Paytm shares fall 4% despite Q3 net profit rocketing 971% QoQ. Buy, sell or hold?

Shares of financial services technology platform Paytm tumbled 4% to Rs 1,117 on the BSE on Friday even as the company posted a consolidated net profit of Rs 225 crore for the third quarter, compared with a loss of Rs 208 crore in the same period last year. On a sequential basis, profit surged 971% from Rs 21 crore reported in the September quarter.

Revenue from operations rose 20% YoY to Rs 2,194 crore, driven by growth in payments GMV, merchant subscriptions, and higher distribution income from financial services.

Contribution profit climbed 30% YoY to Rs 1,249 crore, with contribution margin expanding to 57% on the back of improved payment processing margins and a greater share of revenue coming from financial services distribution.


Paytm reported EBITDA of Rs 156 crore, translating into an EBITDA margin of 7%, despite increased promotional spending to drive consumer growth and the full impact of the new labour code.

The company said its like-for-like revenue growth stood at 25%, while reported growth reflected festive timing differences, lower loan distribution under the default loss guarantee (DLG) model, and a more conservative revenue recognition policy.

On a segment basis, payments services revenue increased 21% YoY to Rs 1,284 crore, while net payment revenue grew 25% YoY to Rs 613 crore. Financial services revenue rose 34% YoY to Rs 672 crore.

Paytm also reported consistent gains in UPI consumer market share for the third straight quarter. Consumer UPI GMV grew 35% over the past nine months, outpacing the industry’s 16% growth.

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Merchant device subscriptions reached 1.44 crore, marking a YoY addition of 27 lakh devices. The company said it is boosting merchant retention and engagement through AI-led targeting and by expanding its merchant sales and service teams.

The number of customers using financial services through the platform increased from 5.9 lakh to 7.1 lakh YoY. The company said it continues to strengthen its presence across online and offline merchants by deepening adoption of its full-stack, omni-channel payment offerings, with product innovation and AI-led merchant acquisition helping improve unit economics and profitability.

What should investors do?

Bernstein has maintained its Outperform rating on Paytm with an unchanged target price of Rs 1,600, implying an upside potential of nearly 37% from current market levels. The international brokerage described Q3FY26 as a strong and reassuring quarter for the company. The brokerage highlighted that financial services revenue grew 34% YoY despite a lower share of DLG loans, while underlying transaction momentum remained healthy, with services revenue rising over 20% on a QoQ basis. It also noted continued cost discipline, with indirect costs declining 8% YoY.

GMV growth stayed robust at 23% YoY, supported by higher device installations, while monthly transacting users increased by around 6 million sequentially. Although net margins faced seasonal pressure during the quarter due to elevated cashback spending, Bernstein expects margins to normalize, with payment processing margins trending above 4 bps going forward.

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