Affle 3i — Q4 FY26 earnings call

Call held 11 May 2026

Management summary

Affle 3i reported strong Q4 and full-year FY26 results, with robust revenue and EBITDA growth driven by its AI-powered platform. The company emphasized strategic investments in verticalization and M&A, backed by a significant capital raise through warrants. While gross margins saw a temporary dip due to these investments, management expects recovery and remains confident in its long-term growth trajectory and resilient CPCU business model.

Highlights

  • Q4 FY26 Revenue of INR 7.24 billion, up 20.3% YoY, sustaining growth momentum.

  • FY26 EBITDA of INR 6.1 billion, up 26.3% YoY, with margin expanding 120 bps to 22.5%.

  • Operating cash flows of INR 5.02 billion in FY26, increasing by ~25% CAGR over the last 5 years.

  • Board approved preferential issue of warrants totaling approximately INR 11 billion to strengthen the balance sheet for M&A.

  • Received 5 new patent grants, expanding IP portfolio to 18 unique patents granted and 21 filed & pending.

Concerns

  • Q4 FY26 PAT growth of 16% YoY was relatively subdued due to a lower effective tax rate in the base quarter last year.

  • Gross margin reduced to 36.7% in Q4 FY26 due to conscious investments, though expected to recover in about a year.

Key financials

2 periods

Headline

  • Revenue
    7.24 Bn
    YoY +20.3% QoQ +1%
  • EBITDA
    1.61 Bn
    YoY +20.3%
  • PAT
    1.2 Bn
    YoY +16% QoQ +0.2%
  • EBITDA Margin
    22.3%
  • PAT Margin
    16.3%

FY26

  • Operating Cash Flows
    5.02 Bn

What they filed

Q1 FY27: revenue up 20.3%, net profit up 20.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue543 602 602 621 647 +19%717 +19%724 +20%747 +20%
EBITDA113 131 134 140 146 +29%163 +24%161 +20%168 +20%
Net profit92 100 103 106 111 +21%119 +19%120 +17%128 +21%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue ContributionYoY Growth
India and Global Emerging Markets71.6%0.212 decimal_fraction
Developed Markets28.4%0.18 decimal_fraction

Order book

low confidence
Management discussed customer engagements and new logo additions but did not quantify an order book or TCV in the traditional sense for IT services.

Source: Inferred

Capital allocation

high confidence
  • M&A Undisclosed (several companies) Acquisition · Pending regulatory · Consideration ₹[object Object] (mixed)

    To further bolster readiness, strengthen balance sheet, acquire larger customer base, larger sales force, tech stack with preliminary integrations, expand into premium philosophy and verticalized integrated platform, direct to advertisers, direct-to-consumer conversions, strengthen in developed markets.

    25% upfront payment for warrants, ensuring capital readiness for acquisitions.

    Our Board has approved a preferential issue of equity shares to strengthen our balance sheet. Post our shareholders' approval, our corporate promoter, Affle Holdings, will invest to acquire ~7.4 million warrants at INR 1,487, totaling approximately INR 11 billion, with 25% upfront payment. This will ensure that we are well capitalized and ready to move swiftly this year on the right acquisition opportunities.
  • Liquidity Liquidity disclosed Company reported INR 5.02 billion in operating cash flows for FY26 and stated it has a substantial amount of cash, but did not provide a specific cash balance.
    We achieved operating cash flows of INR 5.02 billion during the year, increasing by ~25% CAGR over the last 5 years. This underscores the quality of our earnings, our disciplined working capital management and our consistent ability to convert profitable growth into strong cash flows.

Guidance & targets

Revenue

  • Revenue CAGR Revenue · medium-term (next 5 years) · High confidence 20%
    We are firmly on course to deliver on our medium-term guidance of 20% CAGR as we progress towards our 10x decadal growth vision.

    — Anuj Khanna Sohum

  • Decadal Revenue Growth Revenue · decadal · High confidence 10x

    — Anuj Khanna Sohum

Profitability

  • EBITDA Margin Profitability · over a period of time · Medium confidence 23% to 25%
    our goal would be that the combined entity must be deeply growth-oriented and should average towards the 20% growth in the near to medium term with a clear emphasis on the bottom line efficiencies of the organization, delivering close to about 23% to 25% EBITDA over a period of time.

