Fractal Analytics Q1 FY27 Earnings Call: Wins Landmark Healthcare AI Program, Net Revenue Retention Hits 117%

Fractal Analytics Ltd held its Q1 FY27 earnings call on July 23, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Headline Financials for the Quarter

• Revenue of Rs.912.5 Cr in Q1 FY 2026-2027, up 20% YoY (9% in constant currency, 3% QoQ).
• Adjusted EBITDA margin expanded 189 bps YoY to 16.8% (17% per segment 3); net income margin rose 296 bps to 7.9%.
• Net income surged 92% YoY to Rs.72 Cr; diluted EPS of Rs.4.09 (up 78% YoY); ex-associate loss EPS at Rs.5.39.
• Gross margin improved 29 bps YoY to 45.7% in Q1 FY 2026-2027. Operating cash flow was negative Rs.103 Cr due to variable pay payout.
• Cash and equivalents at Rs.1,639 Cr as of Q1 FY 2026-2027, including IPO proceeds of Rs.689 Cr. DSO improved 2 days to 71 days.

Sector Performance and Client Trends

• Healthcare & life sciences grew 69% YoY and BFSI grew 36% YoY in Q1 FY 2026-2027, while TMT declined 22% YoY. Excluding TMT, overall growth would have been 37% YoY.
• Europe led geographic growth at 25% YoY; Americas at 24% YoY; APAC & others declined 2% YoY in Q1 FY 2026-2027.
• Net revenue retention improved to 117% (from 108% in Q1 FY 2025-2026); net promoter score improved to 77 (from 73); client churn was 0%.
• Clients with TTM revenue >$20M stood at 5 (from 4), >$5M at 19 (from 18), >$1M at 58 (from 54). Top-10 client concentration fell to 51.8% (from 55.9%).
• Fractal won one of the largest single programs in its history — building AI foundations and modernizing the data estate for a large healthcare player. Signed an MOU with Mumbai's BMC to pilot Vyasa.ai across public hospitals.

Cogentic, Partnerships and R&D Strategy

• Cogentic secured early wins with 10+ clients in Q1 FY 2026-2027, with a product-led qualified pipeline spanning underwriting and e-commerce use cases. Management plans to report Cogentic revenue separately from Q2 FY 2026-2027.
• 5 of Fractal's largest deals in Q1 FY 2026-2027 came through partnerships with DataBricks, OpenAI, and Anthropic. Management disclosed 42 TTM joint engagements with foundation model and AI layer companies.
• License revenue (including Cogentic) accounted for 3% of total revenue in Q1 FY 2026-2027; management expects this share to increase.
• Outcome/output/license-based pricing mix at 42% (vs 58% input-based); management targets 60% over the next few quarters.
• R&D spend rose 31% to Rs.61 Cr (Rs.41 Cr expensed, 4.5% of revenue). Long-term aspiration to increase R&D to "as much as 10% of revenue," but only on the back of expanding gross margins.
• Management cited "tech companies increasing AI spend from 4.5% to 6% of revenue" as expanding the total addressable market, with industry growth expected at 16-17% levels.

Wage Impact, Fractal Alpha and Associate Results

• Annual wage increment effective June 1, 2026 impacted Q1 FY 2026-2027 by 75 bps on gross margin and 120-130 bps at full P&L level; Q2 FY 2026-2027 will reflect a full 3 months impact.
• Adjusted EBITDA margin of 16.8% in Q1 FY 2026-2027 improved YoY but declined sequentially from 22% in Q4 FY 2025-2026; management attributed this to typical Q1 seasonality.
• Fractal Alpha segment loss of Rs.14 Cr in Q1 FY 2026-2027 (vs Rs.4 Cr in Q1 FY 2025-2026), driven by Analytics Vidya/GigAI product investments. Asper ARR grew 59% to $9M in dollar terms.
• Cure.ai revenue grew 160% YoY to Rs.24 Cr in Q1 FY 2026-2027; Fractal's share of loss flat at Rs.23 Cr. Cure's backlog increased to Rs.100+ Cr from ~Rs.20 Cr in the prior-year period.
• DSO improved to 71 days; billable AR at 54 days. Cash conversion to EBITDA at ~70%; ROCE close to 13%. Company was rated by Black Kite in the highest cybersecurity category.

Guidance, TMT Recovery and Execution Priorities

• TMT vertical "bottoming out" — management expects "healthy sequential growth" from Q2 FY 2026-2027. Full-year qualitative outlook for FY 2026-2027 remains unchanged despite Q1 underperformance.
• Near-term volatility expected as new AI-driven work grows rapidly while legacy work (ad hoc analysis, dashboards) compresses or moves toward zero; management states "net effect is expansion more than offsets compression."
• Deal sizes increasing with larger RFPs and higher client ambition; revenue impact expected over "coming few years (FY27-28 onward)."
• Management acknowledged Q1 growth below expectations but noted that excluding TMT, growth was significantly stronger. Key positive trends: clients deepening relationships, margins expanding, revenue mix shifting toward outcomes.
• CFO Ashwat Bhatt departing after 5.5 years; successor search underway (Q1 FY 2026-2027). Management emphasized improving execution to capture the expanding AI TAM amid growing competition.