Fractal Group Q2 net income rises 139% to Rs 79.2 crore

In Q2 FY27, Fractal recorded net income of Rs 79.2 crore, up 139% year on year, as revenue from operations reached Rs 956.5 crore in its first quarter above $100 million and net-income margin rose to 8.3% from 4.2%.

How did Fractal cross its first $100 million revenue quarter?

Fractal generated Rs 956.5 crore in Q2’27 revenue from operations, its first quarter above $100 million, with 20% organic growth in rupee terms and 10% organic growth at constant currency. Revenue per billable full-time equivalent, calculated using trailing-12-month data, increased 2% year on year to Rs 75 lakh.

Fractal.ai reported net revenue retention, or NRR, of 115% in Q2’27. NRR measures revenue retained and expanded from clients present at the start of the period, including upsells, cross-sells and contractions; Fractal’s bridge showed 15% growth from existing clients, 5% from new clients and 0% churn, with total growth of 21%.

The number of larger Fractal.ai client relationships also rose in the trailing 12 months ended September 2026. Clients in the source-defined above-$1 million annual-revenue category increased to 58 from 52 a year earlier, while above-$5 million relationships rose to 20 from 17; the above-$20 million category increased to six from four.

Why did Fractal’s profit grow faster than revenue?

Fractal’s net income grew faster than revenue because operating profitability expanded despite lower gross margin. Management attributed the 123-basis-point improvement in adjusted earnings before interest, taxes, depreciation and amortisation, or EBITDA, margin to operating leverage, while attributing the short-term gross-margin impact to investment in artificial-intelligence engineering talent.

Gross profit increased by Rs 51.5 crore to Rs 420.5 crore, but gross margin fell to 44.0% from 46.2%. Operating earnings before interest and taxes, or EBIT, excludes other income, share of loss of associates and exceptional items; its margin increased to 10.8% from 7.9%, a 281-basis-point change.

Net-income margin reached 8.3% in Q2’27, compared with 4.2% in Q2’26, a 413-basis-point expansion. Net income excluding the associate was Rs 102.4 crore, while basic earnings per share rose 119% year on year to Rs 4.71; diluted earnings per share were Rs 4.48, up 132%.

Which industries and regions drove Fractal’s Q2’27 growth?

Consumer packaged goods and retail, or CPGR, was Fractal’s largest Q2’27 industry, contributing 34.7% of revenue and growing 11% year on year. Healthcare and life sciences, or HLS, represented 25.1% of revenue and grew 79%, the fastest rate among the five disclosed industry groups.

Banking, financial services and insurance, or BFSI, accounted for 13.6% of revenue and increased 30%, while Others, comprising largely energy, travel and industrials, contributed 8.7% and rose 47%. Technology, media and telecom, or TMT, represented 17.9% of revenue but declined 18%, contrasting with Fractal’s total revenue growth of 20%.

The Americas represented 67.3% of Q2’27 revenue and grew 22%, exceeding the group’s 20% rate. Europe accounted for 21.5% and grew 20%, while Asia-Pacific and other markets contributed 11.2% and grew 7%; Fractal bases these geographic figures on client billing location.

What do client satisfaction and Fractal Alpha results show?

Fractal.ai’s net promoter score, or NPS, was 76 in Q2’27, down from 77 in Q1’27 and 81 in Q4’26. Fractal calculates NPS as the percentage of clients scoring 9 or 10 on willingness to recommend less the percentage scoring 6 or below.

Fractal Alpha recorded Q2’27 revenue of Rs 34 crore, up 40% year on year in rupee terms and 32% at constant currency. Its gross margin declined to 54% from 62%, while its adjusted segment loss widened to Rs 10.4 crore from Rs 8.4 crore.

Fractal said the Fractal Alpha margin reflected Analytics Vidhya’s shift to enterprise clients, and management said asper momentum was building into the second half. The segment’s FY26 numbers were restated after Iqigai and edtech-related teams moved from Fractal.ai into Fractal Alpha, making the Q2’26 Rs 24.3 crore revenue comparison consistent with the revised reporting structure.

What changed in Fractal’s cash flow and working capital?

Fractal generated Rs 79.3 crore of cash flow from operations in Q2’27, down from Rs 107.4 crore in Q2’26. Trailing-12-month operating cash flow rose to Rs 406.7 crore from Rs 367.8 crore, so the quarterly decline occurred alongside a Rs 38.9 crore increase in the longer-period measure.

Days sales outstanding, or DSO, increased to 76 days in Q2’27 from 71 days in Q2’26. Billed DSO rose to 58 days from 52, while unbilled DSO fell to 18 days from 19, leaving the billed component as the driver of the five-day increase.

Cash, cash equivalents, mutual funds and fixed deposits totalled Rs 1,727.7 crore at the end of September 2026, including Rs 607.8 crore of initial public offering proceeds net of offer expenses. Cash and cash equivalents before the separate IPO-proceeds line were Rs 1,119.9 crore, compared with Rs 794.7 crore in Q2’26.

Conclusion

Fractal combined 20% Q2’27 revenue growth with a 139% increase in net income as adjusted EBITDA, operating EBIT and net-income margins expanded. The 225-basis-point gross-margin decline did not prevent net-income margin from rising to 8.3%, reflecting the operating leverage management identified during the quarter.

The next results will show whether investment in AI engineering talent continues to affect gross margin or is absorbed by operating leverage. Management also cited asper momentum into the second half, while Fractal Alpha reported a Rs 10.4 crore adjusted segment loss and products reported an annual run-rate above Rs 150 crore.