Fractal Analytics Limited — Q1 FY27 earnings call

Call held 24 Jul 2026

Management summary

Fractal Analytics Limited delivered a robust Q1 FY27 with 20% YoY revenue growth to INR 912.5 crore and a 92% increase in net income. Adjusted EBITDA margin expanded by 189 bps to 17%, driven by operational efficiencies. While the TMT vertical saw a 22% decline, management expects a sequential recovery, and other verticals like HLS and BFSI showed strong growth. The company continued to de-risk client concentration and made strategic investments in AI platforms, positioning for future growth despite an increased loss in the Fractal Alpha segment.

Highlights

  • Revenue of INR 912.5 crore, up 20% YoY, demonstrating strong top-line growth.

  • Adjusted EBITDA margin expanded by 189 bps YoY to 17%, indicating improved operational efficiency.

  • Net Income surged 92% YoY to INR 72 crore, reflecting significant bottom-line improvement.

  • Healthcare and Life Sciences (HLS) vertical was a growth leader, growing at an exceptional 69% YoY.

  • Net Revenue Retention (NRR) improved to 117% from 108% last year, showing strong client expansion.

Concerns

  • Technology, Media, and Telecom (TMT) vertical declined by 22% YoY, dragging down overall headline growth.

  • Constant currency revenue growth was 9% YoY, significantly lower than the reported 20% growth, indicating currency tailwinds.

  • Cash from operations was negative INR 103 crore due to payment of variable pay for the previous fiscal year.

  • Fractal Alpha segment loss increased to INR 14 crore, primarily due to investments in Analytics Vidhya products.

Key financials

  1. Revenue ₹912.5 Cr +20%YoY
  2. Constant Currency Revenue Growth 9% -0.4%QoQ
  3. Net Income ₹72 Cr +92%YoY
  4. Adjusted EBITDA Margin 17%
  5. Gross Margin 45.7%
  6. Net Income Margin 7.9%
  7. Diluted EPS ₹4.09 +78%YoY

What they filed

Q1 FY27: revenue up 19.9%, net profit up 82.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue360 400 422 443 489 +36%513 +28%506 +20%
EBITDA41 74 56 59 87 +112%99 +34%92 +64%
Net profit33 44 41 23 49 +48%73 +66%75 +83%
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

  • Healthcare and Life Sciences (HLS)
    69% Revenue Growth
  • Banking and Financial Services (BFSI)
    36% Revenue Growth
  • CPG and Retail
    19% Revenue Growth
  • Technology, Media, and Telecom (TMT)
    -22% Revenue Growth
  • Europe
    25% Revenue Growth
  • Americas
    24% Revenue Growth
  • APAC and others
    -2% Revenue Growth
  • Fractal Alpha Segment
    20% Revenue Growth (like-to-like)65% Gross Margin₹14 Cr Segment Loss
  • Analytics Vidhya
    57% Revenue Growth
  • Asper
    0% Revenue Growth9 Mn ARR
  • Qure.ai (Associate)
    160% Revenue Growth₹24 Cr Revenue₹23 Cr Share of Loss

Order book

low confidence

Pipeline

deal pipeline tcv

Significant pipeline in TMT vertical and for Cogentiq platform

Management noted a significant pipeline in the TMT vertical and for the Cogentiq platform, expecting it to contribute to future growth. Five of the largest deals this quarter came through partners, indicating a shift in how companies buy.

Source: Inferred

Capital allocation

high confidence
  • Capex Capex disclosed
    • Research and Development (expensed portion) ₹41 Cr
    In Q1 2027, we invested INR 61 crore into research and development, 31% higher than the previous year. Out of the INR 61 crore, INR 41 crore or 4.5% of the revenue was expensed.
  • Debt Debt disclosed
    • Repayment Fully repaid long-term debt from IPO proceeds in April 2026.
    As mentioned in our previous earnings call, in April 2026, we fully repaid our long-term debt from the IPO proceeds.
  • Liquidity Cash ₹1,639 Cr Includes IPO proceeds of INR 689 crore.
    As of June 30th, 2026, we had cash and cash equivalents, including mutual funds and fixed deposits of INR 1,639 crore or $173 million, including IPO proceeds of INR 689 crore.

Guidance & targets

Vertical Growth

  • TMT Vertical Sequential Growth Vertical Growth · next quarter · Medium confidence healthy sequential growth
    Secondly, the TMT performance is bottoming out and we expect healthy sequential growth in TMT the next quarter.

