IndiaAI mission not yet in pipeline: The IndiaAI mission is not included in the company's pipeline or order book; momentum is expected to start this year and continue for a few more years, with a possibility of entering the pipeline in coming quarters.
- Pipeline mix: All three segments (supercomputing, cloud, AI) are growing, with more opportunities in AI driving higher AI growth.
- Export ambition: Exports are targeted at around 5-6% of turnover on a yearly basis; over the next 2-3 years, exports would reach around 10% of total turnover but not beyond that because domestic demand is very high.
- Google Andhra Pradesh project: Management would not confirm or deny participation; the project is at an elementary stage, and while NetWeb does not do contracting work for data centers, a Make in India mandate for private cloud could create an opportunity.
Competitive Position & Strategy
- R&D-driven differentiation: The ~3% of turnover spent on R&D is what management credits for the margin gap versus single-digit competitors.
- Value-for-money positioning: The company serves large government R&D organizations and large Indian enterprises, not the assembly segment; the deliberate ~14% margin strategy is framed as building long-term customer relationships and market share.
- Quantum computing on the horizon: Management is working on a strategy for quantum computing but declined to comment further, saying disclosure would come at the right opportune moment.
Lodha: "We want to show the value for money to our customers. If you see my customers also, if you see the government side, they are all basically large government R&D and large enterprises actually. And as regards enterprises are concerned, they are all basically large Indian companies. So, we are not present in the assembly and all those areas."
Guidance & Commitments
| Commitment | Specifics | Timeline |
|---|---|---|
| Revenue growth | 35%-40% YoY growth | FY26 |
| EBITDA margin | ~14% | FY26 |
| PAT margin | 10% to 10.5% | FY26 |
| AI revenue share | ~22% of total revenue | By end of FY26 |
| Export share | 5-6% of turnover yearly; ~10% over 2-3 years | FY26 and medium-term |
| Working capital cycle | 80-100 days | Ongoing |
| Growth trajectory | Sustain 40% CAGR, with quarterly variation | Medium-term |
Key Metrics
| Metric | Q1 FY26 |
|---|---|
| Revenue from operations | ₹301.2 cr, +102% YoY |
| Operating EBITDA | ₹44.8 cr, +127% YoY |
| Operating EBITDA margin | 14.9% |
| PAT | ₹30.5 cr, +100% YoY |
| PAT margin | 10.1% |
| Return on equity | 22.4% |
| Return on capital employed | 30.6% |
| Net free cash | ₹47.52 cr as on 30th June |
| Revenue growth guidance | 35%-40% for FY26 |
| EBITDA margin guidance | ~14% for FY26 |
| PAT margin guidance | 10%-10.5% for FY26 |
| AI revenue share | 29% of operating revenue, +300% YoY |
| AI revenue share guidance | ~22% of total revenue by end of FY26 |
| Order book | ₹230 cr |
| L1 position | ₹460 cr |
| Order book plus L1 | ~₹700 cr |
| Pipeline | ~₹4,000 cr |
| Pipeline conversion ratio | ~60% |
| Government revenue share | 60% of total revenue |
| Enterprise revenue share | 40% of total revenue |
| Space & defense revenue | ₹83.4 cr, +283% YoY, 28% of total revenue |
| Working capital cycle | 90-100 days typical, reduced ~17 days YoY |
| Exports share | 5%-6% of turnover expected for FY26 |
| R&D spend | ~3% of turnover |