Fractal FY26 Results: Revenue up 19% as margins and net income improve

Fractal closed FY26 with steady topline growth and a sharper focus on profitability. For the full year ended March 31, 2026, revenue from operations rose 19 percent year on year to INR 32,997 million. Net income increased 30 percent to INR 2,868 million, with the company noting that net income excluding associates was INR 3,571 million, up 43 percent. Gross margin improved to 47 percent, up 93 basis points, while adjusted EBITDA margin held at 18 percent.

The final quarter of the year was stronger on both growth and profitability. Q4 FY26 revenue from operations was INR 8,863 million, up 17 percent year on year, and net income more than doubled to INR 1,158 million, up 109 percent. That jump was backed by margin expansion across the income statement, and a continued improvement in operating efficiency, with Q4 adjusted EBITDA margin rising to 22 percent and operating EBIT margin reaching 16 percent.

Fractal positioned this performance as a mix of sustained client expansion and disciplined execution. Net revenue retention for the Fractal.ai segment came in at 112 percent for Q4 and 117 percent for FY26, pointing to rising wallet share among existing clients. The company also highlighted an industry leading client satisfaction signal, with a Q4 net promoter score of 81, up 6 points year on year.

A quarter defined by margin expansion and client depth

Q4 FY26 showed clear operating leverage. Gross margin was 48 percent, up 47 basis points year on year. Adjusted EBITDA expanded to INR 1,959 million, up 28 percent, taking margin to 22 percent, up 189 basis points. Operating EBIT increased 53 percent to INR 1,436 million, and net income margin reached 13 percent.

Management attributed the quarter’s net income growth to a broad based margin improvement, rather than a one off line item. The net income bridge showed incremental benefits from gross margin, operating cost leverage across SG and A and R and D, and a step up in other income. The bridge also referenced ESOP and one time retention costs, depreciation and finance costs, tax, and exceptional items as moving parts, but the end result was a sizeable increase in net income from INR 555 million in Q4 FY25 to INR 1,158 million in Q4 FY26.

Operationally, Fractal’s client franchise continued to deepen. Revenue per billable FTE, based on trailing twelve months data, was USD 85K or INR 7.5 million, up 5 percent year on year. The company also referenced cash flow from operations of INR 3,010 million in Q4, up 8 percent, which is consistent with the narrative of stronger profitability and improved cash conversion.

A diversified base with clear pockets of momentum

The company’s Q4 industry mix showed growth across most verticals, with one notable exception. In Q4 FY26, healthcare and life sciences grew 82 percent year on year and BFSI grew 42 percent, while consumer packaged goods and retail grew 11 percent and other industries grew 33 percent. Technology, media and telecom declined 19 percent in the quarter. The revenue split still remained diversified, with CPGR at 37 percent, HLS at 22 percent, TMT at 21 percent, BFSI at 13 percent, and others at 7 percent.

Geographically, growth remained broad based in Q4. Americas revenue grew 17 percent year on year and represented 68 percent of the revenue base. Europe grew 24 percent and contributed 18 percent, while APAC and others grew 7 percent and contributed 13 percent. The company clarified that geography is based on client billing location, which is relevant because it ties the revenue lens to customer contracting entities.

For the full year, the same themes held with slightly different growth rates. FY26 industry growth was strongest in healthcare and life sciences at 66 percent, followed by BFSI at 32 percent, CPGR at 12 percent, and others at 30 percent. TMT was down 1 percent. The FY26 revenue split showed CPGR at 37 percent, TMT at 25 percent, HLS at 19 percent, BFSI at 12 percent, and others at 7 percent.

Across geographies in FY26, Europe was the standout with 34 percent growth, while the Americas grew 20 percent. APAC and others declined 3 percent. The revenue split stayed concentrated in the Americas at 67.3 percent, followed by Europe at 19.9 percent and APAC and others at 12.8 percent. For investors, this concentration matters. The safe harbor statement directly flags that revenues are highly dependent on clients located in the United States, which makes sustained demand in the Americas, along with expanding Europe, a key watch item.

