# 1. Financial Performance ## A. Key Figures * **Revenue:** ₹854 Cr Q3 FY2026 (+21% YoY, +7% QoQ) · **₹2,562 Cr** 9M FY2026 (+20% YoY) * Gross Margin: 47.2% Q3 FY2026 (+17 bps YoY) · 46.3% 9M FY2026 (+110 bps YoY) * Adjusted EBITDA Margin: 17.8% Q3 FY2026 (+43 bps YoY) · 16% 9M FY2026 * **PAT:** ₹100 Cr Q3 FY2026 (+10% YoY) · **₹286 Cr** 9M FY2026 * **Cash from Operations:** ₹129 Cr Q3 FY2026 (+16% YoY) · ₹108 Cr 9M FY2026 (ex-items: ₹165 Cr, +38% YoY) ## B. Revenue Growth * **Sustained High Growth:** Revenue expanded at a robust double-digit pace, driven by strong demand in life sciences, healthcare, and BFSI, with new client wins contributing meaningfully. * **Organic Scale-Up:** First-nine-month growth of 20% was entirely organic, reflecting deep client penetration and resilience despite macro headwinds in telecom and media. * **Pricing Power & Efficiency:** Revenue per billable headcount rose 6% in rupee terms, signaling improved realization and operational leverage. * **Long-Term Trajectory:** 10-year revenue CAGR of **30%** underscores consistent execution, with expectations of acceleration as AI adoption deepens across enterprises. ## C. Gross Margin * **Margin Expansion Underway:** Gross margin improved sequentially and YoY, supported by a strategic shift toward **output-based contracts**, which carry higher profitability and better align with client outcomes. * **Structural Advantage:** A multi-quarter trend toward output-based models—driven by AI-powered productivity tools—is enhancing margin quality and creating a durable competitive moat. * **Best-in-Class Benchmark:** Margins remain industry-leading, with management committed to further expansion as high-value engagements scale. ## D. Profitability * **Profitability Milestone Achieved:** Crossed ₹100 Cr in quarterly PAT, marking a key inflection in earnings power despite headwinds from associate losses and forex. * **Underlying Earnings Strength:** Excluding Qure.ai losses and forex drag, PAT would have reached ₹138 Cr—**50% higher YoY**—highlighting core operating momentum. * **R&D Investment Distortion:** Adjusted EBITDA is structurally lower than peers due to **1% of revenue invested in R&D**, which reduces margins by ~400 bps but fuels long-term AI-driven growth. * **Operating Leverage Building:** SG&A declined 30 bps YoY in Q3, with AI-driven efficiencies in sales and administration enabling margin expansion despite new office investments. ## E. Cash Flow * **Strong Operating Cash Conversion:** DSO improved by 14 days to 78 days, driving a 16% YoY increase in cash from operations during the quarter. * **Temporary Cash Drag:** 9M cash flow was weighed down by **₹57 Cr in delayed IPO-related expense recoveries and GST refunds**, masking underlying 38% growth in core cash generation. --- # 2. Client & Revenue Retention ## A. Key Figures * **Net Revenue Retention (NRR):** **114%** Q3 FY2026 · **115%** 9M FY2026 * **Must-Win Clients (MWCs):** **127** as of Dec-25 (+14 from Mar-25) · **83%** revenue contribution in Q3 * **High-Value Clients:** **58** clients >$1M TTM revenue (+5) · **6** clients >$20M revenue (+1) ## B. Client Retention & Expansion * **Strong Expansion Momentum:** Robust NRR reflects deep client penetration and upsell success, with expansion contributing meaningfully to growth despite minor churn. * **Churn Contextualized:** Recent client de-risking in TMT—US and APAC—driven by client-specific issues, not systemic trends; consistent with **~1% annual churn** expectation. * **Revenue Visibility:** Enters year with **nearly two-thirds revenue visibility** from renewals, order book, and pipeline, unchanged from prior year’s strong base. ## C. Strategic Client Portfolio * **Premium Client Base Growth:** Accelerated addition of Must-Win Clients—large, high-quality enterprises—now representing **83% of revenue**, signaling rising strategic relevance. * **Preferred Supplier Recognition:** Achieved strategic status with **two of the "magnificent seven"**, reinforcing Fractal’s position in elite enterprise ecosystems. * **Scaling Client Value:** Increasing concentration in top revenue tiers confirms **AI-led client trust and cross-sell execution**, with more clients scaling beyond $10M and $20M thresholds. --- # 