Eternal Q2 FY26: Revenue Explodes, But Profit Takes a Hit As Costs Surge

Eternal Q2 FY26: Revenue Explodes, But Profit Takes a Hit As Costs Surge

Eternal delivered a dramatic quarter on the top line with revenue roughly tripling YoY, driven by a huge jump in its quick-commerce business. However, despite the surge in business activity, its net profit fell sharply, reflecting higher operating costs and investments as it scales up.

*Key Highlights*
* Revenue from operations in Q2 FY26: ₹ 13,590 crore (up +183% YoY vs ₹ 4,799 crore in Q2 FY25).
* Total Income (all revenues): ₹ 13,942 crore (up +177.7% YoY vs ₹ 5,020 crore in Q2 FY25).
* Profit Before Tax (PBT): ₹ 129 crore (down vs ₹ 237 crore in Q2 FY25, −45.6% YoY)
* Profit After Tax (PAT): ₹ 65 crore (vs ₹ 176 crore in Q2 FY25, down −63.1% YoY)
* Quarter-on-quarter (QoQ) growth: Compared to Q1 FY26 (₹ 7,521 crore total income), Q2 total income grew by +85.4%.
* Earnings per Share (EPS): ₹ 0.07 for Q2 FY26 (vs ₹ 0.20 in Q2 FY25)

*Revenue & Profit Analysis*
Eternal’s revenue surge (approx. +183% YoY) is eye-catching, showing that business demand (especially from quick commerce) has accelerated sharply. But profit didn’t follow the same path: PAT dropped by about 63% YoY.
As the company scales up, costs have risen heavily: fulfillment, delivery, inventory and marketing to support growth. These costs have eaten into margins. So while top-line growth is strong, the business is still working to turn that into stable profitability.
On a sequential basis, Q2 shows improvement over Q1 (total income +85%), which suggests momentum is building. However, with profit still under pressure, this remains a “growth-first, profitability-later” phase.

*What’s Driving Growth?*
* The major driver of the growth appears to be the quick-commerce business (owned by Eternal’s subsidiary), which saw massive scale up, that contributed significantly to the overall revenue jump.
* Other verticals: food delivery, B2B supplies, going-out & entertainment (via its other arms) continue to operate, but quick-commerce is clearly the standout growth engine this quarter. The quick-commerce push appears central to the company’s strategy to scale rapidly and capture market share.
Thus, growth is being driven by aggressive expansion and scaling of quick-commerce operations, even if that means higher costs in the short term.

*Margin & Cost Pressure: The Trade-off of Scale*
This quarter’s results reflect a classic trade-off many growth companies face: rapid expansion vs. profitability. While revenue surged, margin pressure intensified: high delivery costs, marketing spends and investments in inventory/ operations have pushed down profitability. The sharp drop in PAT despite strong revenues suggests the company is prioritizing scale over near-term profitability.

*Balance Sheet & Cash: Headroom Still Present*
Publicly available filings show that as of Q2 FY26, the company ended with a substantial cash balance. This cash cushion gives Eternal some breathing space: it can continue to invest (marketing, scale, operations) while waiting for volume growth and operating-leverage gains to translate into better margins. But the path to consistent profits still depends on controlling costs and improving efficiency.

*Strategic Outlook: What This Quarter Means for Investors*
Eternal’s massive revenue growth in Q2 shows that demand and scale are real, especially for quick commerce. That suggests the business model has legs and there is potential for growth in user base, frequency and market share. But profitability remains elusive for now.

*Key Concerns to Monitor*
* Whether cost controls and operating-leverage improvements begin showing up in margins.
* Whether quick-commerce growth sustains, and its unit economics improve.
* How other verticals (food delivery, B2B supplies, going-out services) contribute. Portfolio diversification could help reduce dependence on a single business line.
So far, Eternal looks like a high-growth, high-risk, high-potential stock: well suited for investors comfortable with short-term swings but optimistic about long-term scale and dominance.

*Valuation Outlook*
Eternal is currently valued like a high-growth platform company, mainly because its quick-commerce business is expanding very fast, even though profits are still small. Based on recent market pricing, the company trades at a price-to-sales (P/S) multiple of roughly 5-6x FY26 revenue, which is on the higher side compared to traditional consumer or internet companies, but typical for high-growth tech-enabled platforms. If revenue continues to grow at a strong rate (30-40% annually over the next two years), and if the company can lift its net profit margin from the current ~0.5% level to a more stable 2-3%, then the valuation can remain justified. However, if profitability stays weak, the stock may see correction because the business is still priced for strong future earnings. In simple terms, Eternal’s valuation today depends more on expectations than on current profits. Consistent improvement in efficiency, margins and cash flow is required for the stock to deliver long-term returns.

*Conclusion*
Eternal’s Q2 FY26 shows a company that is growing extremely fast but still figuring out how to make that growth consistently profitable. Revenue nearly tripled, showing that demand and execution are working. But the steep fall in profit shows that scaling quickly comes at a cost. Margins and cost control will decide how durable this growth really is. If the company can manage costs, improve efficiency and turn higher volume into stronger margins, there could be substantial upside ahead. For now, Eternal remains a high-potential but highly volatile.

The image added is for representation purposes only