Are GTT Data latest results good or bad?

GTT Data Solutions' latest financial results for Q2 FY26 reveal a complex operational landscape characterized by significant revenue growth alongside ongoing profitability challenges. The company reported net sales of ₹36.77 crores, marking a remarkable year-on-year increase of 938.70% from ₹3.54 crores in Q2 FY25 and a quarter-on-quarter growth of 44.54% from ₹25.44 crores in Q1 FY26. This surge in revenue indicates strong demand traction; however, it has not translated into sustainable profits.
The consolidated net loss narrowed to ₹1.05 crores in Q2 FY26, an improvement from ₹4.52 crores in the previous quarter. Despite this reduction, the company continues to face fundamental challenges in cost management and operational efficiency, as evidenced by a negative PAT margin of -2.96%. The operating margin turned positive at 4.35%, a significant recovery from the previous quarter's -5.27%, yet it remains thin and vulnerable to fluctuations in input costs.

Employee costs have risen, consuming a substantial portion of net sales, which underscores the company's investment in talent to support its growth ambitions. However, the operational cash flow dynamics remain concerning, with negative operating cash flow reported for FY25, indicating unsustainable cash burn without achieving profitability.

Furthermore, GTT Data's return on equity stands at 0.0%, reflecting an inability to generate meaningful returns for shareholders, while the return on capital employed is negative, suggesting value destruction. The company's valuation metrics, including a price-to-book ratio of 11.35x, appear disconnected from its financial fundamentals, raising questions about the sustainability of its current valuation.

Overall, GTT Data Solutions is navigating a challenging transition, with impressive revenue growth overshadowed by persistent losses and operational inefficiencies. The company saw an adjustment in its evaluation, reflecting these ongoing structural challenges. Investors should monitor future results closely for signs of improvement in profitability and operational efficiency.