Q3 earnings: Dixon hit by mobile slowdown, Syrma turns cash flow positive

NEW DELHI: December-quarter (Q3FY26) earnings from Dixon Technologies and Syrma SGS point to growing differences within India’s electronics manufacturing services (EMS) sector: firms still dependent on mobile-device manufacturing are seeing pressure, while those with greater exposure to industrial and export-led segments are proving more resilient.

The performances of the two companies highlight the growing importance of diversification for EMS firms as cost pressures and a global slowdown in mobile devices weigh on the sector.

On Thursday, Dixon Technologies reported ₹10,672 crore in operating revenue for Q3FY26, down 28% sequentially. Net profit fell 57% sequentially to ₹321 crore. The company attributed most of the impact to a slowdown in manufacturing of mobile phones, smartwatches, audio products, laptops and telecom hardware, where revenue dropped 27% sequentially to ₹9,750 crore.

Syrma SGS, on the other hand, reported a 10% sequential rise in its December operating revenue to ₹1,264 crore. Net profit crossed ₹100 crore for the first, growing 66% sequentially to ₹110 crore, driven by exports in high-margin segments such as automotive electronics, medical electronics and defence technologies, managing director Jasbir Singh Gujral said in a post-earnings call with analysts on Friday.

Syrma SGS also turned operationally cash flow-positive in the December quarter, and expects its net operating cash flow to increase further by 31 March 2026, Gujral told Mint after the earnings call.

The move comes as both Syrma and Dixon invest actively in building new facilities to manufacture printed circuit boards (PCBs) and camera and display modules respectively, which both the companies expect will be ready for production through FY27.

Investors responded positively to Syrma SGS in the bourses on Friday. The stock was up 5.6% at the time of writing. The reaction to Dixon’s earnings, however, was muted, with its shares up 0.35% from previous close. The 30-share BSE Sensex was down 0.48%.

Dixon Technologies also missed street estimates, while Syrma outperformed. A consensus of 20 analysts polled by Bloomberg had expected Dixon to report ₹11,590 crore in consolidated revenue, while 16 analysts expected Syrma to report ₹1,185 crore in revenue for the December quarter.

“The electronics market faces near-term headwinds from commodity inflation and memory price increase. We continue to focus on building scale, bringing operational efficiency, strengthening backward integration, and diversifying the core electronics business to navigate the environment,” said Atul Lall, vice-chairman and managing director of Dixon Technologies, during a post-earnings call with analysts on Thursday.

The slowdown, Lall said, can be attributed to the rise in prices of memory chips around the world as a result of most memory manufacturers focusing on artificial intelligence (AI) chips.

“Industry reports indicate this sharp rise, and expect further increases through 2026. For smartphones and PCs, memory chips have emerged as one of the most important line items in the bill of materials, especially for lower-priced devices,” he added.

In contrast, Syrma SGS wrapped up 2025 on a bullish note.

“We had previously guided for an operating margin of 8%, and we revised the same to 9% as exports continue to help us expand our margin as strategic segments such as automotive electronics continue to do very well,” Syrma’s Gujral said. “We’re confident of maintaining this tempo as we’re seeing secular growth across all verticals, and this diversification is helping us improve our margins and cash flow, which we also expect to do in the coming year as well.”

Analysts said that while long-term growth projections for the EMS industry remain intact, short-term concerns could hurt momentarily.

“Aspects such as memory chip price increase and US tariff uncertainties, coupled with a slowdown in the global mobile phone market, will continue to affect companies that have a larger exposure to these areas,” said Harshit Kapadia, vice-president at brokerage firm, Elara Capital.

“For companies that have a wider exposure to various industrial electronics, as well as resilient consumer sectors such as laptops where Syrma is showing strength, business resilience will be stronger. But, until then, there could be near-term concerns due to sectoral exposure, especially until the electronics components push for each of these companies materialize,” he added.