How PhonePe built multiple revenue engines to move closer to profitability ahead of its IPO

India’s largest UPI platform PhonePe has grown from a high burn startup into one of the country’s most influential fintech platforms.

The company has built a robust revenue engine, improved its loss profile significantly, and achieved key profitability milestones on an adjusted basis as it prepares to launch an IPO.

Rapid revenue growth at scale

According to the updated DRHP, PhonePe’s revenue from operations has grown sharply over the last few years. The company reported revenue of Rs 7,114.9 crore in FY25, up from Rs 2,914.3 crore in FY23. This represents a compound annual growth rate of 56.25% during the two year period.

The growth trajectory is visible across each financial year. Revenue increased from Rs 2,914.3 crore in FY23 to Rs 5,064.1 crore in FY24 and further to Rs 7,114.9 crore in FY25.

The momentum has continued in the current financial year. In the first six months of FY26, PhonePe recorded revenue from operations of Rs 3,918.5 crore. This already exceeds the company’s entire revenue for FY23.

According to the DRHP, PhonePe has demonstrated the ability to grow at scale while continuing to expand monetisation across its platform.

Focused on multiple revenue engines

Although widely known as a payments app, PhonePe has evolved into a broader financial platform built on top of India’s UPI infrastructure. The company now operates through five distinct revenue streams that reduce dependence on any single source of income.

The first engine is payments monetisation. This includes person to person transfers, bill payments, and both offline and online merchant payments. This remains the core UPI driven business that helped PhonePe build one of the largest digital user bases in the country.

The second engine is payment devices and payment gateway services. PhonePe supplies EDC machines and Smartspeakers, which provide audio confirmation for transactions. It also offers payment gateway services that allow merchants to accept digital payments. This segment positions PhonePe as a technology infrastructure provider for digital commerce.

The third revenue stream is lending and insurance distribution. This segment has been the fastest growing within the platform. Its contribution to revenue increased from 0.96% in FY23 to 7.84% in FY25. In the six months ended September 30, 2025, the share rose further to 11.55%. The company views this capital light distribution business as an important driver of future profitability.

The fourth revenue stream is platform revenue. This includes income from mobile recharges, advertising, and other monetisation opportunities built on top of user activity within the PhonePe app.

The fifth engine consists of new platforms such as stock broking and mutual fund distribution through Share.Market, along with the Indus Appstore. These businesses are still in the early stages but are intended to expand PhonePe’s role in India’s digital economy.

The shift in revenue mix is already visible. Merchant payments contributed 14.75% of total revenue in FY23. This increased to 27.99% in FY25 and further to 30.78% in the first half of FY26. The growth indicates that PhonePe is successfully converting its large consumer user base into a two sided merchant ecosystem.

Losses narrow as profitability improves

Despite strong revenue growth, PhonePe continues to report losses on a GAAP basis. The company reported a restated net loss of Rs 1,727.4 crore in FY25.

However, the scale of losses has reduced significantly. The net profit margin improved from negative 90.68% in FY23 to negative 22.64% in FY25. This represents a sharp improvement in operating performance within a relatively short period.

More importantly, PhonePe has achieved several non GAAP profitability milestones that reflect the improving economics of its business.

The company achieved positive Adjusted EBITDA in FY24. This indicated that the core operating business had begun covering its operating costs.

In the same year, PhonePe also reported positive Adjusted Profit. The company sustained this milestone through FY2025, showing that the improvement was not a one time event.

In FY25, PhonePe reached another milestone by achieving positive Adjusted EBIT. This measure includes amortisation and is often used by investors to assess the long term earnings potential of a business.

The company notes that adjusted profitability excludes stock based compensation and certain other non cash charges. On these adjusted measures, PhonePe has been profitable since FY24 and on an Adjusted EBIT basis since FY25.

Turning free cash positive

One of the most important developments highlighted in the DRHP is PhonePe’s transition to positive free cash generation. This milestone is significant because it indicates that the company can fund its growth without relying heavily on external capital.

In FY2025, PhonePe generated free cash of Rs 190.48 crore.

For the six months ended September 30, 2024, the company reported free cash generation of Rs 250.16 crore.

According to the DRHP, the company’s business model emphasises the generation of free cash. This allows PhonePe to reinvest in existing businesses, explore new opportunities and expand into new segments while reducing revenue concentration risks.

A positive free cash position also gives management greater flexibility in allocating capital to growth initiatives without diluting shareholders.

Technology infrastructure designed for scale

PhonePe attributes much of its operational efficiency to its technology strategy. The company said that its business model has been intentionally designed for scale and efficiency.

One important element of this strategy is the early investment in proprietary data centres. By building its own infrastructure, PhonePe aims to ensure that platform costs do not increase linearly as transaction volumes grow.

Automation is another major component of the company’s operating model. Multiple automation initiatives have been introduced across the organisation to reduce operational overhead and improve efficiency.

PhonePe also uses data intelligence to improve customer acquisition and retention. Data driven acquisition strategies help optimise customer acquisition costs while enhancing the user experience.

In addition, the company’s technology architecture allows new products to be launched quickly without rebuilding systems from scratch. This enables faster product development and innovation cycles.

Together, these capabilities create a cycle in which lower costs support competitive pricing, higher volumes generate more data, and better products lead to stronger monetisation across the platform.

Preparing for the Dalal Street

The narrative presented in PhonePe’s DRHP highlights a company that has achieved large scale revenue growth and is beginning to benefit from operational leverage.

The transition from a loss heavy startup to a platform that generates free cash represents a major milestone in the company’s evolution.

For public market investors, the next phase of growth will likely depend on how quickly the lending and insurance distribution segment scales further, whether new platforms such as Share.Market and Indus Appstore become meaningful contributors, and how regulatory developments shape the competitive landscape in the UPI ecosystem.

What the numbers already demonstrate is PhonePe’s ability to generate revenue at scale, manage costs more efficiently, and gradually move toward sustainable profitability.

The company has crossed an important threshold in its journey from startup to large scale fintech platform.