---
title: "Dr. Reddy's Q2 FY2027: EPS of $0.12 beats estimate, profit below year-ago"
canonical_url: https://www.stockexpertai.com/journal/2026-10-25/dr-reddy-s-q2-fy2027-eps-of-0-12-beats-estimate-profit-below-year-ago-a61c81b946d5
last_updated: 2026-10-25T04:15:57.274Z
section: "Earnings Watch"
author: "Stock Expert AI Research"
publisher: Stock Expert AI
tickers: RDY
content_type: journal-article
---

# Dr. Reddy's Q2 FY2027: EPS of $0.12 beats estimate, profit below year-ago

_Dr. Reddy's reported EPS of $0.12 and revenue of $913.3M for the quarter ended Sept. 30, 2026, both above estimates, though net income was lower than a year earlier._

![Data cover: Dr. Reddy's Q2 FY2027: EPS of $0.12 beats estimate, profit below year-ago](/public-objects/streetnews/2026-10-25/EARNINGS_WATCH-cover-7a11dad3.jpg)
Stock Expert AI data cover: figures from Financial Modeling Prep; background is an illustrative public-domain photo, credited on the image.

Dr. Reddy's Laboratories (NYSE: RDY) reported earnings per share of $0.12 for its fiscal second quarter ended Sept. 30, 2026, against an analyst estimate of $0.09679, and revenue of $913.3M against an estimate of $894.9M. In rupee terms, revenue and profit were both lower than a year earlier, but margins recovered sharply from the previous two quarters. That recovery is the key question.

## Key facts

- **Reported Oct. 23, 2026:** EPS of $0.12 vs. an estimate of $0.09679 (a beat of $0.02, or 24.0%). Revenue of $913.3M vs. an estimate of $894.9M (a beat of $18.3M, or 2.0%). Both figures are per US-listed share, in US dollars.
- **Year-ago comparison, in rupees (Q2 FY2027 vs. Q2 FY2026):** revenue of INR 86.59B vs. INR 88.05B (down 1.7%); net income of INR 9.24B vs. INR 14.37B (down 35.7%); diluted EPS of INR 11.45 vs. INR 17.25.
- **Margins in the quarter ended Sept. 30, 2026:** gross margin of 52.1% and operating margin of 13.7%, vs. 54.7% and 19.9% in the quarter ended Sept. 30, 2025.
- **Stock:** traded at $13.21 as of Oct. 23, 2026, down 0.15% on the latest quote. The 52-week range is $11.36 to $15.67.
- **Next report:** expected Jan. 22, 2027, with an EPS estimate of $0.15 and a revenue estimate of $905.4M.

| Metric | Latest (Q2 FY2027) | Year-ago or estimate |
|---|---|---|
| EPS (USD per share) | $0.12 | Estimate: $0.09679 |
| Revenue (USD) | $913.3M | Estimate: $894.9M |
| Revenue (INR) | INR 86.59B | Year-ago: INR 88.05B |
| Net income (INR) | INR 9.24B | Year-ago: INR 14.37B |
| Diluted EPS (INR) | INR 11.45 | Year-ago: INR 17.25 |
| Operating margin | 13.7% | Year-ago: 19.9% |

The dollar and rupee figures differ because the company reports its financial statements in Indian rupees, while the US-listed share figures are in dollars. We keep the two separate and do not convert between them.

## What happened

The quarter has two sides. Compared with the same quarter last year, Dr. Reddy's sold slightly less in rupee terms and earned noticeably less. Compared with the quarter just before it, the business improved a great deal. It also did better than Wall Street expected on both earnings and sales.

**The five-quarter trend shows a dip and a recovery.** Here is the sequence, oldest to newest:

| Quarter ended | Revenue (INR) | Gross margin | Operating margin | Net income (INR) |
|---|---|---|---|---|
| Sept. 30, 2025 | 88.05B | 54.7% | 19.9% | 14.37B |
| Dec. 31, 2025 | 87.27B | 53.6% | 16.3% | 12.10B |
| March 31, 2026 | 76.33B | 44.8% | 0.6% | 2.24B |
| June 30, 2026 | 81.18B | 46.5% | 3.7% | 4.46B |
| Sept. 30, 2026 | 86.59B | 52.1% | 13.7% | 9.24B |

Gross margin is the share of sales left after the direct cost of making the drugs. Operating margin is the share left after running costs such as selling and research. Both fell sharply in the quarter ended March 31, 2026, and have now climbed back most of the way, though neither is yet at the level of a year ago.

