Dr. Reddy's Q2FY26: Revenue Grows 9.8% YoY, Profit Up 14% Despite Challenges
Dr Reddy's Laboratories reported a 9.8% YoY revenue growth to ₹8,805.00 crore and a 14% increase in profit to ₹1,437.00 crore in Q2FY26. Global Generics revenue grew 10% YoY, with strong performance in Europe (+138% YoY) offsetting a 13% decline in North America. PSAI segment revenue increased 12% YoY. The company faced challenges with gross margin declining 492 bps YoY due to reduced Lenalidomide sales and price erosion in North America. Key developments include the acquisition of the STUGERON® portfolio and launches of novel drugs in India.
*this image is generated using AI for illustrative purposes only.
Dr Reddys Laboratories reported a robust performance in the second quarter of fiscal year 2026, with revenue growth of 9.8% year-on-year (YoY) and a 14% increase in profit attributable to equity holders, despite facing headwinds in its North American market.
Financial Highlights
For Q2FY26, Dr. Reddy's reported:
| Metric | Q2FY26 (₹ Cr) | YoY Change | QoQ Change |
|---|---|---|---|
| Revenue | 8,805.00 | +9.8% | +3% |
| Gross Margin | 54.7% | -492 bps | -223 bps |
| EBITDA | 2,351.00 | +3% | +3% |
| EBITDA Margin | 26.7% | -170 bps | No change |
| Profit Before Tax | 1,835.00 | -4% | -4% |
| Profit After Tax* | 1,437.00 | +14% | +1% |
*Attributable to equity holders of the parent company
Segment Performance
Global Generics
- Revenue: ₹7,850.00 crore, up 10% YoY and 4% QoQ
- North America revenue declined 13% YoY to ₹3,241.00 crore due to price erosion and lower Lenalidomide sales
- Europe revenue surged 138% YoY to ₹1,376.00 crore, primarily driven by the acquired Nicotine Replacement Therapy (NRT) portfolio
- India revenue grew 13% YoY to ₹1,578.00 crore
- Emerging Markets revenue increased 14% YoY to ₹1,655.00 crore
Pharmaceutical Services and Active Ingredients (PSAI)
- Revenue: ₹945.00 crore, up 12% YoY and 16% QoQ
- Growth driven by new API product launches and favorable forex
Key Developments
- Acquired the STUGERON® portfolio for $50.5 million, expanding presence in 18 markets across APAC and EMEA regions
- Launched novel gastrointestinal drugs Tegoprazan (PCAB®) and Linaclotide (Colozo®) in India
- Partnered with Unitaid, Clinton Health Access Initiative, and Wits RHI to make HIV prevention tool Lenacapavir accessible in low- and middle-income countries
- Received positive opinion from EMA's CHMP for denosumab biosimilar candidate
- Acceptance of IND application for COYA 302, a novel drug for ALS treatment
Challenges and Outlook
While the company demonstrated growth across most markets, it faced challenges in North America due to price erosion in key products, including Lenalidomide. The gross margin declined by 492 basis points YoY, primarily due to reduced Lenalidomide sales and price erosion in North America.
Dr. Reddy's remains focused on strengthening its core business, advancing key pipeline assets, driving productivity, and pursuing business development initiatives to offset challenges in the US market.
Co-Chairman & MD, G V Prasad, commented: "Growth in Q2 was driven by momentum in branded markets and steady contributions from the Nicotine Replacement Therapy (NRT) portfolio, which helped offset the decline in U.S. Lenalidomide sales. We remain focused on strengthening our core business, advancing key pipeline assets, driving productivity and pursuing business development initiatives."
The company's diversified geographical presence and focus on innovation appear to be key factors in maintaining growth momentum despite headwinds in certain markets.
Historical Stock Returns for Dr Reddys Laboratories
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -0.40% | +3.50% | -1.90% | +8.23% | -2.87% | +27.89% |
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