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    FRACTAL

    FRACTAL
    Information Technology·12 May 2026
    Management Summary

    Fractal Analytics reported strong Q4 and full year FY26 results, with revenue growing 17% and 19% respectively, driven by existing clients and robust performance in healthcare and financial services. Profitability saw significant expansion, with Q4 adjusted EBITDA margin reaching 22.1%. The company became debt-free post-Q4 and saw strong growth in its IP-led businesses, despite challenges in the TMT vertical and broader macroeconomic uncertainties. Management highlighted the pivotal era of enterprise AI and Fractal's strategic positioning to capitalize on it.

    Highlights

    5

    • Strong revenue growth: Q4 revenue up 17% YoY (INR 886 crore) and full year revenue up 19% YoY (INR 3,300 crore).

    • Significant margin expansion: Q4 adjusted EBITDA margin at 22.1% (up 189 bps YoY) and gross margin at 48.2% (up 47 bps YoY).

    • IP-led businesses (Fractal Alpha) showed robust growth of 41% YoY and reduced losses to INR 15 crore.

    • Improved client metrics: Net revenue retention at 117% for the year, 59 clients with $1M+ revenue (up from 53), and highest ever NPS of 81 in Q4.

    • Debt-free status: Repaid long-term debt post-Q4, utilizing IPO proceeds, ending the year with INR 2,052 crore cash and equivalents.

    Concerns

    3

    • TMT vertical declined 1% for the full year and 19% in Q4 due to client-specific issues (JV, restructuring, data delays).

    • Geopolitical situations (trade uncertainties, Middle East war) are tempering the overall excitement around enterprise AI.

    • Qure.ai, while expected to recover, contributed to losses in prior periods, though management expects it to not contribute to additional losses going forward.

    Key financials

    Metrics

    11

    Periods

    2

    Q4

    5
    • Revenue
      ₹886 Cr
      YoY+17%QoQ+4%
    • Adjusted EBITDA Margin
      22.1%
      YoY+1.9%
    • Net Income
      ₹116 Cr
      YoY+109.0%
    • Gross Margin
      48.2%
      YoY+0.5%
    • Diluted EPS
      ₹6.73
      YoY+106%

    FY26

    6
    • Revenue
      ₹3,300 Cr
      YoY+19%
    • Adjusted EBITDA Margin
      17.6%
    • Net Income
      ₹287 Cr
      YoY+30%
    • Gross Margin
      46.8%
      YoY+0.9%
    • Cash from Operations
      ₹409 Cr
      YoY+3%

    Segment breakdown

    Fractal Alpha (IP-led businesses)
    41% Revenue Growth (FY26)₹15 Cr Segment Loss (FY26)
    List

    Order Book

    low confidence

    Pipeline

    deal pipeline tcv

    Qure.ai has a phenomenal order pipeline and a very strong order book.

    Cancellations / Deferrals

    • descoped:One TMT client reduced work to almost zero due to joint venture. Another TMT client contracted work due to restructuring. Data-led delays prevented revenue recognition for a large MAG 7 company in Q4.

    "The company focuses on 'Must Win Clients' (USD 10B revenue, USD 20B market cap, or 30M consumers) and aims for outcome/output/license-based deals for higher margins. While no specific TCV was disclosed, client retention and growth in IP-led businesses are strong."

    Source:
    Inferred

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Debt

    Net ₹0 crores

    Liquidity

    Cash ₹2,052 crores

    Includes IPO proceeds of INR 957 crore.

    Guidance & targets

    3
    CategoryTargetPriority
    Revenue Mix
    Output, Outcome, or License-based Revenue Share
    60%
    		Medium
    Revenue Mix
    License-driven Revenue Share
    20%
    		Medium
    Profitability
    Profitability Journey
    Continue
    		Medium

    TMT Vertical Performance

    next few quarters
    CurrentDeclined 19% in Q4 FY26
    TargetImproved growth as client-specific issues resolve

    Why it matters

    TMT vertical's recovery is crucial for overall revenue growth, as it was a drag in FY26.

    Now, for the last part of your question, which is about outlook for TMT, we expect these client-specific growth issues to have worked themselves out through this year, and therefore, we expect to do better in the TMT vertical in the next few quarters.

