Fintech player Paytm's Q1 FY26 profit attributed to tight cost cuts

Paytm posted a net profit of Rs 122.5 crore in Q1FY26, driven by sharp cost controls, after a steep loss in the corresponding quarter of FY25

The first quarter of 2025-26 (Q1FY26) turned profitable for One97 Communications, parent of fintech player Paytm, after a steep loss of ₹838.9 crore in Q1FY25. The net profit of ₹122.5 crore in Q1FY26 was largely driven by sharp cost controls. The fintech firm had posted a net loss of ₹539.8 crore in Q4FY25.

 

Paytm’s indirect expenses, excluding ESOP (Employee Stock Ownership Plan) costs, were down 19 per cent year-on-year (Y-o-Y) to ₹1,049 crore in Q1FY26 from ₹1,301 crore in Q1FY25.

 

Most notably, the company slashed its marketing expenditure by 65 per cent to ₹62 crore in Q1FY26 from ₹177 crore in Q1FY25. Sequentially, this cost was down 39 per cent from ₹102 crore in Q4FY25.

 

Paytm’s total direct expenses rose marginally at 3 per cent to ₹767 crore in Q1FY26 from ₹746 crore a year ago. Sequentially, they contracted 9 per cent from ₹840 crore in Q4FY25.

 

That said, Paytm is not actively looking to cut down on costs further, with the company intending to invest in specific business lines. 

 

“(The agenda) is rather investing in a few more line items that we believe are (for) long-term growth. So, we are not actively pursuing cost cuts while I am definitely pursuing whatever is not necessary… drop it out of the window (sic),” Vijay Shekhar Sharma, founder and chief executive officer (CEO) of Paytm, said in a call with analysts.

 

Paytm did not respond to Business Standard’s request for a comment till press time.

 

The company reported total expenses of ₹2,016.1 crore in Q1FY26, an 18.6 per cent reduction from ₹2,476.4 crore it recorded in Q1FY25. Total expenses were down 6.4 per cent from ₹2,154.9 crore in Q4FY25.

 

Sharma’s commentary on not actively pursuing cost cuts assumes significance since the company’s revenue from operations grew 27.7 per cent to ₹1,917.5 crore in Q1FY26 from ₹1,501.6 crore in Q1FY25. However, on a quarter-on-quarter (Q-o-Q) basis, growth remained stagnant compared to ₹1,911.5 crore in Q4FY25.

 

To add to it, the company’s other income — which can include items such as interest income, dividends, and asset sales — grew 75.6 per cent on a Y-o-Y basis to ₹241.4 crore in Q1FY26 from ₹137.5 crore, adding to the consolidated top line. Sequentially, there was a minor 7.9 per cent rise from ₹223.8 crore in Q4FY25.

 

“Profitability rose due to opex (operating expenses) control but management flagged positive structural outlook as well,” said Shivaji Thapliyal, head of research and lead analyst, Yes Securities, in a research note. 

 

Based on the company management’s commentary, Thapliyal said that Paytm’s payments business is already profitable on a standalone basis without MDR (merchant discount rate) on UPI (Unified Payments Interface). He added that it will be a large profitability driver when MDR-bearing form factors grow.

 

“Scaling up distribution of secured products, improvement in personal loan disbursements, strong growth in POS (point of sale) distribution revenues, and applicability of UPI for large merchants should imply upside risks to our payment and distribution revenues. This, coupled with improving operating leverage, implies upside risk to revenue and profit estimates,” said Suresh Ganapathy, managing director, head of financial services research, Macquarie Capital. 

• Cost discipline
• Paytm’s tightly controlled  costs in Q1
• Indirect expenses, excluding  ESOP costs were down 19%
• Notably, marketing and  employee costs (excl ESOPs) shrunk for company
• Direct costs grew just 3%
• Other income grew 75.6% to ₹241.1 crore boosting topline