3. Vertical & Geography Mix ## A. Key Figures * **Life Sciences & Healthcare Revenue Growth:** **78%** YoY * **Banking & Financial Services Revenue Growth:** **26%** YoY * **Americas Revenue Growth:** **26%** YoY (Q3) · **26%** YoY (9M) * **Europe Revenue Growth:** **26%** YoY (Q3) · **37%** YoY (9M) * **APAC Revenue Growth:** **-6%** YoY (Q3) * **CPG & Retail Revenue Mix:** **36%** of total revenue ## B. Segment Performance * **Healthcare Emerges as Growth Engine:** Life sciences and healthcare became the fastest-growing vertical, showing strong double-digit momentum driven by strategic capability investments and expansion of Vaidya 0 into pharma. * **Resilient Core Growth Excluding Headwinds:** Excluding CPG and retail, underlying business growth reached approximately **26%**, reinforcing Fractal’s ability to deliver on its long-term **30% average growth target** over cycles. * **CPG Drag from Trade Policy Uncertainty:** Softness in CPG—Fractal’s largest vertical by revenue—was driven by tariff-related headwinds and client spending delays post April 2025 policy announcements, weighing on reported growth. * **Disciplined Vertical Expansion:** New verticals pursued only with credible, differentiated offerings, ensuring sustainable and high-quality growth. ## C. Regional Growth * **Europe Outperforms with Client-Led Expansion:** Europe delivered robust momentum with strong double-digit growth over nine months, driven by deepening relationships with existing clients. * **APAC Dip Due to Client Concentration Risk:** Decline in APAC attributed to reduced activity from a major telecom client, highlighting regional exposure to single-client dynamics. * **Stable Seasonality Supports Predictability:** Minimal quarter-on-quarter seasonality and absence of budget flush effects enable consistent, predictable revenue progression across fiscal periods. * **India AI Mission: Cost-Advantaged Compute Access:** Fractal leverages government-subsidized H100 compute via pre-negotiated vendor rates, enhancing margin efficiency for mission-critical AI projects. --- # 4. Product & Platform Progress ## A. Key Figures * **Fractal Alpha Growth:** **51% YoY** (9M FY26) · **Asper:** **43% YoY** · **Analytics Vidhya:** **69% YoY** * **Gross Margin Expansion:** **+276 bps YoY** (Fractal Alpha) * **Segment Loss Reduction:** **INR 54 Cr** FY23 → **INR 10 Cr** (9M FY26) ## B. Cogentiq & Agents * **Enterprise AI Leadership:** Positioned as a pure-play AI partner trusted by global enterprises to transform complex workflows, leveraging deep domain expertise and an ontological agentic layer atop foundational models. * **Differentiated Agentic Architecture:** Cogentiq enables workflow reimagining via specialist agents integrated with enterprise systems (e.g., SAP), avoiding model-layer competition while benefiting from advances in underlying LLMs. * **Innovation Velocity:** PiEvolve, the autonomous ML agent, ranked among world’s top performers on OpenAI’s MLE bench, signaling leadership in agentic AI and potential for broad productivity gains. * **Strategic R&D Focus:** Sustained investment in AI R&D—targeted at Fractal.ai, Cogentiq/Asper, and Vaidya—reinforces innovation moat and is expected to drive gross margin expansion and revenue acceleration. * **Trusted AI Framework:** Human-in-the-loop systems mitigate hallucination risks in enterprise settings, with tracking mechanisms to reduce intervention over time and build client trust. ## C. Fractal Alpha * **Strong Growth & Margin Trajectory:** Fractal Alpha delivered robust double-digit growth with significant margin expansion and sharply reduced losses, reflecting operating leverage despite continued reinvestment. * **Path to Profitability:** Segment loss narrowed to **INR 10 Cr** in 9M FY26 from **INR 54 Cr** in FY23, indicating clear progress toward breakeven. ## D. Vaidya & Healthcare * **National AI Ambition:** Vaidya.ai launched as a free, multimodal healthcare companion, with Vaidya 0 achieving a world-first 50+ score on OpenAI HealthBench (Hard), validating technical leadership. * **Scalable Public-Private Model:** Designed under India AI mission to serve 140 crore people, Vaidya aims to accelerate India’s frontier AI capabilities through real-world feedback at scale.