Fractal Analysis Profit Soars 139% as Healthcare Drives Growth – Unite.AI

Fractal Analytics surpassed $100 million in quarterly revenue for the first time and grew net profit 139% to 792 million rupees in the fiscal second quarter, according to results released Nov. 3, 2026. Operating revenue increased 20% year-over-year to 9.565 billion rupees.

The second quarter financial manual separates the core earnings measure from the Fractal adjusted earnings measure. EBITDA increased by 71.4% to INR 1.557 billion, while adjusted EBITDA increased by 29.6% to INR 1.549 billion. The company’s adjusted version starts with EBITDA and takes into account items such as employee stock option expenses, other revenue and an associate’s share of a loss. The adjusted EBITDA margin was 16.2%, compared to 15.0% in the previous year, while the profit after tax margin reached 8.3%, compared to 4.2%.

Finance costs fell to INR 53 million from INR 115 million, while depreciation and amortization rose to INR 472 million from INR 335 million. Lower financing costs helped profits, while higher depreciation and amortization partially offset that benefit, adding context to the strong increase in net income.

Healthcare grows while the TMT contracts

Healthcare and life sciences revenue grew 79% year-over-year and represented 25.1% of the quarterly industry mix. Banking, financial and insurance services grew by 30% and accounted for 13.6%. Consumer packaged goods and retail remained the largest vertical at 34.7% of revenues and grew 11%, while TMT grew 6% sequentially but fell 18% year over year.

In his letter to shareholders, group co-founder and CEO Srikanth Velamakanni said the group grew 33% in rupee terms excluding TMT and described constant currency growth of 10% as lower than the company’s ambition.

It primarily attributed the decline in gross margin of 225 basis points to 44.0% to investments ahead of talent growth in AI engineering. Separately, R&D investments stood at INR 397 million, or 6.3% of revenue.

Cogentiq and Fractal Alpha expand

According to the shareholder letter, Fractal products, including its flagship agentic AI platform Cogentiq, achieved annual revenue of INR 1.53 billion, up 39% year-on-year.

Fractal.ai’s core segment generated revenues of INR 9.361 billion, up 20.7%. The adjusted margin on segment results was 17.7%, compared to 17.5% in the previous year; Fractal calculates the underlying measure by adding the costs of employee stock options, including cash bonuses and acquisition retention bonuses, to the segment results.

Net revenue retention in Fractal.ai, which tracks spending across an existing customer group including expansions and contractions, improved to 115.2% from 112.2%. Six customers contributed more than $20 million annually, up from four the previous year.

Fractal Alpha’s revenue grew 39.9% to INR 340 million. The segment’s adjusted loss widened to INR 104 million from INR 84 million, but adjusted margin improved to negative 30.6% from negative 34.6%, leaving the smaller business growing alongside continued losses.

Cash conversion delays accounting profit

For the six months ended September 30, 2026, revenue reached INR 18.69 billion, up 20%, and net profit reached INR 1.515 billion, up 114%. Velamakanni described first-half revenue growth as entirely organic. Quarterly cash flow from operations was INR 793 million following an outflow of INR 1.03 billion in Q1FY27.

The unaudited balance sheet recorded 237 million rupees of net cash used in operating activities for the half-year, compared to 214 million rupees a year earlier. Trade receivables took up 1.4 billion rupees of working capital during the period, helping to explain why higher accounting profit coexisted with negative operating cash flow.

Fractal ended the period with 17.28 billion rupees in cash and investments and no long-term debt, according to Velamakanni’s letter. The balance sheet listed no current borrowings, compared to INR 2.86 billion as of March 31, 2026.

The results reveal a clear operational tension: healthcare, products and large customer portfolios are expanding, while TMT is contracting, gross margin is under pressure and first-half operating cash flow remains negative. The central question is whether Fractal will be able to convert its faster profit growth into cash, while supporting investments in engineering and AI products.