PhysicsWallah Cites AI Efficiencies for Job Cuts, Sets Aside $20 Mn for M&A

PhysicsWallah's headcount fell sequentially in Q2 FY27 to roughly 19,100 employees, and management blames — or credits — artificial intelligence. During the Noida-based edtech's Q2 FY27 earnings call, executives said AI-driven efficiencies across content creation, quality checks, test paper preparation and evaluation reduced the company's need for staff, with faculty strength also slipping to approximately 7,100.

The numbers behind the shrinkage are modest but clear. Employee expenses declined 2.3% year-on-year in Q2 FY27, excluding ESOP costs, and fell 2.4% in the first half of FY27 versus the same period last year. Management also disclosed that AI now writes around 90% of the company's code — a striking figure for a business built on human teachers and content teams.

The automation dividend isn't free. PhysicsWallah's technology spend climbed to Rs 104 crore in H1 FY27, up from Rs 70 crore in the corresponding period last year. That's a 49% increase in tech investment against a 2.4% drop in employee costs — the company is trading payroll for platforms. AI-led efficiencies have improved operating leverage, management said.

What's happening with the offline business?

The offline segment, which includes the fast-expanding Vidyapeeth centre network, remains loss-making. It posted a pre-Ind AS EBITDA loss of Rs 108 crore in H1 FY27, an improvement from the Rs 120 crore loss in the year-ago period, per figures discussed on the call.

Revenue growth moderated too:

• Q2 FY27 offline revenue: Rs 541 crore, up 9% year-on-year
• H1 FY27 offline revenue: Rs 1,031 crore, up 12% year-on-year

Management attributed the slowdown to lower NEET enrolments and delays in government exam notifications, which dampened demand at some centres.

The Vidyapeeth network itself is the bright spot. PhysicsWallah now operates 370 offline centres in total, including 167 Vidyapeeth centres — up from 117 a year earlier. Vidyapeeth contributed around 66% of offline business collections in H1 FY27. Management said the standalone Vidyapeeth business is already profitable, and it expects the broader offline segment to move closer to breakeven. The plan calls for adding 25-30 offline centres annually over the next two to three years, with a tighter check on upfront costs.

In plain words: the offline business is still bleeding, but more slowly, and its biggest sub-brand has turned the corner on its own.

Where does the $20 million go?

PhysicsWallah is also shopping. The company said it is in advanced discussions with a couple of fully online education businesses and is actively evaluating several other targets. It has earmarked less than $20 million for these acquisitions, in line with the Rs 300 crore allocation from its IPO proceeds reserved for unidentified deals.

Management expects the transactions to be margin-accretive, strengthening the company's presence in new categories while offering synergies with its technology stack and YouTube-led distribution. But don't expect M&A to move the needle this year: management said acquisitions should contribute less than 5% to revenue growth in FY27, even though the company's overall revenue growth guidance of around 30% includes potential deal contributions.

How did the quarter close?

The consolidated picture remains strong. PhysicsWallah reported Q2 FY27 revenue of Rs 1,242 crore, up 18% year-on-year, while net profit jumped to Rs 142 crore from Rs 70 crore in the year-ago quarter — more than doubling.

The takeaway: a shrinking workforce and rising profit suggest the AI-efficiency story is real, but the company's next test is whether its offline losses keep narrowing fast enough to absorb a fresh round of centre openings and dealmaking.