Cofounder, Fractal
Fractal Analytics FY27 Outlook | Cogentiq Platform Is Seeing Strong Growth, Says Company | CNBC TV18
FY27 Outlook | Srikanth Velamakanni Of Fractal Analytics to CNBC-TV18
Cogentiq platform is seeing strong growth
Product investment & revenue are growing better than overall business
Globally tech spends will increase hereon
#fractalanalytics #2026growth #businessexpansionplans #2026dealwins #investmentplans #globaltechspends #revenuegrowth #margingrowth #earningsgrowth #margingrowth #ebitdamargingrowth #cnbctv18 #cnbctv18market #businessnews #businessnewstoday #businessnewsinenglish #sharemarkettoday
🔴CNBC TV18 LIVE TV: https://youtube.com/live/P857H4ej-MQ
SUBSCRIBE to our Channel: h...
About Srikanth Velamakanni
Srikanth Velamakanni, co-founder and group CEO of Fractal Analytics, discussed the company's Q1 FY27 results in July 2026, reporting a 92% year-on-year increase in net profit and 20% revenue growth. He attributed the performance to strong demand for AI services, particularly in the BFSI and healthcare sectors, and said the company's margin expansion was driven by operating leverage. Velamakanni described the quarter-on-quarter profit decline as a seasonal blip due to salary increases and campus hiring, and stated that the TMT vertical's 22% year-on-year decline was linked to clients shifting from AI operational expenditure to capital expenditure. He expressed confidence that TMT would return to sequential growth in the following quarter. Velamakanni has stated that Fractal's 20% growth rate is below the company's ambition, and that he would be satisfied with growth exceeding 30% year-over-year. He described Fractal as an "AI first company" that uses classical AI, generative AI, and agentic AI to solve business problems. He has called on Indian IT services companies to increase their R&D spending from roughly 1% of revenue to at least 3%, noting that Fractal spends about 7% of revenue on R&D. In a May 2026 address at the NASSCOM GCC Summit, Velamakanni argued that the AI industry is not in a bubble, citing real progress on benchmarks and a major platform shift, and said the "best days of tech" are ahead. He also predicted that global tech spending growth would remain low single-digit for the current year but would begin to expand within 12 to 18 months.
Transcript (19 segments)
R
Reema0:12
Welcome back. You're watching Corporate Radar. Now, let's talk about the IT space. Remember, IT plummeted on Friday after Accenture cut the guidance. What's the read-through? We have with us Srikanth Velamakanni, cofounder, group CEO at Fractal Analytics. Srikanth, great to have you this morning. You know, I'm going back to that town hall conversation that we had when you came down to our studio and we'd asked you the prescription for Indian IT going ahead. And you said that companies need to take some short-term hits. They need to increase their R&D spend. It's okay if the margins reduce. They need to convince the street about it because that's what it takes for long-term sustenance. And you know, I'm just tying in with what Vishal Sikka, the former Infosys CEO, recently said on Voices of the Valley to CNBC-TV18. He's actually arguing for IT and SaaS companies to consider going private because then they can take those bold, radical calls for innovation. I mean, you, you know, since the last one, two months since we spoke, things are again changing. They're changing rapidly. What is your view on Indian IT from now on? And talk to us about how they need to reinvent themselves.
S
Srikanth Velamakanni1:15
The first thing to realize is that the demand for software, for tech, is only increasing. Companies are becoming more and more tech-centric, tech-intensive. Therefore, overall, people will spend more on tech than they have spent traditionally. So, which means that the opportunity space is large. The only question is, how will the tech services industry capture it? And they can capture it if they can move from input-based models to output-based models, bring in more productized revenue, and increase the overall R&D investments into what they're building. I think they will be ready to capture that much expanded market in the next couple of years. I foresee that the best days of the tech industry are well ahead of us. It's just a short-term blip that companies have to find ways to encounter and grow from.
R
Reema2:09
You know, tech spends undoubtedly are going up, but it's getting redirected towards the infrastructure side. The services spend seems to be compressing. How long do you think that will last? And do you think the only way for the Indian IT companies to thrive, not survive, is to go beyond services? Or do you think the services spend itself will expand after this initial period of compression?
S
Srikanth Velamakanni2:35
What you're saying is that overall the world economy is growing by 2 to 2.5% a year, whereas the tech spends are growing by about 13% a year. So, there's a major gap between the growth rate of the world versus the growth rate of tech. That's an expanded opportunity. A lot of that, like you rightly said, is going towards infrastructure, is going towards tokens, and so on. But, what you will see eventually is that every company in the world will need to transform itself through technology, through AI. And therefore, even the service opportunity will expand dramatically in the coming years. The way it will work is that let's say you need 100 units of work to finish a task. Earlier, it was 100 units of people time. Now, it's probably only going to be 20 or 10 units of people time. But then, the total amount of work dramatically expands through what is called a Jevons paradox. So, therefore, the services spend will also expand, but if you are trying to be undifferentiated, you will be struggling. You have to be very differentiated. You have to bring in AI, and you'll certainly build products as well as a way to overall expand your revenues and expand your margins over the next few years.
R
Reema3:46
And that point that Vishal Sikka made that companies must consider or think about going private because that gives you the freedom to innovate without getting tied up in quarter after quarter numbers and reporting. I mean, it's a radical thought, but do you think it's far-fetched or do you think that's what's needed right now?