    — Srikanth Velamakanni

Revenue Mix

  • Output/Outcome/License Revenue Mix Revenue Mix · next few quarters · High confidence 60%

    From 42% today

    We are at 42 right now. That outcome/output/license as well as license revenue is at 42, and 58 is the input-based pricing. We are inching gradually forward on that number, and we want to get it to 60 over the next few quarters.

    — Srikanth Velamakanni

R&D Spend

  • R&D as % of Revenue R&D Spend · High confidence 10%
    We have said that we will continue to increase R&D spends as a percentage of revenue, and we will take it to as much as 10% of revenue.

    — Srikanth Velamakanni

Profitability

  • Overall Profitability Profitability · next few quarters · Medium confidence continue to improve
    we expect that profitability will continue to improve over the next few quarters as we continue to expand our growth.

    — Srikanth Velamakanni

What to watch in Q2 FY27

TMT Vertical Sequential Growth

next quarter
Current -22% YoY decline
Target Healthy sequential growth

Why it matters

TMT was the worst-performing vertical, dragging down overall growth; its recovery is crucial for the company's stated growth acceleration.

Secondly, the TMT performance is bottoming out and we expect healthy sequential growth in TMT the next quarter.

Risks & concerns

  • TMT Vertical Decline

    high

    The Technology, Media, and Telecom (TMT) vertical declined by 22% YoY, significantly dragging down overall headline growth.

    Management acknowledged

  • Lower Constant Currency Growth

    medium

    Constant currency revenue growth was 9% YoY, which is lower than the reported 20% growth, indicating reliance on currency tailwinds.

    Management acknowledged

  • AI-driven Work Compression

    medium

    AI can make work faster and cheaper, potentially shrinking per-deal size or making some existing work (e.g., ad hoc analysis, dashboards) vanish, though management expects new opportunities to compensate.

    Management acknowledged

  • Increased Competition in AI Market

    medium

    Many players are vying for a share of the AI-led growth, making the market more competitive and requiring enhanced execution from Fractal.

    Management acknowledged

  • Client Discretionary Spend Shift in TMT

    medium

    Big tech firms' shift from operational expenditure (opex) to capital expenditure (capex) due to AI investments could be impacting discretionary spend in the TMT vertical.

    Management acknowledged

Q&A highlights

8 direct
TMT Vertical Outlook and Visibility Direct
Secondly, the TMT performance is bottoming out and we expect healthy sequential growth in TMT the next quarter. ... That is mostly newer deals from existing clients rather than completely new clients.

Addresses concerns about the underperforming TMT vertical and provides a forward-looking view on its recovery drivers.

Asked by Gaurav Rateria

Cogentiq Pipeline and Deal Nature Direct
Most of these revenues are product led. There could be some FDE or implementation component to it in some ways, but these are completely product-led. We have built Cogentiq for underwriting, which is seeing a pretty solid traction.

Clarifies the business model and traction for Cogentiq, a key AI platform for future growth.

Asked by Gaurav Rateria

Impact of AI on Business Volatility and Deal Sizes Direct
The size of the deals are bigger and the ambition of what they want to get done are also much larger. ... The work that is coming through is so huge that it more than makes up for that.

Explains how AI is changing deal dynamics, leading to larger opportunities despite potential work compression, and addresses concerns about business volatility.

Asked by Gaurav Rateria

Impact of Annual Wage Increment Direct
It is effective June 1st. You are only seeing one month of impact on that in this quarter... The 75 bps that I called out was gross margin-related impact in Q1. The full P&L level, it will be more close to 120 to 130 bps impact. It is for one month in the first quarter. Again, it is effective 1st of June, so it will have three months impact in the second quarter.

Provides specific financial impact of wage hikes on Q1 and Q2 margins, crucial for modeling profitability.

Asked by Aditi Patil

Fractal Alpha Segment Loss and Asper/Analytics Vidhya Growth Direct
Fractal Alpha, which includes only Asper.ai and Analytics Vidhya, that is the place where the loss is up from Rs.4 crore to Rs.14 crore. ... Asper revenue growth was flat, which should accelerate in the second half of the year because the annual recurring revenue has gone up by 59% in dollar terms in Asper.

Explains the reasons behind the increased loss in a key growth segment and provides outlook for its recovery.

Asked by Anish Khanal

Qure.ai Performance and Profitability Direct
Qure.ai does have a big jump from first half of the year to second half of the year. We have also seen their backlog kind of go up quite substantially to Rs.100 plus crore right now... With that, the Qure.ai profitability situation should also be improving.

Highlights strong revenue growth and backlog for the associate company, indicating future profitability improvement.

Asked by Anish Khanal

Adjusted EBITDA Margin Trajectory Direct
Our year-over-year is a better comparison, and we will see that year-over-year, our profitability will continue to improve. ... we expect that profitability will continue to improve over the next few quarters as we continue to expand our growth.

