Detailed Narrative
Q3 & 9M FY26 Financial Performance Overview
Capillary Technologies reported a strong financial performance for Q3 and 9M FY26. Revenue for Q3 FY26 reached INR 184 crores, representing a 16% year-on-year growth. For the nine-month period, revenue was INR 543 crores, up 22% YoY. Adjusted EBITDA for Q3 FY26 grew by 25% to INR 30 crores, achieving a 16.4% margin, while 9M FY26 Adjusted EBITDA increased by 54.3% to INR 71 crores, with a 13% margin. PAT for Q3 FY26 was INR 8 crores, a decline from INR 11.4 crores in Q3 FY25, primarily due to one-time📎 expenses of INR 1.6 crores for gratuity and INR 2 crores for IPO expenses.
Net Retention Rate (NRR) and Growth Drivers
The company's Net Retention Rate (NRR) for the trailing twelve months ending December 2025 stood at 111%. Notably, the organic business NRR was 115%, placing Capillary in the top 10 percentile of global SaaS companies. Growth is driven by three axes: NRR expansion (platform overages, inflationary clauses, upgrades), new customer wins, and M&A. The new order book for 9M FY26 increased by 24.5% to INR 66 crores, compared to INR 53 crores in the same period last year, with 12 new customers added in the nine-month period.
Profitability and Cost Structure Leverage
Capillary's gross margins are robust at 69%-70%, with a 1.5% increase in 9M FY26. The company benefits from significant operating leverage, as approximately 60% of its costs (technology, sales & marketing, corporate) are not directly linked to revenue. While revenue grew 22% in 9M FY26, non-COGS costs grew only 11%. Depreciation and amortization increased from INR 13 crores in Q3 FY25 to INR 19 crores in Q3 FY26, largely due to the acquisition of Kognitiv in May. The company aims for further improvement in below COGS items as a percentage of revenue.
AI Strategy and Monetization (aiRA)
Capillary is adopting an AI-first approach with its AI-powered Research Assistant (aiRA), which is seen as a force multiplier for improving win rates. aiRA helps customers with analytics, campaign management, and customer support, moving beyond traditional workflow systems. The company is currently offering a 3-month free pilot for aiRA and is in early conversations to bill for annual licenses linked to usage. Management expects to have a clearer understanding of aiRA's pricing strategy and its specific contribution to NRR within the next one to two quarters.
Business Model and Market Positioning
Capillary positions itself as a 'system of record' for loyalty, managing the entire ledger of earn, burn, and customer profile data for its clients. This deep integration and data ownership contribute to high stickiness and switching costs. The company's pricing model is outcome-linked (per transaction or per member) rather than seat-based, providing insulation from AI-driven pricing shocks seen in other software segments. Capillary is highly rated by analysts like Forrester, positioned at the top of the Forrester Wave for its current offering and strategy, which aids in securing large enterprise deals.
US Healthcare Payer Exposure Clarification
Addressing an analyst's concern regarding pressures in the US healthcare payer space, management clarified that Capillary has no exposure to the Medicare or Medicare books of business. Their focus is on direct payer and insurance type use cases, which typically operate on a January 1st cycle. The company has seen major go-lives in this segment, with member bases increasing by approximately 50%, indicating no direct impact from the reported industry pressures🌐.