Affle Q4 FY2026: Steady CPCU Compounding, AI-Led Execution, and a Clear M&A Setup

Affle 3i Limited closed Q4 FY2026 with another quarter of year-on-year growth and extended its sequential growth streak. Consolidated revenue from contracts with customers rose to INR 7,244 million, up 20.3% versus Q4 FY2025 and 1.0% versus Q3 FY2026. EBITDA increased in line with revenue to INR 1,612 million, while PAT grew 16.0% year-on-year to INR 1,195 million.

For the full year FY2026, the company reported consolidated revenue of INR 27,093 million, up 19.5% year-on-year. EBITDA grew faster at 26.3% to INR 6,101 million, lifting EBITDA margin to 22.5% from 21.3% in FY2025. PAT rose 19.1% to INR 4,549 million, with PAT margin broadly stable at 16.3%.

A CPCU Business That Keeps Scaling

Affle’s operating narrative remains anchored to a single outcome metric. The company stated that 99.2% of revenue from contracts with customers in FY2026 was contributed by its CPCU model, where CPCU revenue is driven by the number of conversions and the average CPCU rate.

In Q4 FY2026, conversions increased to 120.3 million from 104.0 million in Q4 FY2025. Average CPCU rose to INR 60.0 from INR 57.8. This translated into CPCU revenue of INR 7,217 million in Q4 FY2026, compared with INR 6,007 million in Q4 FY2025.

On an annual basis, FY2026 conversions stood at 456.0 million versus 392.8 million in FY2025. Average CPCU increased to INR 58.9 from INR 57.5, resulting in CPCU revenue of INR 26,873 million for FY2026.

Financial summary

Geography: Emerging Markets Still Dominate, Developed Markets Stay Resilient

Affle disclosed a market-wise revenue split for Q4 FY2026. India and Emerging Markets contributed 71.6% of revenue, while Developed Markets contributed 28.4%. Growth was broad-based: India and Emerging Markets grew 21.2% year-on-year, while Developed Markets grew 18.0%.

In the concall, management noted that select markets and verticals saw temporary softness in Q4 due to geopolitical events. Despite this, the company reiterated that it delivered its 13th consecutive quarter of sequential topline growth.

Margins: A Deliberate Investment Phase in Data and Inventory

While EBITDA margins held up, analyst questions focused on gross margin compression in recent quarters. Management explained the trade-off directly. The company is pushing deeper verticalization, direct advertiser integrations, and premium positioning focused on higher lifetime value users. That strategy requires sourcing premium device models and premium touchpoints, as well as expanding beyond mobile into CTV. Accounting-wise, these investments are reflected in inventory and data costs.

In Q4 FY2026, inventory and data costs were INR 4,583 million, or 63.3% of revenue. Management framed this as range-bound within unit economics and called it a conscious investment phase to build deeper audience intelligence and advertiser intelligence. Importantly, management indicated a rough timeline: about a year to achieve the required level of verticalization and intelligence build-out, and then another year to see margin levels improve as the investment intensity moderates.

AI and platform differentiation: OpticksAI, Niko, and human vs non-human filtering

The company positioned AI as both a productivity lever and a competitive moat. Management stated that OpticksAI and Niko have been integrated into its consumer and native capabilities, with upskilling efforts to embed AI into day-to-day workflows. The stated outcome is better creative optimization, more automated campaign management, and improved execution across iOS and Android, with spillover into CTV.

A key point in the concall was the emphasis on human versus non-human filtration. Management argued that as agentic AI tools proliferate, advertisers will demand clarity on whether engagement is human, authenticated agentic AI acting for humans, or noisy non-authenticated activity that resembles fraud. Affle linked this to its historical IP position, stating that it has been filing patents related to distinguishing human versus machine activity since 2017, and that this capability is becoming more relevant as the ecosystem evolves.

Affle disclosed a total patent portfolio of 39 unique patents, with 18 granted and 21 filed or pending. Management stated it received 5 new patent grants during the year.

Balance sheet strength and a new capital move for acquisitions

Affle ended FY2026 with a strong consolidated balance sheet. As of March 31, 2026, the company reported cash and liquid investments of INR 17,921 million and total borrowings of INR 119 million. Operating cash flows increased to INR 5,023 million in FY2026 from INR 4,260 million in FY2025.

The most material corporate update alongside results was the board’s approval of a preferential issue of warrants to the promoter entity, Affle Holdings Pte. Ltd. The company approved issuance of up to 7,400,000 warrants at an issue price of INR 1,487 per warrant, aggregating to approximately INR 11,003.8 million. The structure requires 25% payment upfront and 75% at conversion. The warrants can be exercised in one or more tranches within 18 months, and unexercised warrants would lapse with forfeiture of the amount paid.

Management connected this decision to inorganic growth readiness. It stated that it has evaluated more than 10 opportunities and shortlisted about 4 for deeper due diligence and negotiations. Management also indicated there is a realistic chance to conclude a meaningfully sized transaction within calendar year 2026, subject to diligence and definitive agreements.

Takeaways

Affle’s FY2026 results reinforced a familiar pattern: predictable growth driven by CPCU conversion volume and pricing, improving full-year EBITDA margin, and strong operating cash flows. The more nuanced debate is around margin mix and data costs. Management has acknowledged the current investment phase in premium touchpoints and verticalization and has provided a directional timeline for when the benefits should begin to show.

The additional capital move through promoter warrants is a clear signal that the company is preparing for acquisitions, with management describing an active pipeline and a desire to move quickly when the right asset is available. The next leg of the story will likely be defined by how effectively Affle can translate its verticalized CPCU playbook into developed markets at larger scale, whether organically or through inorganic execution.