Reassures investors about the long-term margin trajectory despite sequential fluctuations, attributing it to a built-up 'muscle' for managing profitability.

Asked by Anish Khanal

R&D Spend and Outcome-based Revenue Mix Direct
We are at 42 right now... we want to get it to 60 over the next few quarters. ... We have said that we will continue to increase R&D spends as a percentage of revenue, and we will take it to as much as 10% of revenue.

Outlines strategic targets for shifting revenue mix towards higher-value outcome-based models and increasing R&D investment, funded by margin expansion.

Asked by Om Kavadi

3 min read 8 chapters

Detailed narrative

Q1 FY27 Financial Performance Overview

Fractal Analytics Limited reported a revenue of INR 912.5 crore for Q1 FY27, marking a 20% year-on-year growth and 3% quarter-on-quarter growth. In constant currency terms, revenue growth was 9% year-on-year. Net income for the quarter grew by 92% to INR 72 crore, with the net income margin expanding by 296 basis points year-over-year to 7.9%. Adjusted EBITDA margin reached 17%, an increase of 189 basis points year-over-year, reflecting improved operational efficiency.

Vertical Performance and TMT Recovery Outlook

The Healthcare and Life Sciences (HLS) vertical was the leading growth driver, expanding by an exceptional 69% year-over-year, becoming the second-largest industry vertical. Banking and Financial Services grew 36% year-over-year, and CPG and Retail, the largest vertical, grew 19%. However, the Technology, Media, and Telecom (TMT) vertical experienced a 22% year-over-year decline, which significantly impacted overall headline growth. Management indicated that the TMT performance is 'bottoming out' and anticipates 'healthy sequential growth' in the next quarter.

Profitability Drivers and R&D Investments

Gross margin expanded by 29 basis points year-over-year to 45.7%, primarily benefiting from rupee weakness (+273 bps), despite negative impacts from annual merit increases (-75 bps) and increased headcount (-169 bps). Selling, General & Administrative (SG&A) expenses as a percentage of revenue reduced from 26.2% to 24.3%. The company invested INR 61 crore in research and development, 31% higher than the previous year, with INR 41 crore (4.5% of revenue) expensed, focusing on platforms like Cogentiq, Asper, and Analytics Vidhya.

Fractal Alpha Segment and Qure.ai Update

The Fractal Alpha segment, which includes Asper.ai and Analytics Vidhya, saw its revenue grow 20% year-over-year on a like-to-like basis, but reported a segment loss of INR 14 crore. This increased loss is largely attributed to investments in integrating iqigai and EdTech teams into Analytics Vidhya. Asper's Annual Recurring Revenue (ARR) grew 59% to $9 million as of June 2026, with revenue expected to accelerate in the second half of the fiscal year. Qure.ai, an associate company, reported a 160% year-over-year revenue growth to INR 24 crore, and its backlog has substantially increased to over INR 100 crore, indicating improving profitability.

Strategic Focus on AI-led Transformation and Partnerships

Fractal is strategically organized around AI-led business transformation, AI foundations, and AI workforce transformation, addressing a 'multi-trillion-dollar opportunity.' Management emphasized the importance of trust in AI, leveraging data assets for context layers, and transforming entire workflows. Partnerships with key players like Databricks, OpenAI, and Anthropic are becoming increasingly critical, with five of the largest deals this quarter originating through a partner, signaling a shift in how companies procure AI services.

Client Mining and De-risking Client Concentration

The company continued to deepen its client relationships, with the number of clients contributing over INR 1 million, INR 5 million, and INR 20 million in TTM revenue increasing year-over-year. The contribution from the top 10 clients decreased from 55.9% a year ago to 51.8% in Q1 FY27, indicating successful de-risking of client concentration and a broader revenue base.

Capital Management and Liquidity Position

Fractal fully repaid its long-term debt in April 2026 using proceeds from its IPO, maintaining a strong balance sheet. As of June 30, 2026, cash and cash equivalents stood at INR 1,639 crore or $173 million. Days Sales Outstanding (DSO) improved by 2 days to 71 days. While cash from operations was negative INR 103 crore due to the payment of variable pay for the previous fiscal year, it was 20% better compared to the same period last year.

Outlook on R&D and Outcome-based Revenue Mix

Management aims to increase the proportion of output/outcome/license-based revenue from the current 42% to 60% over the next few quarters, indicating a strategic shift towards higher-value engagements. The company also plans to increase its R&D spend to 10% of revenue, which will be funded by expanding gross margins. A key focus is on improving the conversion of R&D investments into revenue at a faster pace.

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