Fractal’s first US$100m quarter: revenue up 20%, half of that growth from currency

01What Fractal sells

Mostly people. On the call on 4 November the chief financial officer, Shilpa Kedia, said 58% of revenue came from input-based engagements, billed for the people and time put in, and 42% from output- and outcome-based ones, “including 4% from products”. Products earned ₹38 crore in the quarter, and the portfolio runs at more than ₹150 crore a year, up 39%, the chief executive, Srikanth Velamakanni, said; contracted product revenue not yet recognised is over ₹200 crore.⁴ The products are built on Cogentiq, its agentic AI platform, which clients also use directly (Cogentiq Invoice to Cash and Cogentiq CX are two).⁴ A separate unit, Fractal Alpha (Asper.ai, revenue-management software for consumer-goods companies, and the edtech platform Analytics Vidhya),¹ earned ₹34 crore, up 40%, with an adjusted segment loss of ₹10 crore.⁴

The target is far off. Asked about a goal of products reaching 20% of revenue, Velamakanni said “we aim to do roughly a $100 million run rate by the time, in about 12 quarters from now” and called it “a tall order”.⁴

02Why half the growth is currency

Fractal bills 67.3% of its revenue in the Americas and 21.5% in Europe,³ and reports in rupees. When the rupee weakens, the same dollar and euro invoices turn into more rupees. The weaker rupee also flattered margins: gross margin fell 225 basis points to 44%, after hiring AI engineers cost 279 points and annual pay rises 216, while “the weaker rupee provided a benefit of 270 basis points,” Kedia said.⁴ Adjusted EBITDA margin rose 123 basis points to 16.2%.⁴

03Which clients grew

Healthcare and life sciences grew 79% and banking and insurance 30%. Consumer goods and retail, the largest industry at 34.7% of revenue, grew 11%, and revenue from technology, media and telecom clients fell 18%.³ Velamakanni put the consumer slowdown down to “inflation and consolidation in this sector” and said technology, media and telecom “has bottomed out”, growing 6% on the previous quarter.⁴

Existing clients spent more: in the main Fractal.ai business, net revenue retention was 115%, from 112% a year earlier, and 58 clients paid over US$1m a year, from 52. The ten largest clients’ share of revenue fell to 51.7% from 53.2%.⁴ Excluding its share of losses at Qure.ai, the healthcare AI company it incubated and spun out, net income was ₹102.4 crore.¹³