Are Allied Digital Services Ltd latest results good or bad?

The latest financial results for Allied Digital Services Ltd for the quarter ended December 2025 present a mixed operational picture. The company reported a net profit of ₹13.91 crores, which reflects a decline of 9.79% compared to the previous quarter and a significant drop of 21.46% year-on-year. This decline in profitability occurred despite a notable revenue growth of 5.87% quarter-on-quarter and 12.17% year-on-year, indicating that while the top line is expanding, the bottom line is under pressure. Operating profit before depreciation, interest, tax, and other income (PBDIT) improved to ₹26.16 crores, marking a sequential increase of 22.70%. The operating margin, excluding other income, rose to 10.57%, suggesting enhanced operational efficiency. However, the profit after tax (PAT) margin decreased to 5.62%, down by 98 basis points from the previous quarter, highlighting the challenges in maintaining profitability amidst rising costs, particularly due to a higher tax rate and reduced other income. The company's cumulative sales for the nine-month period ending December 2025 reached ₹700.14 crores, showcasing a robust growth of 16.42% compared to the same period last year. However, the net profit for this nine-month period showed a modest increase of 9.62% year-on-year, which is considerably lower than the revenue growth, indicating potential margin pressures. Allied Digital operates in a competitive environment within the IT services sector, facing challenges such as pricing pressures and wage inflation. The company's return on equity (ROE) stands at 7.01%, which is below industry standards, and the return on capital employed (ROCE) has shown signs of deterioration, currently averaging at 4.75%. In terms of evaluation, the company saw an adjustment in its evaluation, reflecting the mixed signals from its financial performance. Despite the positive aspects of revenue growth and operational improvements, the concerns surrounding profitability and return ratios are significant and warrant attention. Overall, Allied Digital's results indicate a need for strategic focus on enhancing profitability while sustaining revenue growth.