    — Anuj Khanna Sohum

  • Gross Margin Profitability · in about a year · Medium confidence 37%-38%
    I believe in about a year, we should be able to achieve the level of verticalization and the level of intel that we need to develop across all the key geographies and hopefully, around that time onwards, we should see another year of bringing it back to better levels, where we don't need to invest as much.

    — Anuj Khanna Sohum

M&A

  • Meaningfully Sized Transaction M&A · within this calendar year · Medium confidence Conclude transaction
    In terms of the timeline, there's a realistic chance that we may conclude a meaningfully sized transaction within this year itself. And when I say year, I'm not meaning the whole financial year, but within this calendar year.

    — Anuj Khanna Sohum

Market context

  • Long-term Inflation Rate Macro · long-term · High confidence 2%
    We model at 2% long-term average inflation rates as we do our long-term planning. Inflation definitely is there in the economies across geographies. On an average, we built in about 2% inflation on a CAGR basis or on a long-term basis.

    — Kapil Bhutani

What to watch in Q1 FY27

M&A Transaction Conclusion

within this calendar year
Current Shortlisted 4 companies, deeper due diligence and negotiations ongoing.
Target Meaningfully sized transaction concluded.

Why it matters

The conclusion of a significant M&A deal will impact future growth, market presence, and capital deployment strategy, leveraging the recently approved INR 11 billion warrants.

In terms of the timeline, there's a realistic chance that we may conclude a meaningfully sized transaction within this year itself. And when I say year, I'm not meaning the whole financial year, but within this calendar year.

Risks & concerns

  • Geopolitical events and temporary market softness

    medium

    Q4 FY26 growth was achieved despite some temporary softness in select markets and verticals due to geopolitical events.

    Management acknowledged

  • Gross margin compression due to investments

    medium

    Gross margin reduced to 36.7% in Q4 FY26 due to conscious investments in verticalization and premium positioning, but expected to recover.

    Analyst acknowledged

  • Subdued PAT growth due to prior year's lower tax rate

    low

    PAT growth of 16% YoY in Q4 FY26 was relatively subdued due to a lower effective tax rate in the base quarter last year.

    Management acknowledged

Q&A highlights

7 direct
Competitive dynamics and GenAI impact Direct
The competitive edge that Affle has versus most of the other competitors is that we are working with the advertisers directly. We are integrating as part of our unique CPCU business model with deeper conversion level, first-party data integrations with our advertisers directly.

Management clarified Affle's strategic differentiators (direct-to-advertiser, CPCU, first-party data, verticalization) in the evolving GenAI landscape, highlighting its competitive moat.

Asked by Ashwin Mehta

Targeting non-human traffic and digital fraud Direct
A big part of the ad spend will go to target humans. We are addressing that very well. Another smaller part, but a meaningful part, could go towards targeting the Al agents, which are authenticated and are assisting humans or the consumers. We must absolutely ensure that there is no loss of budget or engagement to the noisy non-authenticated Al agents.

Addressed the future of advertising with AI agents and emphasized Affle's unique IP in filtering out non-authenticated AI agents (digital fraud), which is a critical capability.

Asked by Ashwin Mehta

Gross margin reduction and investment payback timeline Direct
I believe in about a year, we should be able to achieve the level of verticalization and the level of intel that we need to develop across all the key geographies and hopefully, around that time onwards, we should see another year of bringing it back to better levels, where we don't need to invest as much.

Provided clarity on the reasons for current gross margin compression (conscious investments) and offered a timeline for expected recovery, addressing investor concerns about profitability trends.

Asked by Arun Prasath

Industry consolidation vs. new players in the AI era Direct
First of all, we are a very strong business-to-business platform. We are deeply integrated with the advertisers whose data integrations and apps integrations are a non-trivial matter to do across industry verticals, across geographies, with our very broad-based and diversified presence, which takes a lot of time.

Management articulated Affle's defensibility against new entrants and incumbents in the AI era, emphasizing its deep integrations and verticalized approach as barriers to entry.

Asked by Arun Prasath

M&A ticket size and strategic focus Partial
I wouldn't want to give any color to the size of the transaction because there are a few small transactions as well. I don't want to confuse your analysis on that. There are some larger ones. So, there are small, mid-sized, and larger ones.

While not providing a specific ticket size, management confirmed active M&A pursuit, shortlisting of targets, and capital readiness, signaling significant future inorganic growth.

