Faze Three Q1 FY27 Results (NSE: FAZE3Q)
Signal: Margin pressure
The read
The key inflection is negative: after Q4FY26's 12% OPM recovery, consolidated EBITDA margin fell to 11.8% from 13.5% YoY and 13.4% QoQ as raw materials reached 60.3% of revenue versus 57.9% YoY; revenue still grew 8.2% YoY, but PAT fell 24.5% to ₹9.64 crore and finance costs rose 34.6%.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹229.39 Cr | +8.2% | -17.2% |
| Net profit | ₹9.64 Cr | -24.5% | |
| EPS | ₹3.96 | -24.6% | |
| EBIT margin | 11.8% |
P&L walk
Revenue increased to ₹229.39 crore, +8.2% YoY but -17.2% QoQ, while gross margin fell to 48.2% from 50.3% YoY and EBITDA margin declined to 11.8% from 13.5%, leaving PAT at ₹9.64 crore, -24.5% YoY.
Segments
The group added ₹16.55 crore of revenue over standalone, but a subsidiary reported a ₹2.10 crore net loss; consolidated PAT of ₹9.64 crore was therefore only ₹0.87 crore above standalone PAT of ₹8.77 crore.
Key positives
- Consolidated revenue reached ₹229.39 crore, up 8.2% YoY despite a 17.2% QoQ decline, maintaining positive year-on-year growth.
- Gross margin recovered 433bps QoQ to 48.2%, indicating the Q2FY26 margin trough has not persisted sequentially, although it remains 208bps below the year-ago level.
- Employee plus other expenses grew 8.9% YoY to ₹89.12 crore, broadly in line with revenue and avoiding a major fixed-cost spike.
- The company received PLI approval for the MMF Fabrics and Technical Textiles segment on July 1, 2026, creating a potential future support for the technical-textiles expansion.
Key concerns
- Gross margin compressed 208bps YoY to 48.2% as raw-material cost rose to 60.3% of revenue from 57.9%; with revenue growing 8.2% while material cost grew 12.6%, the company appears to have absorbed part of the input-cost pressure.
- Consolidated EBITDA declined 5.1% YoY to ₹27.09 crore and margin fell 165bps to 11.8%, reversing the margin improvement seen in Q4FY26.
- Finance costs rose 34.6% YoY to ₹5.64 crore, materially faster than revenue growth, increasing the sensitivity of PAT to borrowing costs.
- A subsidiary generated ₹7.49 crore of revenue but reported a ₹2.10 crore net loss, creating a drag on group earnings quality.
- The company granted 3,31,154 stock options during the quarter; current EPS tracks PAT, but future exercise could increase the share count.
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