- Download the Q4 FY26 shareholder letter of PhysicsWallah here.
Listed edtech company PhysicsWallah has an “unfair advantage” in the AI-enabled learning space, with nearly 3.5 million students spending two hours on its app daily and generating “billions of data points,” its co-founder Prateek Maheshwari said.
During the Q4 FY26 earnings call, Maheshwari said the startup is building small language models in-house and training them on data collected from students on the platform. According to the company, its AI models can outperform some frontier models in accuracy and offer 5X speed while being built at one-tenth the cost.
PhysicsWallah’s privacy policy says it may use personal data collected from users to “improve our products and services.” However, it doesn’t specifically mention AI.
Why is PhysicsWallah investing in small language models? Building a frontier AI model like OpenAI’s GPT-5.2, Google’s Gemini 3 Pro, Anthropic’s Claude Opus 4.5 and xAI’s Grok 4.1 can cost millions of dollars. This includes GPU pre-training costs, research and development expenses, infrastructure, etc.
“If an AI tutor is to be built for Indian students, it has to be affordable. The average revenue per user (ARPU) from our online courses is less than Rs 4,000. We deliver almost four hours of live lectures daily. That comes down to Rs 10 per day. That’s why we want to invest more and more in small language models—to make AI more cost effective for students,” Maheshwari told analysts.
The edtech startup is set to roll out Aryabhata 2.0, an upgraded version of its small language model that solves mathematical queries, as well as AI Tutor, a tool designed to increase the students’ problem-solving capabilities.
“This will act as a true companion for the kids, and it will remember all of your past mistakes. For example, six months before you have done any question wrong in any of the chapters, it will have that memory,” Maheshwari said.
These AI projects are expected to generate meaningful revenue for the company in FY27. This marks a sharp departure from the company’s previous approach of recorded learning.
Let’s take a look at how PhysicsWallah is embedding AI into its product suite:
- Ask AI (voice-based) — 3.05 million doubts solved
- AI Guru (text-based) — 99.45 million queries resolved
- AI Grader — 1.43 million subjective copies checked
- AI Mentor — 0.52 million users served
PhysicsWallah makes U-turn on school: In Q3 FY26, PhysicsWallah laid out its ambitious, long-term strategy for K-12 or school education. At the time, its Chief Financial Officer (CFO), Amit Sachdeva, predicted that K-12 could become bigger than the test prep business within five years. While acquiring and operating schools was central to the company’s K-12 ambitions, it has abruptly taken a U-turn.
During the Q4 FY26 earnings call, Maheshwari said PhysicsWallah will be going “100% asset-light” in this direction and not deploy any capital for mergers and acquisitions in K-12. Instead, the company will focus on the online mode, which saw a 9x jump in revenue in the State Boards category and a 4x jump in revenue in Curious Jr, its online tuition product for classes 1-10.
Note that the edtech firm acquired Tender Heart School in Ranchi in the preceding December quarter. It had also invested Rs 400 crore in its subsidiary Penpencil Edu Services (its school management arm) as part of the K-12 investments it had earmarked. However, it seems the K-12 is proving too difficult to crack. Several edtech players in the past have either shuttered or consolidated their K-12 business due to concerns around unit economics. These include BYJU’S and Unacademy.
As part of its asset-light strategy in K-12, PhysicsWallah has entered into a partnership with other schools, wherein the company sends its faculty members to schools for test-prep and earns a share of revenue. Secondly, the edtech firm is diversifying beyond its core test prep business and launching courses for different State Board examinations, which will ultimately help grow the K-12 business.
PhysicsWallah said 72 out of 116 Vidyapeeth centres, which account for 70% revenue from offline channels, are now profitable. The company claimed it would achieve EBITDA profitability in the offline business in FY27.
As reported earlier by MediaNama, the edtech startup has also received an NBFC licence from the RBI, which will allow it to lend directly to students.
Key operational metrics
- Total number of paid users: 5.34 million, up 20% from 4.46 million in Q4 FY25
- Number of unique transacting users: Rose 18% to 4.87 million in Q4 FY26, compared to 4.13 million a year ago in the same quarter
- Average collection per user (online): Rs 4,104, a 11% jump from Rs 3,683 seen a year ago
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