Data Patterns Q1 2026 Results: Net Profit Slumps 22% Amid Margin Pressures
In the first quarter of 2026, Data Patterns, one of India’s prominent electronic systems design and manufacturing companies catering to the defence and aerospace sector, reported a sharp decline in profitability. Despite ongoing government focus on indigenous defence production, the company’s Q1 performance reflected both seasonal and operational challenges. The numbers revealed significant contractions across key financial metrics, indicating that cost pressures and project execution cycles impacted overall earnings.
The company’s share price stood at ₹2,428 as of the latest update, with a market capitalisation of ₹13,590 crore. While long-term investors continue to see promise in the company’s capabilities and its niche positioning in the defence electronics segment, the short-term outlook is clouded by weaker quarterly performance and a high price-to-earnings (PE) ratio of 63.4, which may raise valuation concerns in the current market environment.
Headline Numbers
For the quarter ended June 2025, which corresponds to Q1 2026 in the company’s financial reporting, Data Patterns posted:
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Sales: ₹99.3 crore, down 5% year-on-year from ₹104 crore in Q1 2025.
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EBITDA: ₹32.1 crore, down 14% from ₹37.2 crore in the same quarter last year.
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Net Profit: ₹25.5 crore, down 22% from ₹32.8 crore in the year-ago period.
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Earnings Per Share (EPS): ₹4.55, compared to ₹5.86 in Q1 2025.
The decline in revenue, though modest at 5%, was compounded by steeper drops in operating and net profits, signalling compression in margins. This could be attributed to higher input costs, execution delays in certain projects, and possibly changes in the revenue mix.
Sequential Performance
On a sequential basis, the fall was much steeper because Q4 2025 was an exceptionally strong quarter for the company, driven by year-end order deliveries and milestone billings. Sales in the March 2025 quarter were ₹396 crore, EBITDA was ₹149 crore, and net profit stood at ₹114 crore, with an EPS of ₹20.38. The sequential decline highlights the cyclical nature of the defence manufacturing business, where revenues can fluctuate significantly depending on project schedules.
While such quarter-to-quarter volatility is not unusual in the defence and aerospace sector, investors often look at year-on-year trends for a more stable view of the company’s growth trajectory. In that respect, the year-on-year decline in all key financial metrics warrants attention.
Understanding the Decline
Several factors could have contributed to the weaker performance:
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Order Execution Timing: Defence projects often follow complex timelines tied to client acceptance and quality certifications. A delay in even a single large order can shift revenue recognition into the next quarter, leading to abrupt changes in quarterly numbers.
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Cost Escalations: The company may have faced higher procurement costs for raw materials and components, especially given the ongoing global supply chain realignments. Although some cost increases can be passed on to customers, defence contracts often have fixed pricing, limiting immediate cost recovery.
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Operational Overheads: Investments in new capabilities, research and development, and workforce expansion to meet future orders may have temporarily increased expenses without an immediate revenue offset.
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Revenue Mix Shift: A higher proportion of lower-margin products or early-stage contracts in the revenue mix could have brought down the average profitability.
Valuation Perspective
At a PE of 63.4, Data Patterns remains one of the more expensive stocks in its segment. While high valuations are often justified by strong growth prospects and niche market positioning, they also increase vulnerability to earnings disappointments. With a 22% drop in net profit in Q1 2026, investors may question whether the premium valuation can be sustained unless there is a visible rebound in the coming quarters.
Industry Context
The broader defence and aerospace electronics market in India continues to enjoy robust demand. Government initiatives under ‘Make in India’ and higher allocations in the Union Budget for defence procurement have encouraged domestic manufacturing. Data Patterns, with its focus on design-led manufacturing and indigenous systems, is well-placed to benefit from this policy push.
However, competition in the domestic defence sector is gradually intensifying, with several established public sector undertakings and emerging private players vying for contracts. This may lead to more competitive bidding and pressure on margins in the long run.
Management Commentary and Outlook
While the company has not yet issued detailed guidance for the remainder of 2026, the management is expected to highlight the strength of its order book and pipeline in the upcoming investor interactions. In past communications, Data Patterns has emphasised its long-term contracts, which ensure visibility of revenues over multiple years.
Industry analysts anticipate that the bulk of the revenue for 2026 will still come in the second half of the year, aligning with historical patterns. This means that the company could recover from the slow start in Q1, provided there are no unforeseen execution bottlenecks.
Key positives that could support a turnaround in subsequent quarters include:
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Strong defence capital expenditure pipeline in India.
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Execution of large-scale projects in radar systems, avionics, and space electronics.
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Ongoing R&D investments that could lead to higher-value offerings.
Investor Takeaways
For long-term investors, the Q1 2026 results should be seen as part of the natural volatility in the defence manufacturing business rather than a structural weakness. However, the magnitude of the decline in profits and the elevated valuations suggest that caution is warranted in the short term.
Traders and short-term investors may find the stock prone to corrections if market sentiment turns cautious on high-valuation defence names. On the other hand, any positive surprise in order wins or margin recovery in Q2 and Q3 could act as a catalyst for a rebound.
What to Watch Going Forward
Investors should keep an eye on:
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Order Book Announcements: A significant new order or contract renewal could materially improve revenue visibility.
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Margin Trends: Any improvement in gross and EBITDA margins will be closely watched as a sign of operational efficiency.
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Execution Pace: Timely delivery of ongoing projects can smooth revenue recognition and reduce volatility.
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Industry Policy Updates: New defence procurement policies or import restrictions could create additional opportunities for domestic manufacturers.
Conclusion
Data Patterns’ Q1 2026 performance underscores the challenges of operating in a project-driven business where quarterly numbers can fluctuate sharply. The 22% year-on-year decline in net profit is significant, but not entirely unexpected given the sequential slowdown from a record Q4 2025. Investors will be keen to see if the company can stabilise its margins and capitalise on the favourable industry environment in the coming quarters.
For now, while the long-term growth story remains intact, the near-term earnings trajectory will determine whether the company’s premium valuation is justified.
FAQs
Q1: What was Data Patterns’ revenue in Q1 2026?
A1: The company reported sales of ₹99.3 crore, a 5% decline compared to ₹104 crore in the same quarter last year.
Q2: Why did the net profit fall by 22% year-on-year?
A2: The decline was due to a combination of factors, including lower revenue, higher input costs, and possible changes in the revenue mix.
Q3: What is the current PE ratio of Data Patterns?
A3: As of the latest update, the company’s PE ratio stands at 63.4, indicating a high valuation relative to earnings.
Q4: How does the defence sector outlook impact Data Patterns?
A4: The defence sector in India is experiencing strong demand due to government initiatives, which benefits companies like Data Patterns. However, competition and cost pressures remain key risks.
Q5: Should investors be concerned about the Q1 2026 results?
A5: While the decline is notable, it is not unusual in project-based industries. Long-term investors may focus on the company’s order book and execution capability for future growth.
About TOD News Desk: TOD News Desk is a team of dedicated digital journalists who specialize in breaking down complex news across business, tech, and markets into simple, insightful stories. Our mission is to help readers stay ahead with timely, accurate, and helpful updates that matter.
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