Small-Cap Earnings Surge Outpaces Mid and Large Caps in Q3 FY26
Indian companies sustained strong earnings momentum in the third quarter of FY26, with small-cap firms emerging as the clear outperformers, according to a report released by Equirus Securities on Monday.Small-cap companies reported a robust 22% year-on-year rise in earnings, significantly ahead of mid-caps at 15% and large caps at 14%. The data points to a broad-based recovery in corporate profitability across market capitalisation segments, signalling that earnings growth is no longer confined to large companies.
Revenue, EBITDA and PAT Beat Expectations
Across companies under coverage, revenue expanded 10% year-on-year in Q3 FY26. Operating performance also strengthened, with EBITDA rising 14% and profit after tax climbing 15%, both exceeding market expectations.The improving earnings trajectory was further reflected in upgrades, with nearly 36% of companies witnessing upward revisions in earnings per share. The upgrades were led by sectors such as auto, banking and NBFCs, consumer durables, FMCG and IT.
On the other hand, downgrades were largely concentrated in building materials, cement, infrastructure, chemicals, real estate and retail, indicating selective pressure within certain segments of the economy.
Earnings Visibility Improves Across Segments
The report noted that the ongoing trend reflects improving business fundamentals and resilient demand across industries. The spread of earnings growth across small, mid and large caps indicates strengthening forward earnings visibility and rising investor confidence.Ajay Garg, Managing Director of the Equirus Group, highlighted that an increasing number of firms from Tier 2 and Tier 3 towns are tapping capital markets as founders seek to scale their businesses, underlining the expanding breadth of corporate participation.
Key Monitorables for Q4 FY26
Looking ahead to Q4 FY26, Maulik Patel, Director and Head of Research at Equirus Securities, identified several factors to watch closely.These include the pace of NHAI order awards for construction companies, the summer demand cycle for consumer durables, developments in the US market and RBI rate decisions that could influence net interest margin trajectories in the BFSI space.
In cement, price hikes and demand momentum are offering near-term support. However, new capacity additions may exert pressure on utilisation rates. Meanwhile, logistics continues to benefit from recovery in EXIM activity and improved connectivity through the Dedicated Freight Corridor.
Sectoral Highlights: Financials, Consumption and Technology
During the third quarter, financial services companies maintained steady asset quality trends while sustaining loan growth momentum. Consumption-linked sectors benefited from improving discretionary spending patterns.Electronic Manufacturing Services and IT companies reported sustained deal momentum and strong execution, reinforcing confidence in their earnings outlook.
With earnings upgrades outpacing downgrades and small caps leading the charge, Q3 FY26 underscores a widening and strengthening corporate profit cycle across India Inc.
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