Zydus Q1 FY27 revenue rises 22% but margins shrink

Zydus Lifesciences reported a 22% year-over-year increase in consolidated revenue for the first quarter of fiscal 2027, driven by higher sales across formulations and active pharmaceutical ingredients (APIs). The Mumbai-based pharmaceutical company posted revenue of ₹5,230 crore ($628 million) for the quarter ended June 30, up from ₹4,287 crore in the same period last year.

Gross margins declined 280 basis points to 54.2%, reflecting higher raw material costs, increased competition in key markets, and pricing pressures in the U.S. generics segment. Operating profit rose 15% to ₹1,120 crore, though the operating margin contracted to 21.4% from 23.1% a year earlier.

Net profit for the quarter increased 18% to ₹786 crore, compared with ₹666 crore in Q1 FY26. The company reiterated its full-year net profit guidance of ₹3,200–3,400 crore, citing stable demand in domestic and international markets despite margin headwinds.

Zydus attributed the revenue growth to a 19% expansion in domestic formulations sales and a 25% rise in API exports. The U.S. generics business, which accounts for roughly 30% of total revenue, saw a 12% increase in sales, though pricing erosion limited profitability.

Analysts noted that while the top-line performance aligns with expectations, margin compression remains a near-term challenge amid volatile input costs and regulatory scrutiny in major markets. The company’s cash flow from operations stood at ₹890 crore, up 22% year-over-year, supporting its dividend policy of ₹4 per share.

Shares of Zydus Lifesciences were little changed in early trading, reflecting a market consensus that balances growth prospects with margin concerns.