Key Takeaways from Our Q1 FY26 Earnings Call: Strengthening Merchant Payments and Scaling with AI

We achieved a landmark Q1 FY26, delivering profitability across all key financial metrics, including EBITDA and PAT. With strong operational discipline and product leadership, we continue to push the boundaries of innovation in payments and financial services. We are confident in sustaining our growth momentum and further strengthening our profitability.

At our recent Earnings Call, Founder and CEO Vijay Shekhar Sharma & President and Group CFO Madhur Deora addressed analysts, offering key insights into our growth strategy, profitability, and the increasing role of AI across business functions.

Profitability Led by Product Excellence and Efficiency

We saw a significant improvement in our operating metrics this quarter. EBITDA margins turned positive, and contribution profit increased, reflecting our disciplined focus on financial fundamentals. Our Group CFO Madhur Deora emphasized that our current focus is on EBITDA post-ESOP, targeting 15–20% margins going forward.

“EBITDA before ESOP was last quarter’s story. This quarter, we’ve trimmed out every mention of ‘before ESOP’, going forward, it’ll only reflect actual employee costs, with no ESOP adjustments,” added Vijay Shekhar Sharma

Merchant Payments: A Full-Stack Advantage

Since inception, the company has been a pioneer in building a seamless end-to-end payments tech stack, combining hardware, software, and services with customized business solutions. “We call our merchant payments business full-stack because we own the hardware and have a direct relationship with the customer. Our ability to do everything end-to-end helps us have an edge,” mentioned our Founder.

This ownership-driven approach, where we manage both software and physical infrastructure, has enabled us to deliver superior experiences and scale more efficiently—especially in the rapidly growing merchant segment.

Improving Payment Margins with Smart Product Strategy

Our investments in hardware, UPI innovations, and EMI processing are beginning to show a strong impact on payment margins. Vijay shared: “We have taken the top spot of processing EMI volumes in the country. Our QRs are also card acquiring because of RuPay CC on UPI and that is also helping us with payment margins.”

As payment volumes grow, so does our ability to monetize effectively through intelligent infrastructure upgrades and value-added offerings. Our products are more payment-heavy, reflecting the central role of payments in our product ecosystem, he added.

Cost Efficiencies Driving Financial Resilience

Cost control remains a major pillar of our financial strategy. We continue to optimize our direct expenses and streamline operations. “Our direct expenses are down meaningfully, and we continue to uncover new opportunities to drive further efficiency,” commented Madhur.

Through smart cost management and leveraging scale, we have been able to reduce capex even as we expand our device network across markets. Initiatives such as device refurbishment, sales team productivity enhancement, and lower device costs are helping to improve margins.

AI-First Strategy Across Products and Processes

AI is no longer a future roadmap—it is a present-day reality for us. We are embedding AI across every aspect of our business, from user-facing experiences to internal decision-making. “For the past year and a half, we’ve been deeply committed to embedding AI throughout the organisation. Every customer-facing product and internal process is AI-driven, showcasing our dedication to innovation,” mentioned Madhur.

From fraud detection and risk modeling to customer support and loan underwriting, AI is powering both scale and personalization. Our commitment is clear: “We’re confident that every product and internal process at Paytm will be AI-first,” he further added.

Expanding Our Market Leadership

We continue to dominate the merchant payments landscape with the largest on-street sales fleet and presence across metros and smaller cities alike. “Merchant payments remain the core of our business, and we’re committed to driving continued innovation and growth. In financial services, merchant lending has seen strong tailwinds and we’ve got the business model right,” said our Group CFO.

To strengthen our Tier-1 leadership and deepen penetration into Tier-2 and Tier-3 cities, we are actively expanding our sales network and enhancing field operations. This ensures better customer servicing, faster merchant onboarding, and a strong on-ground presence.

Looking Ahead

Our strategy is anchored in scaling core merchant payments, enhancing product margins, and leveraging AI to improve speed, personalization, and efficiency.