    How to verify

    key_financials.segment_breakdown[name='Technology, Media, and Telecom'].metrics[label='Revenue Growth']

    Risks & concerns

    3
    RiskSeverity

    Geopolitical and macroeconomic uncertainties

    Trade uncertainties and global conflicts are tempering the excitement around enterprise AI adoption, despite high demand. — Management acknowledged

    medium

    Client-specific issues in TMT vertical

    Joint ventures, client restructuring, and data-led delays led to a 19% decline in TMT revenue in Q4, impacting overall growth. — Management acknowledged

    medium

    Qure.ai past losses

    Qure.ai's past performance, impacted by USAID program shutdown, contributed to segment losses, though management expects a turnaround. — Management acknowledged

    medium

    Q&A highlights

    7

    “Number one is that the client specific issues that we had in this year resulted in one of the client situations was where the client entered into a joint venture with another provider and in the process, reduced the work with us to almost zero. So that is one issue. Another client situation was such that the client itself was going through massive restructuring because of which they were unable to expand their business and they had to contract with us. Secondly, to your other question about TMT margins, it is not a low margin business. TMT is pretty robust in terms of the overall margins.”

    Management provided specific reasons for the TMT vertical's decline in Q4 and FY26, clarifying that it's not a low-margin business and expects recovery.

    asked by Pritesh Thakkar

    3 min read6 chapters

    Detailed Narrative

    01

    Pivotal Era of Enterprise AI and Fractal's Strategic Positioning

    Fractal believes the current moment is pivotal for AI, with frontier models becoming more capable and affordable. This shift implies a 100x net opportunity for software, moving from 'cost per token' to 'value generated per token'. Fractal aims to capture this prize by translating AI excitement into outcomes in complex organizations, leveraging deep domain expertise, frontier AI advancement, and contextual understanding of design and behavioral sciences. The company has restructured around three pillars (AI-led transformation, AI foundations, AI for work and workforce transformation) and one platform (Cogentiq) across three regions to address this opportunity.

    02

    Strong Financial Performance in Q4 and FY26

    For Q4 FY26, Fractal reported revenue of INR 886 crore (USD 97 million), a 17% YoY increase, and a 4% QoQ increase. Full year FY26 revenue reached INR 3,300 crore (USD 374 million), growing 19% YoY. This growth was entirely organic, with 17% coming from existing clients. Q4 adjusted EBITDA grew 28% YoY, reaching 22.1% (up 189 bps YoY), while full year adjusted EBITDA margin was 17.6% after expensing 4.1% on R&D. Net income for Q4 grew 109% YoY to INR 116 crore, and for the full year, it grew 30% to INR 287 crore.

    03

    Vertical and Geographical Performance Highlights

    Healthcare and life sciences led vertical growth at an exceptional 66% YoY, becoming the second-largest vertical. Banking and financial services grew 32%, while CPG and retail, the largest vertical, grew 12%. The Technology, Media, and Telecom (TMT) vertical declined 1% for the full year and 19% in Q4 due to specific client issues. Geographically, Europe led with 34% growth, Americas grew 20%, and APAC was down 3% for the year, though Q4 APAC growth turned to 7%.

    04

    Growth in IP-led Businesses and Product Portfolio

    Fractal's IP-led businesses within Fractal Alpha, including Asper and Analytics Vidhya, grew 41% for the year, with Analytics Vidhya growing 49%. Segment losses for Fractal Alpha narrowed significantly from INR 26 crore in FY25 to INR 15 crore in FY26. The company also unveiled Flyfish.ai, an agentic sales platform, and advanced its healthcare foundation model, Vaidya 2.0, and autonomous machine learning engine, PiEvolve. Cogentiq, the agentic AI platform, is seeing early wins, including with a large Mag7 technology company for marketing transformation.

    05

    Profitability Drivers and Capital Allocation

    Gross margin expanded by 47 bps YoY in Q4 to 48.2% and by 93 bps YoY for the full year to 46.8%. This expansion was driven by a shift towards output-based contracts, price increases, and productivity improvements, partially offset by annual merit increases. The company generated INR 409 crore of cash from operations in FY26, a 70% conversion of adjusted EBITDA. Post-Q4, Fractal repaid its long-term debt using IPO proceeds, becoming debt-free. The company ended the year with INR 2,052 crore in cash and equivalents.

    06

    Outlook and Future Growth Strategy

    Fractal aims to maximize revenue growth while maintaining a certain profitability threshold. The company expects its revenue mix to shift significantly, targeting 60% of revenue from output, outcome, or license-based contracts in the next 2-3 years (currently 20 points lower). Specifically, license-driven revenue is targeted to grow from 3% to 20% by 2030. Management expects client-specific issues in the TMT vertical to resolve in the coming quarters and Qure.ai to achieve phenomenal revenue growth and cease contributing to losses.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.