L&T Q3 Earnings Preview: Robust Profit Growth Expected Amid Key Business Focus Areas
India's infrastructure and engineering giant Larsen & Toubro (L&T) is set to announce its October-December quarter results on Wednesday, with market participants eagerly awaiting signals about the health of private capital expenditure in the country. While the company's financial performance is projected to show substantial year-on-year growth, the sustainability of order inflows—particularly from the Middle East and domestic private sector—remains under intense scrutiny.
Financial Projections: Strong Double-Digit Growth
Analysts from four leading brokerages—HDFC Securities, JM Financial, Motilal Oswal, and Nuvama—have provided consensus estimates indicating robust financial performance for L&T in the third quarter of fiscal year 2026. Consolidated revenue is expected to grow by approximately 16% year-on-year, reaching an estimated ₹74,875 crore. More significantly, profit is projected to surge by nearly one-third to around ₹4,346 crore, while earnings before interest, tax, depreciation, and amortization (EBITDA) are pegged to increase by over 20% to ₹7,659 crore.
The Crucial Question: Private Capex Recovery or Temporary Spike?
Beyond these headline numbers, economists and investors will be examining a more specific aspect of L&T's performance: domestic private sector capital expenditure. In October, the company reported seeing the first signs of private sector capex returning to India, with its infrastructure projects segment securing domestic orders worth nearly ₹27,400 crore during the July-September quarter—a remarkable 50% increase compared to the same period last year.
The critical question facing market observers is whether this sharp rise in domestic orders represents a genuine, sustained recovery in private investment or merely a temporary uptick. R. Shankar Raman, L&T's whole-time director and chief financial officer, acknowledged during a post-earnings interaction that while there was an uptick in order receipts during the second quarter, it remains to be seen whether this will evolve into a lasting trend.
Middle East Concerns: Potential Headwinds in Key Market
While domestic orders show promising signs, L&T's substantial international business—particularly in the Middle East—faces potential challenges. The company's order book stood at a record ₹6.67 trillion at the end of September, with a quantified order pipeline of ₹10.4 trillion providing clear visibility into short-term revenue growth. However, recent developments in Kuwait and Saudi Arabia have raised concerns.
Media reports indicate that Kuwait is considering cancelling tenders worth $8.7 billion in the oil and gas sector due to high budget estimates. L&T was the lowest bidder for $4.5 billion of these projects. Although these were not yet part of the company's order book, they were included in the quantified pipeline. JM Financial analysts noted on January 13 that while some cancelled orders might be retendered after reassessment, potential delays could lead them to reduce core order inflow estimates for L&T by 5-6% for fiscal years 2026 through 2028.
Similarly, analysts from InCred Equities have expressed early concerns about order inflows from Saudi Arabia, where construction industry growth—which expanded at a compounded annual rate of 24% during FY22-FY25—could moderate to single digits post-FY27. This development is particularly significant for L&T, as Saudi Arabia accounts for approximately three-quarters of the company's international infrastructure orders.
Strategic Diversification: European Expansion and Defense Initiatives
Amid these challenges, L&T is pursuing strategic diversification efforts. In late October, the company secured its largest contract in the Netherlands, marking its formal entry into the European market. This project involves developing high-voltage direct current converter stations in collaboration with Hitachi Energy, with L&T handling engineering, procurement, and construction aspects. Investors will be keen to understand whether this represents a one-off opportunity or the beginning of sustained expansion into new geographical markets.
Additionally, L&T is expanding its technological capabilities through defense sector initiatives. The company has formed a strategic partnership with Bharat Electronics Ltd to bid for the ₹15,000-crore Advanced Multirole Combat Aircraft program, challenging Hindustan Aeronautics Ltd's monopoly. Furthermore, L&T has partnered with America's General Atomics Aeronautical Systems to manufacture Medium Altitude Long Endurance remotely-piloted aircraft systems in India for the Indian Armed Forces.
Market Implications and Broader Economic Signals
L&T's quarterly results extend beyond corporate performance metrics, serving as a barometer for India's infrastructure investment climate and private sector confidence. The company's ability to sustain order inflow momentum—particularly from both domestic private sources and international markets—will provide crucial insights into broader economic trends.
As investors, economists, and market analysts await Wednesday's announcement, the focus remains firmly on whether L&T can navigate potential Middle East headwinds while capitalizing on emerging opportunities in Europe and defense manufacturing. The company's management commentary on these strategic initiatives, along with updated guidance on order pipeline sustainability, will likely influence market sentiment toward India's infrastructure sector in the coming quarters.
