Allied Digital Services (NSE: ADSL) reports Rs 807cr revenue in FY25, but Q4 loss raises red flags

Why Did Allied Digital Report a Q4 FY25 Loss Despite Record Annual Revenues?

Allied Digital Services Limited (NSE: ADSL), a Mumbai-headquartered global IT services firm, reported its highest-ever annual revenue of ₹807 crore for the financial year ended March 31, 2025, marking a 17% year-over-year increase. However, the fourth quarter saw a surprising net loss of ₹7 crore, reversing the company’s strong performance in the previous quarters and unsettling investors. In Q4 FY24, Allied Digital had posted a profit of ₹14 crore, and the company had closed Q3 FY25 with a net profit of ₹18 crore. The sharp swing into negative territory was primarily attributed to one-time deferred tax adjustments linked to a statutory audit transition.

During FY25, the company appointed Singhi & Co. as its new statutory auditors, replacing Shah & Taparia. As is typical with first-year engagements, the new auditors conducted a rigorous, multi-year review of the company’s financials. This deeper audit revealed the need for adjustments, especially in the treatment of deferred tax assets and liabilities. The audit-led corrections ultimately impacted Q4 earnings, despite strong operational growth and consistent revenue flow across global markets. Company leadership emphasized that these were non-cash adjustments and did not affect Allied Digital’s cash position or long-term financial health.

What Triggered the Audit Disruptions in FY25?

The audit disruptions in FY25 were tied directly to the process of extracting and presenting financial figures in compliance with SEBI’s Regulation 33. During this process, several tax-related entries were incorrectly populated due to human error, resulting in an overstatement of Q4 profit in the originally filed financials. These errors were later corrected and disclosed on June 5, 2025, with full details of adjustments to the deferred tax charge, profit after tax, comprehensive income, and earnings per share. On a standalone basis, the Q4 PAT was revised from a profit of ₹31.83 crore to a loss of ₹4.31 crore. Similarly, full-year PAT for FY25 was revised from ₹43.37 crore to ₹10.73 crore. Basic EPS was adjusted downward to ₹1.92 for the year, compared to an earlier stated ₹7.77.

Despite the severity of these restatements, the company was quick to clarify that the revised figures were a result of procedural oversight rather than any underlying financial mismanagement. The company accepted all findings from the new auditor and has implemented recommended governance enhancements. The leadership reaffirmed Allied Digital’s commitment to corporate transparency, stating that FY25 should be seen as a transitional period as the company builds toward a more robust financial reporting framework.

FY25 Performance Overview: Revenue Growth Outpaces Profitability

While the net profit figure was impacted, the topline and operational performance tell a different story. Consolidated revenue rose 17% year-on-year to ₹807 crore in FY25, up from ₹687 crore in FY24. EBITDA also increased 16% to ₹99 crore from ₹85 crore. EBITDA margin held steady at 12%, reflecting cost discipline amid global macroeconomic headwinds. Profit before tax declined slightly to ₹61 crore from ₹63 crore in FY24, mainly due to the audit-linked adjustments.

India remained the strongest geographical contributor with ₹302 crore in revenue, a 37% increase year-over-year, powered by government and enterprise contracts in the public infrastructure, digital services, and smart city verticals. Revenue from the Rest of the World, including the U.S., EMEA, and APAC regions, reached ₹505 crore, representing an 8% rise from the previous year.

Segment-wise, the company’s Services division contributed ₹618 crore, up 9% from the prior year. The Solutions business, which includes digital transformation, systems integration, and AI-led infrastructure deployment, surged 58% to ₹189 crore. This performance signals a shift toward higher-margin project-based work and reflects growing traction in the enterprise transformation and infrastructure modernization space.

What Were the Key Wins and Strategic Highlights in Q4?