**Why margins improved, according to management.** On the Oct. 23 earnings call, Executive Officer Erez Israeli called the shift in business mix the main driver. Higher-margin businesses grew faster than the company average. These were India, emerging markets and the Nicotine Replacement Therapy (NRT) business. He also said the US business was more profitable because of the contribution of new products. CFO Mannam Venkatanarasimham likewise cited new products and the nivolumab launch; Mr. Israeli described that as a launch in India, marking the company's entry into biosimilar immuno-oncology there. Expenses were essentially flat for the quarter, so sales growth in those areas flowed through to profit. Research and development spending was lower year over year, which management attributed to less spending on generics development.

**What pulled the other way.** Management said sales of lenalidomide, a cancer generic, declined from a year earlier, which weighed on margins. Sales of active pharmaceutical ingredients (the raw drug materials sold to other manufacturers) also fell on lower volumes, as customers preferred finished products. Finance income was lower, which management tied to currency moves in the Russian ruble. Last quarter's results also carried provisions related to semaglutide ingredients, which management described as a drag on that period.

**Cash flow was positive but modest.** In the quarter ended Sept. 30, 2026, operating cash flow was INR 4.69B and free cash flow (cash left after capital spending) was INR 2.31B. The prior quarter's free cash flow was negative at INR -4.63B. A year earlier, free cash flow was INR 5.44B, so cash generation is still below that level. The company paid dividends of INR 6.68B in the latest quarter and made no buybacks.

**Balance sheet.** As of Sept. 30, 2026, cash and short-term investments were INR 76.58B against total debt of INR 72.60B, and shareholders' equity was INR 387.87B. The debt-to-equity ratio is 0.19, which is low.

## Why it matters for investors

**The beat is real but modest.** An EPS beat of $0.02 sounds small, but the estimate was low, so it works out to 24.0%. The revenue beat of 2.0% is more ordinary. Neither erases the fact that net income in rupees was lower than a year earlier.

**The story is about margin repair.** Investors in generic drugmakers mostly care about whether profit per dollar of sales is stable. This quarter suggests the sharp drop in the quarters ended March and June 2026 may have been a low point. Management's outlook, as described on the call, is that gross margin should stay within a range around the current level and that EBITDA margin (earnings before interest, taxes, depreciation and amortization, a rough measure of operating profit) should be above 20%. Mr. Israeli said that figure would rise further if the company's semaglutide launch goes well. These are management's targets, not our forecasts.

**Semaglutide is the biggest swing factor.** Semaglutide is the active ingredient in popular diabetes and weight-loss drugs. Dr. Reddy's said its generic version is now approved in 10 countries and that it is targeting 89 markets. Management said a production scale-up problem was resolved and that the ingredient has shipped. It said the issue was unrelated to the regulatory process. Validation of the finished drug product was still pending, which the company said takes a few weeks. Shipments to Canada, Latin America, Africa and partners were targeted for November, subject to that validation. A Brazil launch was described as likely in the fiscal fourth quarter. Management also kept its volume expectation for this year unchanged. Analyst Neha Manpuria of Bank of America asked about competition in Canada. Mr. Israeli said he was very confident, citing existing orders.

**Abatacept is the next product catalyst.** Abatacept is a biologic for autoimmune disease. The company expects a US regulatory decision in late December 2026. Asked by Citi's Vivek Agarwal about approval odds, Mr. Israeli acknowledged there is a chance of a rejection, known as a complete response letter. If approved, he said, the company would initially be the only competitor to the original maker on the intravenous version and could take a meaningful share. He also noted that getting onto insurer formularies takes about six months.

**Valuation and peers.** On trailing 12-month figures, Dr. Reddy's trades at a price-to-earnings (P/E) ratio of 36.59, a price-to-sales ratio of 3.11 and an enterprise value-to-EBITDA ratio of 18.20. Its price-to-free-cash-flow ratio is 88.73, and its net margin is 8.5%. The dividend yield is 0.7%. Compared with US-listed peers:

| Company | Market cap | P/E | Net margin |
|---|---|---|---|
| Dr. Reddy's (RDY) | $11.00B | 36.59 | 8.5% |
| Amneal Pharmaceuticals (AMRX) | $6.51B | 40.96 | 5.0% |
| ANI Pharmaceuticals (ANIP) | $1.67B | 15.03 | 10.8% |
| Amphastar Pharmaceuticals (AMPH) | $1.07B | 14.45 | 10.8% |
| Bausch Health (BHC) | $2.41B | -2.18 | -10.1% |

Dr. Reddy's is priced richer than ANI and Amphastar, which also earn higher net margins. It is priced lower than Amneal, which earns a lower net margin. Bausch has negative earnings, so its P/E is not meaningful for comparison. Trailing figures also still include the weak quarters ended March and June 2026, which inflates the P/E.

