Synopsis: Ather Energy has made notable progress on growth and margins, while reducing losses and expanding its market presence. However, profitability remains the next major milestone. As the company enters its next phase of growth, how close is it to achieving that goal?
An electric two-wheeler company that was earlier seen mainly as a premium scooter brand is now trying to prove something much bigger. After a sharp rise in volumes, market share, gross margins and software-led revenue contribution, the key question for investors is no longer whether demand exists. The bigger question is whether this scale can convert into sustainable profitability.
Ather Energy ended FY26 with a much stronger operating base than the one it had a year earlier. The company sold 2.63 lakh units during the year, up 69 percent year-on-year, while total income rose 66 percent to Rs. 3,823 crore. In Q4 FY26 alone, Ather sold 83,000 units, up 76 percent year-on-year and 23 percent quarter-on-quarter, while total income stood at Rs. 1,214 crore.
The Profitability Gap Has Shrunk Sharply
The biggest change in Ather’s financial story is visible in EBITDA. In FY25, the company was operating with EBITDA losses of around 23 percent. By Q4 FY26, that loss had reduced to just 2.5 percent. For the full year FY26, EBITDA margin stood at negative 6.7 percent, which was an improvement of 1,630 basis points year-on-year.
The quarterly trend shows why the profitability debate has become more serious. In Q2 FY26, Ather reported total income of Rs. 940 crore, adjusted gross margin on absolute basis was Rs. 210 crore and on percentage basis was 22 percent. EBITDA losses fell below 10 percent for the first time, despite a one-time hit from rare earth supply issues and subsidy filing disruption.
In Q3 FY26, total income was just below Rs. 1,000 crore, adjusted gross margin rose to Rs. 251 crore and EBITDA margin improved to roughly negative 3 percent. By Q4 FY26, EBITDA margin was down to negative 2.5 percent.
This means Ather is no longer far away from EBITDA breakeven on a percentage basis. The company is not yet profitable, and management has not given a specific date for EBITDA positivity. However, in Q2FY26 earnings call it had indicated that the current portfolio itself should be strong enough to take the business to a sustainable place, with EL seen more as a future growth platform than a product required for survival.
Rizta Changed The Scale Of The Business
One of the biggest reasons behind this improvement is Rizta. Management said FY26 was a breakthrough year because Rizta helped establish that Ather’s rightful market share and volumes could be much higher.
By Q4 FY26, Rizta had grown to almost three-quarters of the company’s sales. This matters because Ather was historically viewed as a premium, technology-focused EV scooter brand. Rizta helped it enter a broader family scooter segment and unlock a larger addressable market.
That product success also gave the company confidence to expand its retail network more aggressively. Ather doubled its experience centre count from 351 at the end of FY25 to 700 by March 2026. Service centres also more than doubled to 548 by March 2026.
The expansion was targeted. Ather focused heavily on Middle India, which includes Chhattisgarh, Gujarat, Madhya Pradesh, Maharashtra and Odisha. Middle India market share increased from around 4 percent at the start of FY25 to 17.3 percent by Q4 FY26. Rest of India market share improved from just under 4 percent to about 12 percent, while South India increased from 13 percent to about 23 percent. This showed that Ather’s growth was no longer only a South India story.
Margins Are Improving, But Not Just Because Of Volumes
Ather’s adjusted gross margin improved from 19 percent to 24 percent during FY26. Without incentives, the improvement was even sharper, rising from 12 percent to 21 percent. Management attributed this to a consistent reduction in cost of goods sold, which reduced by around 9 percent through the year, along with product-led design changes, engineering work and technology choices such as LFP batteries.
But the margin story is not only about hardware cost reduction. Ather’s software and non-vehicle revenue are becoming important margin levers. In Q3 FY26, non-vehicle revenue reached 14 percent of revenue, despite service revenue still being at an early stage. Management said the largest contribution to non-vehicle revenue comes from software in the form of ProPacks, and roughly half of non-vehicle revenue comes from ProPacks.
In Q2 FY26, AtherStack had an 89 percent attach rate. In Q4 FY26, the ProPack attach rate reached 93 percent, even as volumes had scaled sharply. This matters because software revenue generally carries superior margins. The software suite includes safety, navigation, convenience and ride-assist features such as Find My Scooter, theft and tow alerts, Google Maps, AutoHold, traction control and Magic Twist.
Operating Leverage Is Doing The Heavy Lifting
Ather’s management has repeatedly highlighted operating leverage as one of the main drivers of EBITDA improvement. Management said around three-fourths of the cost below gross margin is fundamentally fixed in nature, which explains why improvements in gross margin and volume translated strongly into EBITDA.
This is why the current portfolio is important. If Ather can continue to scale Rizta and the 450 portfolio while keeping fixed cost growth controlled, EBITDA breakeven becomes more achievable. The company does not need a dramatic change in the business model. It needs volume growth, steady gross margins, higher software and accessory contribution, and controlled operating expenses.
EL And Factory 3.0 Could Decide The Next Phase
The next big growth trigger is the EL platform. Management said EL will enter a price segment where Ather currently does not operate, giving the company a large upside with limited cannibalisation risk. EL is expected to be commercialised before the end of the year. During Q2, management said EL has been designed for scalability and a better cost structure compared to the current 450 and Rizta platforms.
Factory 3.0 in Chhatrapati Sambhajinagar is the second big piece of the profitability story. The plant is planned for a total capacity of 10 lakh units, with 5 lakh units in Phase 1 and another 5 lakh units in Phase 2. Phase 1 is expected to commence in Q3 FY27.
The plant will have higher vertical integration than Ather’s current operations, including battery pack assembly, transmission assembly, painting, electronics assembly and CED coating. Management also expects the plant to help logistics costs over time because Middle India and North India are expected to remain important markets, especially with EL.
However, EL and Factory 3.0 are not risk-free. New platform launches need execution and consumer acceptance. Factory ramp-up also brings depreciation, operational complexity and working capital needs. So while they can improve volumes and margins, they also raise the execution bar.
The Risks Are Still Real
The path to profitability is not a straight line. Ather faced supply chain challenges in FY26, including rare earth magnet prices, memory cost spikes and lithium-ion battery price inflation.
In Q2, the rare earth supply crunch caused a one-time disruption because the company had to change its supply chain and did not file subsidy claims for the majority of vehicles in that quarter. Management estimated that roughly Rs. 20 crore of subsidy was not filed in Q2, while the overall rare earth impact on EBITDA was around Rs. 20 crore to Rs. 25 crore.
In Q4, management warned that commodity inflation could create short-term margin pressure. It said price hikes, accessories, software and sourcing actions can help, but not fully. This means even if the company is close to EBITDA breakeven, external cost pressures can delay the final move into profitability.
Ather Energy is much closer to profitability than it was a year ago. The company has already proven demand through Rizta, expanded its network to 700 experience centres, improved Q4 market share to 18.6 percent, lifted adjusted gross margin to 25 percent in Q4 and reduced EBITDA losses to just 2.5 percent. The business is no longer fighting only for survival or product acceptance. It is now fighting for the last few percentage points needed to cross into profitability.
So, how close is Ather to becoming profitable? On EBITDA, it appears within touching distance. On PAT, the journey may take longer because of depreciation, interest, capacity expansion and continued investment. But compared to where the company stood earlier, the direction is clear: Ather has moved from being a high-loss EV startup story to a scaling EV business where profitability is no longer a distant dream, but the next major milestone to prove.
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