Despite a turbulent earnings print, Allied Digital closed FY25 with robust operational momentum. In Q4 alone, the company booked over ₹133 crore in new and renewed multi-year contracts. These included a service desk contract for a Texas-based omni-channel furniture leasing firm, spanning the U.S., Mexico, and Puerto Rico, and a U.S. infrastructure support engagement from a British oil and gas major. In the healthcare vertical, the company secured a digital workplace services mandate from a European therapeutics company focused on CRISPR-based gene editing. On the domestic front, Allied Digital won a significant order from MSETCL, Maharashtra’s electricity transmission body, to deploy SD-WAN infrastructure statewide. The company also entered into a facility management contract with a new multispecialty hospital in Gujarat, further diversifying its service portfolio.

These strategic wins span high-growth sectors including healthcare, energy, public infrastructure, and enterprise IT. The company’s renewed focus on embedding next-generation technologies—such as Generative AI, Agentic AI, IoT, cybersecurity, and machine learning—has helped it secure complex transformation projects with global clients.

Institutional Sentiment: Are Investors Losing Patience or Seeing a Long-Term Play?

Institutional sentiment toward Allied Digital appears mixed in the short term. The market reacted cautiously to the audit restatements and Q4 PAT miss, with the stock trading range-bound in recent sessions. However, long-term investors are not discounting the company’s fundamentals, especially its net cash position, increasing order book, and diversified customer base. Allied Digital ended FY25 with ₹188 crore in cash and cash equivalents, compared to ₹72 crore in gross debt, providing a strong liquidity buffer. Net worth rose to ₹646 crore, up from ₹619 crore in FY24, reinforcing balance sheet strength even as accounting volatility affected the bottom line.

Some institutional brokers have adopted a “wait and watch” approach, citing a need for cleaner earnings reports and stable tax recognition policies. However, others see Allied Digital’s transition to global compliance standards as a long-term positive, especially given the global pivot toward AI-led managed services and digital infrastructure outsourcing.

What Does the Road Ahead Look Like for Allied Digital?

The company’s outlook for FY26 is built on its ongoing transformation strategy, which includes governance reform, upskilling, and integration of AI technologies across service offerings. Chairman and Managing Director Nitin Shah emphasized that Allied Digital’s 360-degree transformation effort is designed to correct legacy inefficiencies and lay the foundation for scalable, transparent, and high-margin growth. India is expected to remain a core growth driver, especially as Smart City upgrades and e-governance demand accelerate in states like Maharashtra and Gujarat. The international business, particularly in the U.S. and EMEA markets, is also seeing renewed interest from enterprise clients, particularly in remote infrastructure management and cybersecurity.

From a capital allocation perspective, the company has maintained dividend continuity, with a recommended final payout of ₹1.5 per share, or 30% of the face value, subject to shareholder approval at the upcoming AGM. This reflects confidence in the underlying cash generation ability despite the profit compression.

Analyst Take: Is ADSL Stock a Value Buy or a Value Trap?

Allied Digital offers an interesting paradox for investors. On one hand, the company has demonstrated consistent top-line expansion, strong order wins, and an expanding solutions portfolio aligned with global IT trends. On the other, audit-related restatements and quarterly volatility in reported numbers have undermined investor confidence. For contrarian investors and institutions willing to take a longer view, Allied Digital presents an opportunity to buy into a digital transformation leader with a solid balance sheet and scalable business model.

The upcoming quarters will be critical. If FY26 can show clean earnings, consistent execution, and further growth in AI and Smart City verticals, the stock could re-rate materially. Conversely, any additional volatility in reporting or governance could extend the current valuation discount and keep institutional flows at bay.

FY26 Outlook: Stability, Scaling, and Strategic Execution

Allied Digital enters FY26 with a high order backlog, a healthy pipeline, and sectoral tailwinds in its favor. With ₹807 crore in revenue as a new baseline, and deep investments in AI-enabled services, the company appears well-positioned to capitalize on rising global IT spend and government digital initiatives. The strategic emphasis on enterprise-grade AI, cloud integration, and cybersecurity will likely continue driving differentiated deals in India and abroad.

Internally, Allied Digital’s adoption of best practices in financial governance and audit transparency is expected to enhance credibility and reduce headline risks. With a sharpened execution focus, deep domain expertise, and strong cash reserves, the company may well transform FY26 into a year of reset, recovery, and renewed investor confidence.