**Analysts.** Of 12 ratings, 6 are Buy, 4 are Hold and 2 are Sell, for a consensus of "Buy." Citigroup upgraded the stock from Sell to Buy on Sept. 29, 2026. The consensus price target is $14.80, with the high, low, average and median all at that same figure, so it reflects very little spread of opinion. That compares with the Oct. 23 quote of $13.21. FMP's discounted cash flow model, a statistical estimate of what future cash flows are worth today, gives $13.63 per share as of Oct. 24, 2026. These are third-party estimates, not advice from us.

**Our MoonshotScore.** Stock Expert AI's MoonshotScore V2 for RDY is 83.8, rated Exceptional. Among the pillars, each measured against the sector, growth scores 89 and quality 82, which are the strongest areas. Momentum and safety each score 73. Valuation is the weakest at 55, consistent with the premium multiples above. Financial strength scores are mixed to solid: a Piotroski score of 5 on a 0-9 scale and an Altman Z-score of 5.30.

## What could go wrong

- **Input costs.** The CFO, Mannam Venkatanarasimham, said higher prices for key starting materials, solvents and freight, which management tied to the Middle East crisis and supply disruptions, cost the company about 100 basis points of EBITDA margin. He expects that pressure to continue in the next two quarters.
- **Semaglutide execution.** Validation was still pending at the time of the call, Canada is competitive, and some approvals were delayed by the scale-up issue.
- **Abatacept.** A rejection or a slow insurer rollout would delay the contribution management is counting on.
- **Existing products.** Lenalidomide sales are declining. Management said sales of bosutinib will fall once its period of market exclusivity ends, though Mr. Israeli said he does not think it will have a significant impact and that the company can absorb it. Generics prices in Europe continue to erode, and management said European growth will not be significant this year.
- **Uncertainty.** Mr. Israeli said he cannot predict geopolitical developments and is careful about promising timing on complex generics after past approval delays.
- **Valuation.** The multiples above leave less room for disappointment than a cheaper stock would.

## What to watch next

- **Semaglutide shipments in November** and whether validation of the finished product clears on schedule.
- **The US decision on abatacept** in late December 2026.
- **Third-quarter results,** expected Jan. 22, 2027. Analysts estimate EPS of $0.15 and revenue of $905.4M, both in US dollars per US-listed share.
- **Margin direction.** Watch whether gross margin holds near this quarter's 52.1% as input costs rise.
- **Longer-range estimates.** For the period ending June 30, 2027, one analyst estimates revenue of INR 97.91B and EPS of INR 13.37. For the period ending Sept. 30, 2027, the same analyst estimates revenue of INR 101.00B and EPS of INR 14.76. With only one analyst, treat these as a single opinion.
- **Cash flow.** Watch whether free cash flow returns to the levels of earlier quarters, since the current price-to-free-cash-flow ratio is high.

## Frequently asked questions

## Q: Did Dr. Reddy's beat earnings estimates in the quarter ended Sept. 30, 2026?

Yes. It reported EPS of $0.12 against an analyst estimate of $0.09679, and revenue of $913.3M against an estimate of $894.9M. Both were reported on Oct. 23, 2026, in US dollars per US-listed share.

## Q: Is Dr. Reddy's profit higher or lower than a year ago?

Lower. In rupees, net income for the quarter ended Sept. 30, 2026 was INR 9.24B, down 35.7% from INR 14.37B a year earlier. Revenue was INR 86.59B, down 1.7% from INR 88.05B. Profit has, however, recovered strongly from the two prior quarters.

## Q: What do analysts expect for the RDY stock price?

FMP lists a consensus price target of $14.80, with the high, low, average and median all at that figure. The stock traded at $13.21 as of Oct. 23, 2026. Of 12 ratings, 6 are Buy, 4 are Hold and 2 are Sell. Targets and ratings are analysts' opinions and can change, and this article is not investment advice.


*This is educational content, not investment advice. Past performance does not guarantee future results.*

## Related Tickers
- [RDY](https://www.stockexpertai.com/stock/rdy)

## Sources
- [Stock Expert AI RDY page: quote, financials and MoonshotScore](https://www.stockexpertai.com/stock/rdy)
- [seekingalpha.com: Dr. Reddy's Laboratories Limited (RDY) Q2 2027 Earnings Call Transcript](https://seekingalpha.com/article/4957012-dr-reddys-laboratories-limited-rdy-q2-2027-earnings-call-transcript)
- [marketbeat.com: Dr. Reddy's Laboratories Q2 Earnings Call Highlights](https://www.marketbeat.com/instant-alerts/transcript-dr-reddys-laboratories-q2-earnings-call-highlights-2026-10-23/)

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_AI-generated under human editorial supervision. Educational research, not financial advice._