From services to platform led execution, with investments still visible

Fractal’s story is not only about quarterly numbers. The presentation places CogentIQ at the center of its proposition, positioning the company as a pure play enterprise AI firm delivering AI services, solutions, and products. The operating model is framed through three pillars: AI led transformation focused on business workflows, AI foundations focused on enterprise data and governance, and AI work and workforce focused on redesigning work and upskilling.

In practice, the company backed this positioning with examples that highlight where agentic AI is being deployed. One case described a pharma major where sales representatives took 3 to 4 days to respond to queries from healthcare professionals. Fractal built an agentic platform that delivers cited, confidence scored answers in seconds, enabling real time engagement and standardized evidence backed responses. Another case described a global CPG major where data engineers spent a day to build each data pipeline; an agentic AI engineering platform reduced build time from one day to about two hours, cutting effort by up to 75 percent.

These examples matter for two reasons. First, they show that the company is aiming to attach its AI capabilities directly to measurable time savings and process redesign, not only experimentation. Second, they provide context for the company’s sustained research and development investments. R and D investment was 6.4 percent of revenue in FY26 and 6.6 percent in Q4 FY26, with the company also noting R and D operating expenditure of 4.1 percent in FY26 and 4.2 percent in Q4.

The investment cycle also extends into product building and the broader group structure. The presentation highlighted FY26 performance for Fractal Alpha, where revenue increased to INR 908 million and gross margin reached 71 percent. The adjusted segment result improved to minus INR 146 million in FY26 from minus INR 257 million in FY25, showing steady progress in narrowing losses even as the business scales.

Balance sheet strength and cash discipline add flexibility

Alongside profitability, Fractal pointed to an improving cash and working capital profile. Days of sales outstanding declined to 72 days in FY26 from 74 days in FY25, and 86 days in FY24. Cash flow from operations for FY26 was INR 4,090 million, up 3 percent year on year, and management noted that it represents 70 percent of adjusted EBITDA.

The balance sheet also strengthened meaningfully with the IPO. Cash and cash equivalents as of FY26 end were INR 10,953 million, and IPO proceeds were INR 9,567 million, with the company stating that cash including mutual funds and fixed deposits was INR 20,520 million including IPO proceeds of INR 9,568 million net of offer expenses. The company also highlighted that it had zero long term debt, and noted that IPO proceeds were used to retire long term debt completely subsequent to March 31, 2026.

This liquidity matters because the strategy explicitly includes accelerating success through M and A, alongside partnerships with frontier AI labs, hyperscalers, data platforms, and enterprise software providers. A strong cash position and no long term debt gives Fractal room to fund early stage bets and execute acquisitions with less balance sheet strain.

What investors should take away

FY26 for Fractal reads like a year of steady growth with improving economics. Revenue rose 19 percent, gross margin expanded, and net income grew 30 percent, while Q4 delivered an even sharper profit step up. Client expansion signals were supportive, with net revenue retention at 117 percent for the year and an 81 net promoter score in Q4.

The more important thread is execution discipline. The company scaled R and D investments while keeping margins stable to slightly higher on the full year view, and it exited the year with a stronger balance sheet, better DSO, and solid operating cash flow. The strategy is clear: deepen must win client relationships, deliver through platform led and outcome driven execution powered by CogentIQ, and use partnerships and acquisitions to extend capabilities.

The near term questions for investors are straightforward. Can the company sustain margin expansion after a strong Q4? Will industry momentum in healthcare and life sciences and BFSI continue to offset softness in TMT? And can Europe keep growing faster than the overall base to gradually reduce concentration risk? The FY26 numbers do not answer all of these, but they show a company entering FY27 with stronger profitability, deeper client relationships, and meaningful financial flexibility.