Cofounder, Fractal
Can Fractal Analytics Return To 30% Growth? Group CEO On AI-First Strategy & 30% Growth Ambition
Fractal Analytics discusses its latest quarterly performance, the outlook for key business verticals, and its AI-first strategy. The company's leadership also shares why AI remains central to its business.
Watch the full interview for all the key insights.
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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 (13 segments)
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Host0:00
We're going to be speaking with Srikanth Velamakanni, the co-founder, group chief executive, and executive vice chairman of Fractal Analytics on what the company is doing going ahead. But, Srikanth, hold on. We're just getting Puneet, our colleague who tracks your sector to do a quick setup of what the numbers were like.
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Puneet0:18
Well, thank you for that. As you rightly mentioned, the quarter-on-quarter performance was slightly weaker because revenue grew 3% while the EBIT was down in this particular quarter by almost 28% and margins hence are affected by almost 440 basis points. Now, while the biggest sector, the consumer packaging sector, has done well for the company in this quarter, healthcare has now taken in as the second biggest vertical, and that is a key positive. But there is some pressure seen on the TMT sector. Now, we have seen that within the industry, players like HCL Tech have also called out some pressure visible in that space. So that will be one of the questions as to what they are seeing right now in this particular vertical, will the growth be visibly back? And for BFSI as well for the company, it's a slightly smaller vertical compared to the larger industry players, how does that growth go through there? And if healthcare will continue to have this dominant growth, while of course a lot of questions on AI continue to be one in the company's journey on the same.
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Host1:15
Okay. Let me go across to Srikanth. Srikanth, first of all, thank you so much for speaking with us. Always a pleasure to have you on with us on NDTV Profit. Let's start by understanding the quarter on a quarter-on-quarter basis is a bit of a slide. Was this a tough quarter?
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Srikanth Velamakanni1:33
See, overall, there are seasonalities in this business. Therefore, the best way to look at this business is year-over-year, and we have 20% growth in rupee terms year-over-year overall revenue, and our profits, every single gross margin or EBITDA margin or EBIT margin, every single margin number has trended in the right direction. So, Fractal overall profitability-wise doing really well vis-a-vis last year. One of the things that we were asked when we went when we are going public was that our margins going to be consistent. Can you deliver consistent margins? Yes, our gross margins have always been very consistent, high 40s, almost close to 50. But EBITDA margins were up and down a little bit, but now we have made sure that our profitability numbers look really good and they continue to improve every quarter. So that's the good news. Overall revenues at 20% is sort of okay, but we would like to have had that number at a much higher number. And if you look at our growth excluding TMT, it's 35%. So TMT is a negative 22% quarter vis-a-vis last year. So that's really what has pulled down the overall growth from 35 to 20 overall. And we expect that the TMT vertical will start to bottom out in terms of its degrowth and start to next quarter we'll see sequentially better quarter than this quarter. And so, therefore some of the problems that we're seeing right now will start to get resolved in the coming quarters.
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Host3:01
I take your point, Srikanth, but you know, a lot of the same industry is looked at in a quarter-on-quarter basis. I understand your point that look at it year-on-year, there might be some seasonality. Would the good performance of healthcare, which has in a sense mitigated some of those TMT losses, also be subject to that seasonality or you expect that to sustain?
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Srikanth Velamakanni3:25
TMT is doing really well as a vertical for Fractal and we expect it to continue to do really well for this
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Host3:31
Healthcare, I'm asking about healthcare. Are you referring to healthcare?
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Srikanth Velamakanni3:33
Yes, I'm talking of healthcare. Sorry. Our healthcare life sciences vertical is the second largest vertical now. It has done really well over the last couple of years and we expect it to continue to do well. TMT I think has had the problem. It is bottoming out overall. So which means that the next quarter it will have a sequential growth. Overall, AI opportunity is so huge across so many sectors that really it is our execution which is far more important than just a sector per se. Wherever we're executing well, we are seeing tremendous growth ahead of us. And as we improve our execution in TMT, we should see TMT also starting to grow.
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Alex4:09
Sreekanth, morning. Alex here. So, you say that 20% growth is what you achieved and you say that you would have wanted it to be higher. So, I'm just trying to understand from your perspective, where does that number lie? What are you comfortable with? What is that aspirational figure? And do you anticipate that you will be able to play catch up? You say that TMT is going to get back into the right track in the second quarter, but will you be able to catch up with what you had anticipated for FY27?
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Srikanth Velamakanni4:41
Overall, we don't provide guidance. So there is no number to catch up to in that sense. Having said that, do we expect or do we want our growth to be higher? Absolutely. What growth would I be happy with? We should be happy with growth that exceeds 30% overall. That would be the happy growth number. We're not there right now. And what we're doing is to construct the company in the right way so that we can deliver a 30% growth year over year consistently for the next many years. So that foundation work is happening right now. We've organized the company into three vectors. Number one, AI led transformation. As companies start to reimagine their workflows with AI, AI led transformation of every business function, process, service is going to be very important. And that could be a multi-trillion dollar opportunity. Number one. Second is to in order to do this AI led transformation, you need to build AI foundations, build the knowledge layer, the context layer, the ontology layer of your organization so that you can do transformation. So that's the AI foundation layer. And three is you have to reimagine your work and workforce with AI. So we're helping companies do that as well. So these are the big three opportunities in front of us and we expect that as we execute better on all of these, our growth rate will start to pick up quite well.
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Host5:58
Okay, I do want to ask you about AI-led deals and of course the answer that a lot of people have given us to questions on AI is that every deal has AI embedded. So let me ask you this, right? When you talk about the offerings that you have, I'm trying to understand the margin contribution for each of the sub-levels of AI. So if you're talking about agentic or you're talking about generative or you're talking about classical, what is the kind of breakup that you have and where are you most prevalent?
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Srikanth Velamakanni6:25
See, first of all, when people say that AI is part of every deal, you're talking of a generic tech services answer to that question. And because most of the tech services companies are actually building the engineering backbone of the organization, now they can use AI to build that engineering backbone and to that extent AI is part of that. From a Fractal vantage point, Fractal's business is in powering decisions of the companies, helping companies improve their growth rate, understand customers better, understand their profitability levers better, improve operational effectiveness, improve new product introduction. We solve these kinds of business problems and power decisions inside organizations and here we are an AI first company. We just do AI, we do nothing else. From our vantage point, as you rightly said, we do classical AI, which is using AI to improve decision-making using structured data. Now, that has been a large part of Fractal's business, it continues to be very important, but now you have agentic AI in everything, right? You have to add agentic AI in the way you solve problems. To give you an example, we built a data science agent called Pi evolve, which is now called Cogentic data science. Now, this is an agent that does data work. So it's an agent, but it does solve data science problems. So you will see the blurring of these boundaries between classical AI, GenAI, and agentic AI. From our vantage point, it's all AI, and you use all of the levers to solve business problems and power decisions inside companies.
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Host7:58
That's a good answer. Srikanth, thanks so much for taking the time. Wish you all the best in FY27. We'll speak soon enough.