S
Srikanth Velamakanni4:05
Well, this is not the first time that would have happened, and any company that needs to, let's say, structurally reinvent itself, it makes sense for them to go private and fix whatever has to be fixed and come back into being public. That works. My sense is that at this point in time there is peak fear. There's peak fear about technology services stocks. You can see with what happened in Accenture over the weekend and so on. The key thing right now is that the market will understand if you're going to say, 'Hey, I'm going to let my margins suffer a little bit. Let me increase my R&D intensity. Let me come back in a different avatar.' They don't have to necessarily go private in order to do that. The market will understand if they're making structural adjustments in order to be much more competitive in the next couple of years.
R
Reema4:51
So, R&D spends. Now, broadly Indian IT as an industry may be spending one, one and a half percent of their overall revenues. You are at six and a half percent and you've spoken publicly about going to 10%, and many of the global companies are, you know, 10, 20, even 30% in some cases. At least to begin with, what should be the number that, you know, by how much should the R&D spends go up by?
S
Srikanth Velamakanni5:17
So, firstly, let's look at product companies. They spend roughly 14% of revenue on R&D. Services companies are currently spending about 1% or less than 1% of revenue on R&D. Fractal sits in the middle at about 7% of revenues on R&D. I would expect that most of the services companies should go at least to 3% of revenue as R&D. That would give them a really good opportunity to build things that the world needs. AI is really changing the way the world works and it is giving an opportunity to reimagine every business process with AI. So, what it does is that if you build those products, you can certainly be a part of that transformation, drive your licensing revenue and move from input to output-based models. Right now, a lot of the industry is in a commoditized selling-people's-time kind of stage. That is the part that gets compressed very badly and therefore companies have to move away from selling people and time into more output-based, outcome-based, license-driven models.
R
Reema6:23
Should they also—that's of course one part of the pivot, moving from labor arbitrage, input-based to outcome-based. But should they also consider building products?
S
Srikanth Velamakanni6:33
Yes, why not? I think the entry barriers to building products has come down. You can use AI to write code and you can write 10,000 lines of code. You can write really deep products. The world is full of opportunities and anyone who has a focus area can go really deep and build a very high-quality product today. And if startups can do it, so can big companies. What big companies have to do is to increase that R&D intensity and second, increase the density of talent. By that, I mean increase the quality of talent rather than just quantity of talent.
R
Reema7:07
So, just getting back to that point about Accenture, they lowered the upper end of the guidance. Now, I think NASSCOM's guidance for growth for this year is 6.1%, similar to last year. Is that the number we're working with and is there a risk to that?
S
Srikanth Velamakanni7:22
My sense—I don't have the exact number with me right now. My sense is that the numbers will be low single digit for this year, but will start to expand about 18 months from now. My guess is that some of the structural challenges and also caused by macroeconomic headwinds and the wars in the Middle East and so on, these will all continue to play for some time, but within 12 to 18 months from now, you will see that the compression would have played itself out to some extent. Companies would have emerged with newer capabilities, and given the macroeconomic improvements, companies will start to see growth. Therefore, I think it is about having patience for about 12 to 18 months from here.
R
Reema8:06
Okay. So, FY29 is when perhaps things start getting better, but for this year we should prepare ourselves for a low single-digit kind of revenue growth. How has Q1 shaped up for you, Srikanth, for Fractal Analytics? I mean, when we last spoke, I think it was April on the quarterly numbers, you'd said FY27 should be better than FY26.
S
Srikanth Velamakanni8:26
Overall, our expectations from FY27 is that it should be better than FY26 for sure. And we are obviously now beginning to enter the quiet period, so I'm not going to talk about our Q1 numbers, but overall, we continue to stay bullish about how Fractal is shaping up and how we are building products, how we are building Cogent Tech as our flagship product, how we are seeing the progress of Vaidya and our medical foundation model, and overall bullish about where the company is going from here.
R
Reema8:53
Okay. And just one final word on Fractal Alpha. You know, that is that big optionality that investors in Fractal Analytics have. I think currently it's about 90 crore in revenue, losses are coming down. It was 14 crore. What do those numbers look like three years, five years? And are there any new big AI-related bets that you're making, whether it's related to sovereign AI or sovereign LLM frameworks?
S
Srikanth Velamakanni9:18
So, Fractal is betting on a number of AI products. For example, our Cogent Tech platform is expanding nicely. We launched our Cogent Tech e-commerce product, which helps companies accelerate their e-commerce revenue. Just last week, we are increasing our investments into Vaidya, which is our medical foundation model. You'll see some interesting stuff happening there in the next few months. We're also increasing our Asper investments. So, Asper is our revenue growth management platform. It's part of our Alpha portfolio. It's expanding very rapidly. Overall, what you're seeing is that the product investments and product revenues are expanding quite well relative to the overall business.
R
Reema10:02
Srikanth, a great conversation. Thank you very much for joining in. Look forward to chatting with you when the numbers come out. You know, so many estimates are that Fractal will continue to grow at 17, 18, 19% at a time when the industry itself is struggling to grow in mid to high single digits. So, Fractal has been outperforming just going by what market estimates are that about an 18% revenue CAGR is what the street has for this year and the next two years.
S
Srikanth Velamakanni10:27
Got that, Reema.
N
Narrator10:32
For over 25 years, CNBC-TV18 has been the guiding force for investors, steering them through the markets. Start your trading day with cutting-edge insights and expert analysis. Seize every opportunity by decoding the forces that drive the market. Equip yourself with strategies and guidance from India's biggest market makers. Invest with confidence as we beam live from the CNBC-TV18 Motilal Oswal studio.