Q2 earnings upgrades hold above 50%, says Jefferies. Is the profit cycle turning?

India’s earnings season is showing resilience despite a mixed sectoral performance, with more companies receiving profit upgrades than downgrades. But the recovery remains uneven, raising questions over whether the latest improvement marks a genuine turn in the earnings cycle or simply reflects strength in a few select pockets.

Of the 105 companies under Jefferies’ coverage that have reported Q2 results, 50% saw their FY27 earnings estimates upgraded. The ratio was broadly stable from the previous quarter’s 52%, while 41% of companies saw downgrades and 9% remained unchanged.

Jefferies also said 56% of the companies reported results above expectations, up from 52% in the previous quarter.


The brokerage has raised its FY27 MSCI India earnings growth forecast by 1 percentage point to about 15%. However, consensus earnings estimates have remained broadly flat so far, suggesting that the upgrades have not yet translated into a wider market-wide earnings reset.

“The Sep’26 quarter results so far have been healthy with upgrade ratio sustaining at 50%+,” Jefferies said in its strategy note.

Banks, two-wheelers, power utilities and consumer technology companies were among the stronger areas during the quarter. Large private banks delivered better-than-expected results, supported by stronger net interest income and lower credit costs. Jefferies raised its FY27 earnings estimates for all banks by 3% to 7%.

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Non-bank lenders also reported strong results, helped by robust asset growth and lower provisions. Asset quality remained broadly stable, although net interest margins declined sequentially for most NBFCs.

Two-wheeler manufacturers Bajaj Auto and TVS Motor reported earnings beats on strong volumes and steady margins. The picture was weaker for four-wheeler makers Maruti Suzuki and Hyundai, whose results were either in line or below expectations as insufficient price increases put pressure on margins.

Power utilities delivered some of the strongest performances. JSW Energy, Adani Power and Adani Energy Solutions beat estimates by 10% to 21%, helped by higher generation, merchant sales and stronger transmission-trading businesses.

Consumer technology companies Eternal and Meesho also reported strong beats, alongside improving profitability. Swiggy, however, lagged Eternal, with losses widening.

The performance of the information technology sector was more balanced. The top six IT companies recorded aggregate revenue growth of 1.1% quarter-on-quarter in constant currency, broadly in line with expectations. Margins expanded by 30 basis points, helped by lower employee costs.

There was also an early sign of improvement in hiring. Headcount at major listed IT companies increased by 14,000 sequentially, the highest quarterly addition in eight quarters.

However, Jefferies said IT earnings revisions remained mixed, with four companies receiving positive revisions and five seeing negative revisions in the quarter.

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Consumer staples also produced a mixed report card. Hindustan Unilever and Tata Consumer Products beat expectations and offered positive commentary, while Colgate-Palmolive missed estimates and Nestle India was in line. Inflationary pressures were visible across the sector.

Cement companies faced a tougher quarter as higher input costs and softer realisations weighed on profitability. Earnings estimates were cut across most companies, with UltraTech Cement the only major company in the group to avoid a downgrade.

The brokerage also flagged weakness at Larsen & Toubro, where earnings were 5% below expectations because of lower core margins. The company maintained its 10% to 12% FY27 order flow guidance, while first half order flow growth stood at 22%.

Real estate and hospitality offered more encouraging signals. Property companies reported largely stronger than expected pre-sales, with DLF, Oberoi Realty and Godrej Properties recording strong sustenance sales. Godrej Properties raised its FY27 pre-sales guidance by 4%.

Hotel companies Indian Hotels, ITC Hotels and Chalet Hotels reported EBITDA beats of 4% to 12% on strong revenue growth and margin expansion. Indian Hotels also raised its FY27 revenue growth guidance by 3 percentage points.

The broader data, however, does not yet point to a uniformly accelerating profit cycle. While the upgrade ratio remains above 50%, it has slipped marginally from the previous quarter, and the sectoral picture is sharply divided.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)