Asked by Vijit Jain

Industry trend towards direct-to-advertiser and SDK footprint Direct
In terms of the industry trend, all I'm saying is that you have to be closer to your customer. If you look at our earnings presentation, there's one particular slide that gives the entire Affle 3i Consumer Platform Stack details, one side that tells you how we are direct to advertiser by design and there, we call Al as advertiser intelligence.

Reiterated Affle's core strategy of direct advertiser engagement and first-party data integration, which is becoming increasingly critical in the evolving ad-tech ecosystem.

Asked by Vijit Jain

CPCU model applicability to CTV engagements Direct
No, the CPCU model can work on CTV engagement, can work on digital out-of-home engagement, can work on mobile. The answer is very simple. If you have the intention to deliver ROI, all it requires is to back that intention with execution action to go deeply integrate with the advertiser.

Clarified how Affle's core CPCU model can be extended to new and growing channels like CTV, demonstrating adaptability and future growth avenues.

Asked by Anmol Garg

Impact of geopolitical events and recession on marketing budgets Direct
I believe this kind of alignment is dependable, trustable and especially when times get tough, it becomes very important. So when times get tough as they are and have many times in the past, we are of the clear view that the CPCU business model is going to be resilient, and in fact, going to be the go-to business model for the advertisers.

Management explained the resilience of the CPCU business model during economic downturns, as advertisers prioritize ROI, reinforcing confidence in Affle's business stability.

Asked by Hardik Goyal

2 min read 6 chapters

Detailed narrative

Robust FY26 Performance and Consistent Growth Momentum

Affle 3i concluded FY26 with its 13th consecutive quarter of sequential topline growth, reporting INR 7.24 billion in revenue for Q4 FY26, an increase of 20.3% YoY. For the full year, revenue reached INR 27.1 billion, growing 19.5% YoY. EBITDA for FY26 demonstrated robust growth of 26.3% YoY to INR 6.1 billion, with margins expanding by 120 bps to 22.5%. The company also generated strong operating cash flows of INR 5.02 billion during FY26, reflecting a ~25% CAGR over the last five years.

Strategic Investments in Verticalization and Premium Positioning

Management clarified that the gross margin reduction, with inventory and data costs at 63.3% of revenues in Q4 FY26, is a conscious investment. These investments are directed towards launching more verticals, expanding into new geographies, deepening direct-to-advertiser integrations, and emphasizing premium positioning to target higher-value lifetime users. The company anticipates these investments will lead to margin improvements, with gross margins expected to return to the 37%-38% range within approximately one year.

AI-Powered Platform and Competitive Differentiators

Affle positions itself as a technology thought leader, leveraging its AI-powered consumer platform stack for ROI-based advertising. Key differentiators include direct integration with advertisers' first-party data, deep verticalization across key industry verticals, and unique IP for distinguishing human from non-human (AI agent) traffic. This strategy provides a competitive moat against both walled gardens and emerging GenAI native platforms, especially as the digital ecosystem evolves with AI-generated content and agents.

Capital Readiness and M&A Strategy

To support its inorganic growth ambitions, Affle's Board approved a preferential issue of equity shares to Affle Holdings, raising approximately INR 11 billion through warrants, with a 25% upfront payment. The company is actively evaluating over 10 potential acquisition targets, having shortlisted about four for deeper due diligence. The M&A strategy focuses on acquiring entities that can expand Affle's customer base, sales force, and tech stack, with the goal of transforming them into Affle's CPCU business model and strengthening its presence in developed markets. A meaningfully sized transaction is realistically expected within the current calendar year.

Broad-Based Growth Across Geographies and Channels

Affle's growth remains broad-based across key industry verticals and geographies. India and global emerging markets contributed 71.6% of Q4 FY26 revenues, growing 21.2% YoY, while developed markets contributed 28.4%, growing 18.0% YoY. The company's platform reaches over 4 billion connected devices across mobile, CTV, and digital out-of-home, demonstrating its ability to adapt its CPCU model to diverse consumer touchpoints and drive conversions across a connected journey.

Resilience of CPCU Business Model in Challenging Macros

Despite a challenging macro environment in Q4 FY26, marked by geopolitical events and temporary market softness, Affle's CPCU business model proved resilient. Management highlighted that in times of economic uncertainty, advertisers increasingly prioritize ROI-linked spending, making the CPCU model a preferred choice. This inherent resilience, combined with a focus on high-quality revenue and disciplined execution, underpins the company's confidence in achieving its medium-term 20% CAGR and 10x decadal growth vision.

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