Dr Reddy's Q2 preview: Profit may moderate as US sales dip; check estimates

Dr Reddy's Labs Q2 results preview: Dr Reddy’s Laboratories is expected to deliver moderate year-on-year growth in the September 2025 quarter (Q2FY26), supported by robust performance in India and expanding contributions from its inorganic portfolio in Europe. While US sales are expected to face pressure due to continued weakness in Revlimid and price declines, the company’s domestic business and strategic acquisitions should provide a cushion.

 

While profitability is likely to remain under strain with gross margin compression and steady operating costs, quarterly revenue and earnings are likely to show modest improvement.

Dr Reddy's Labs Q2 results expectations 

According to brokerages tracked by Business Standard, Dr Reddy's net profit is expected to come at ₹1,479 crore, marking a moderate 5.5 per cent Y-o-Y increase, on average, as against ₹1,401 crore in the year-ago period (Q2FY25). However, on a quarterly basis, the company's bottom line is projected to increase marginally by 4.3 per cent.

 

 

The pharma major's revenue for the quarter under review is expected to increase 7.7 per cent to ₹8,637 crore, on average, as compared to ₹8,016 crore in the corresponding quarter of the previous fiscal. On a sequential basis, revenue is expected to remain flat compared to ₹8,545 crore in the June 2025 quarter.

 

Brokerages expected the company's earnings before interest, tax, depreciation and amortisation (Ebitda) to remain almost flat at ₹2,238 crore in Q2FY26 compared to ₹2,248 crore in the year-ago period.  It is expected to increase around 4 per cent quarter-on-quarter (Q-o-Q) from ₹1,418 crore in previous quarter. 

Here's how analysts expect Dr Reddy's Labs to perform in Q2 FY26:

HDFC Securities: The domestic brokerage expects Dr Reddy’s US business to decline 6 per cent Q-o-Q, impacted by lower gRevlimid sales alongside price and market share erosion in the base portfolio. Meanwhile, the India business is forecasted to grow 8 per cent Y-o-Y, supported by GST-related benefits in September 2025. The brokerage has factored in a contribution of ₹670 crore from the NRT business. 

 

However, gross margins are expected to contract due to price erosion in key products, while steady operating costs could weigh on the Ebitda margin, leading to a decline in profitability for the quarter.

 

ICICI Securities: ICICI Securities noted several regulatory and strategic developments ahead of Q2FY26 results. The USFDA completed GMP and pre-approval inspections at multiple manufacturing sites, including formulations and biologics facilities, with observations reported but no major red flags. Notably, the company’s API facilities in New York and Telangana were classified as VAI by the USFDA. Dr Reddy’s also announced the appointment of Deloitte Haskins & Sells LLP as statutory auditors from FY26-27.

 

On the business front, the company entered a definitive agreement to acquire the STUGERON brand from Janssen Pharmaceutica NV for USD 50.5 million, expanding its portfolio across 18 markets in APAC, EMEA, and the Middle East.

 

Additionally, Dr Reddy’s launched a novel patented molecule, Tegoprazan (PCAB), in India for acid-related gastrointestinal diseases, and received a positive CHMP opinion from the European Medicines Agency for AVT03, a biosimilar candidate for Prolia and Xgeva. 

 

Systematix Institutional Equities: Analysts at Systematix Institutional Equities expect Dr Reddy’s to deliver 9 per cent Y-o-Y revenue growth in Q2FY26, supported by strong performance in the India branded formulations business, which is anticipated to register high single to low double-digit growth. Additionally, inorganic growth from the NRT portfolio is expected to more than double the company’s Y-o-Y sales in Europe.

 

However, US generic sales are forecasted to decline by 10 per cent Y-o-Y (in USD terms), primarily due to ongoing weakness in Revlimid sales. The brokerage highlights key monitorables for the upcoming earnings call, including cost rationalisation efforts, the potential approval of semaglutide in Canada, and the filing for an abatacept biosimilar.

 

On a quarterly basis, revenue is expected to grow by 2 per cent, Ebitda by 6 per cent, and PAT by 8.4 per cent. Year-on-year, the brokerage forecasts revenue, Ebitda, and PAT growth of 9 per cent, 2.4 per cent, and 13.9 per cent, respectively, for Q2FY26.