Why Doesn’t PhonePe’s ₹2,792 Crore FY26 Loss Tell the Full Story?
Walmart-backed fintech PhonePe reported a net loss of ₹2,792 crore for FY26, but the headline figure masks a much stronger underlying operating performance. A closer examination of the company’s financial statements shows that a significant portion of the reported loss stemmed from non-cash accounting adjustments, particularly employee stock option (ESOP) expenses and goodwill impairment, rather than day-to-day business operations.
After excluding these one-time, non-cash charges, PhonePe’s adjusted loss narrows sharply to around ₹364 crore, highlighting the company’s improving path toward profitability as it continues to dominate India’s digital payments market.
Revenue Crosses ₹7,900 Crore
PhonePe reported operating revenue of ₹7,920 crore during FY26.
The company’s revenue was primarily generated through its fast growing digital payments ecosystem, including:
- Payment processing fees from bill payments
- Digital gold transactions
- Travel bookings
- Platform fees
- Subscription income from payment devices and smart speakers
- Advertising revenue
- Financial services such as insurance, lending, stock broking, and mutual fund distribution
Together, these businesses contributed ₹7,619 crore during the financial year.
Additionally, PhonePe received ₹286 crore as incentives from the Reserve Bank of India (RBI). Interest income and other non-operating gains pushed the company’s total income to ₹8,388 crore in FY26.
ESOP Accounting Had the Biggest Impact on Profit
Employee benefits remained PhonePe’s largest expense, amounting to ₹4,386 crore during FY26.
However, only ₹1,994 crore, or about 45%, represented actual salary payments.
The remaining ₹2,390 crore was booked as Employee Stock Option Plan (ESOP) expense.
More importantly, around ₹2,197 crore, representing 91% of the ESOP cost, was a non-cash accounting charge, meaning it did not involve any actual cash outflow from the company.
Because this expense reflects accounting treatment rather than operating cash expenditure, excluding it provides a clearer picture of PhonePe’s underlying financial performance.
Other Operating Expenses Rise
Apart from employee costs, PhonePe continued to invest aggressively in expanding its business.
Key expenses included:
- Payment processing charges: ₹1,907 crore
- Advertising and sales promotion: ₹956 crore, nearly double the previous year
- Technology infrastructure
- Licensing fees
- Customer support
- Legal and administrative expenses
- Logistics and operational costs
Overall, the company’s total expenditure reached ₹10,589 crore during FY26.
These investments reflect PhonePe’s continued focus on customer acquisition, merchant expansion, and strengthening its digital payments ecosystem.
Adjusted Loss Drops to ₹364 Crore
PhonePe also reported an exceptional loss of ₹231 crore, largely due to goodwill impairment.
Like the ESOP charge, this impairment is also a non-cash accounting adjustment rather than an operational expense.
After excluding:
- ₹2,197 crore of non-cash ESOP expense, and
- ₹231 crore of goodwill impairment,
PhonePe’s adjusted FY26 loss reduces from ₹2,792 crore to approximately ₹364 crore.
The adjusted figure indicates that the company’s core business is significantly closer to breakeven than the reported financial statements initially suggest.
Closure of Pincode Could Improve Profitability
PhonePe also disclosed a ₹364 crore loss from discontinued operations, primarily related to the closure of its hyperlocal commerce platform, Pincode.
Since the business generated limited revenue and has now been shut down, exiting the loss-making vertical could improve the company’s profitability in future financial years by reducing operating losses.
Continues to Lead India’s UPI Market
Operationally, PhonePe maintained its dominant position in India’s digital payments ecosystem.
According to June NPCI data:
- UPI transactions processed: 10.48 billion
- Market share by volume: 46.15%
- Market share by value: 49.07%
- Total payment value processed: ₹14.19 lakh crore
June also marked the fourth consecutive month in which PhonePe processed more than 10 billion UPI transactions, reinforcing its leadership in India’s real-time payments market.
IPO Plans Put on Hold
Earlier this year, PhonePe filed updated draft papers with the Securities and Exchange Board of India (SEBI) for its proposed ₹12,000 crore (approximately $1.5 billion) Initial Public Offering (IPO).
However, the Walmart-backed fintech has temporarily paused its listing plans due to geopolitical uncertainty and volatility in global financial markets.
While the IPO timeline remains uncertain, the company’s improving operational performance and dominant market position are expected to remain key focus areas for investors once listing plans resume.
What’s Next?
PhonePe’s FY26 results show that while the reported loss appears substantial, much of it stems from non-cash accounting adjustments rather than weaknesses in its core business. With an adjusted loss of around ₹364 crore, continued leadership in the UPI market, and the closure of loss-making operations like Pincode, the company appears to be moving closer to sustainable profitability. Investors will now watch for further margin improvements and clarity on the timing of its highly anticipated IPO.
