Fractal Analyt. Q1 FY27 Earnings Call — Analysis (NSE: FRACTAL)
Fractal delivered 20% YoY revenue growth with net profit surging 92% YoY to ₹72 Cr, but a 22% decline in TMT dragged overall growth; excluding TMT, growth was 37%.
The take
Q1FY27 Net Income ₹72 Cr ( +92% YoY ) . New guidance — outcome/output/license revenue… 60% . New story: AI core budget shift and massive demand .
Results
Revenue ₹912.5 Cr +20% YoY; Adjusted EBITDA margin 16.8% (+189 bps); Net Income ₹72 Cr +92% YoY; constant currency growth 9% YoY.
Financial highlights
| Metric | Value | Change | Basis |
|---|---|---|---|
| Revenue from operations | ₹912.5 Cr | +20% | yoy · Q1FY27 |
| Net Income | ₹72 Cr | +92% | yoy · Q1FY27 |
| Adjusted EBITDA margin | 16.8% | +189 bps | yoy · Q1FY27 |
| Gross margin | 45.7% | +29 bps | yoy · Q1FY27 |
| Net Revenue Retention | 117% | +9pp | yoy · Q1FY27 |
| DSO (Days Sales Outstanding) | 71 days | -2 days | yoy · Q1FY27 |
| Cash and cash equivalents | ₹1,639 Cr | point_in_time · Q1FY27 · Jun-26 |
What management committed to
- TMT performance is bottoming out and we expect healthy sequential growth in TMT the next quarter. — Q2FY27
- We expect the second half of fiscal year to be much stronger for Asper. — H2FY27
- We expect that our growth rate will dramatically accelerate from here once [go-to-market reorganization] settles.
- We will take R&D spends to as much as 10% of revenue, only on the back of expanded gross margins. — 10% of revenue
- [Outcome/output/license revenue mix] will be taken to 60% over the next few quarters. — 60%, next few quarters
- [Adjusted EBITDA/net income] profitability will continue to improve over the next few quarters. — next few quarters
Key themes
TMT bottoming, AI core budgets, margin expansion
How the narrative shifted
- TMT vertical drag and bottoming out: TMT decline of 22% is the main drag on headline growth; management argues the worst is behind and sequential recovery is visible from the pipeline.
- AI core budget shift and massive demand: AI has moved from experimentation to core enterprise budgets, creating a multi-trillion-dollar opportunity for AI-led transformation, foundations, and workforce re‑imagination.
- Platform-led growth with Cogentiq and Asper: Cogentiq platform and industry-specific products (underwriting, e-commerce) are gaining traction; Asper ARR is up 59% with a strong second half expected.
- Margin expansion and operating leverage: Gross margins expanding, SG&A leverage driving adjusted EBITDA margin up 189 bps; R&D investment disciplined by margin expansion.
- Go-to-market reorganization and leadership: New Chief Commercial Officer, restructuring into AIT/AIF/AIW vectors, and senior hires across verticals to capture demand and accelerate execution.
- Partnership ecosystem strengthening: Five of the largest deals this quarter originated through partners (Databricks, OpenAI, Anthropic); building partnership muscle as deal origination shifts.
- Qure.ai associate scaling: Qure.ai revenue up 160%, backlog up 5x; share of loss flat but profitability expected to improve with scaling.
Operational commentary
- Won one of the largest single programs in Fractal's history: building AI foundations for a large healthcare player, modernizing their data estate using AI.
- Signed MoU with Mumbai's municipal corporation (BMC) to pilot Vaidya.ai/Cogentiq Health across several public hospitals; potential citywide rollout could become a blueprint for other states.
- Cogentiq platform gaining traction with early wins across 10+ clients; building industry-specific products (Cogentiq Underwriting, e-commerce, supply chain, customer service) that are product-led deals.
- Asper.ai ARR up 59% YoY to $9M, serving 20 CPG clients; revenue recognition lag means second half of FY27 expected to be much stronger.
- Analytics Vidhya revenue up 42% YoY (USD); integrated iqigai and EdTech teams into Analytics Vidhya, creating a consolidated AI for Work & Workforce pillar.
- Partnership ecosystem deepening: 5 of the largest deals this quarter came through partners (Databricks, OpenAI, Anthropic); 42 TTM joint engagements.
- Go-to-market reorganization under new Chief Commercial Officer Matt, structured around three vectors: AI-led Transformation (AIT), AI Foundations (AIF), and AI for Work & Workforce Re‑imagination (AIW).
- TMT vertical decline of 22% YoY is seen as bottoming out; management guided healthy sequential growth next quarter based on new deals from existing clients.
- Outcome/output/license revenue mix improved to 42%; management targeting 60% over the next few quarters.
- Qure.ai (associate) revenue grew 160% YoY to ₹24 Cr; backlog surged to ₹100+ Cr from ₹20 Cr a year ago, signaling improved profitability ahead.
- CFO Ashwath Bhat announced his departure after 5.5 years; successor identification in advanced stage.
Analyst Q&A
Q. What drives visibility for the healthy sequential growth in TMT next quarter?
Visibility comes from new deals from existing clients; we have a significant pipeline and know next quarter will be better because of what we already have in the bag.
Q. Nature of Cogentiq pipeline – are deals product-led or services-heavy?
Cogentiq deals are product-led, with some FDE/implementation components. We are building specific products for underwriting, e-commerce, supply chain, and customer service on the platform.
Q. Was there any unexpected client‑specific issue in TMT besides those called out earlier?
We are no longer going to discuss client-specific issues. The quarter did perform worse than expected, but we believe the worst is behind us.
Q. Has the full-year FY27 outlook changed given the weak Q1?
We underachieved in Q1 relative to our own expectations. We hope some of that starts to get addressed in the coming quarters, but execution is key.
Research and educational content only. Not investment advice.