Fractal Analytics Bets Big On AI! CEO Reveals Why Demand Is Exploding | Business News | ET Now Fractal Analytics Co-founder & Group CEO Srikanth Velamakanni explains why AI demand is accelerating globally despite near-term margin pressure. He discusses the company's growth outlook, larger enterprise AI deals, the expansion of its Cogentic platform, and how AI is reshaping industries worldwide. Watch the exclusive ET Now conversation to understand where the next wave of AI-led enterprise growth is headed and what it means for investors. #ai #artificialintelligence #fractalanalytics #generativea...
What Srikanth Velamakanni said
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Srikanth Velamakanni, co-founder and group CEO of Fractal Analytics, addressed the sequential margin compression, attributing it to seasonal hiring and salary increases in Q1, and emphasized that year-over-year adjusted EBITDA improved from 15% to 17% and gross margins rose 29 basis points. He noted Europe grew 25% and the US 24%, with overall growth at 20%, driven by AI demand, though he admitted TMT execution was poor and took responsibility, expecting sequential TMT growth next quarter. He discussed Cogentic, the agentic AI platform, with a pipeline of $4 million and license revenue expected to rise from 3% to 20% over three years. He highlighted AI's role in reimagining workforces and processes, stressing trust and model optionality. He mentioned larger deal sizes, including a major healthcare payer deal, and expects continued growth.
Key takeaways
Adjusted EBITDA improved from 15% to 17% year-over-year, with gross margins up 29 basis points.
Europe grew 25% and the US 24%, while overall growth was 20%, with TMT execution lagging.
Cogentic pipeline is $4 million, and license revenue is expected to rise from 3% to 20% over three years.
Expects sequential TMT growth next quarter as the sector's AI capex pressures ease.
0:00What drove the sequential margin compression and do you expect it to persist going ahead?
1:32What is driving this growth and is it durable?
2:53What exactly is causing this drag and when do you expect stabilization or recovery over here?
4:32What is Cogentic's current revenue contribution and its expected trajectory this year?
5:56So, where do you see the biggest AI-led growth opportunity for the rest of FY27?
7:10All right, how are expanding deal sizes reflecting in the order pipeline and large deal wins and what is the outlook for sequential margin recovery and full year FY27 growth?
But we've also got Mr. Srikanth Velamakanni, co-founder and group CEO of Fractal Analytics. He was here to speak to us. Thank you, sir, for joining in. Tell us about the EBIT margin in the first quarter. EBIT margin dropped nearly 490 basis points on a quarter-on-quarter basis. PAT as well was seen falling about 38% despite the revenue growth that you've clocked. What drove the sequential margin compression and do you expect it to persist going ahead?
See, first of all, our margins are usually the highest in the fourth quarter, the lowest in the first quarter, and they gradually go up to the fourth quarter. This has happened historically every single year. So, the best way to look at margins is to look at year over year over year. And our adjusted EBITDA has gone up from 15 to 17%, 2-point improvement. Our gross margins are up 29 basis points. So, every single margin number has actually improved over the last year. So, on a year-over-year basis. So, that's the best way to look at it. That's while sequentially yes, they are down. That is sort of expected because usually we hire a lot in the first quarter. We have salary increases, etc. And over the year we bring our margins back up to the usual level. So, this is really a year-over-year trend. And best is to look at the year-over-year numbers in terms of profitability. And every single profitability number has improved year over year.
Number one, Europe grew by 25%, US grew by 24%. And we expect that given the explosion in demand for AI, we expect that this industry has phenomenal growth prospects. Yes, our overall growth has been 20% and that's because some of the pressures that we have seen in TMT, but if you see sectorally or geographically, there's opportunities everywhere. And because AI can fundamentally address several needs that are being addressed typically by IT services or business process outsourcing or business process management or management consulting, all these industries are now being disrupted with AI and therefore AI's total addressable market is expanding in such a way that is creating this opportunity for us to grow in every industry across every geography at a pretty significant clip. Overall growth rate for us has been 20%, but we expect that that number is more because of our execution, not because of our demand. We can grow faster and we should be growing faster as we get our execution into play.
Also tell us about excluding the TMT business which grew at 35%. What exactly is causing this drag and when do you expect stabilization or recovery over here?
First of all, I will take responsibility that our TMT execution has been less than stellar. And instead of blaming the sector or blaming clients, I think we should take responsibility that we haven't executed well. TMT as a sector is still growing. We should be growing there although we are not. So it is our execution and we are making some changes in order to improve our overall execution in TMT.
Having said that, let's also look at what's happening within TMT. TMT industry has significantly increased its AI capex. So because they're putting more, buying more chips, building more data centers, building capacity for AI explosion, because of which their AI investments are going up quite substantially from a capex standpoint. But from an opex standpoint, it's putting pressure because they have eventually, you know, a part of money and they're spending a lot more of that on AI capex. So, there is pressure in reducing the AI opex. And part of that is playing out in the way our opportunities have some of them went away or some of because of which our overall revenues have gone down. Eventually, we think that the massive opportunity in TMT, TMT is one of the largest industries for AI and we should be able to recover that growth. But for now, we've had a bad growth. Now, this growth is bottoming out. So, we expect that the next quarter we would have a sequential growth in TMT.
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Velamakanni, S. (2026, July 24). Fractal Analytics Bets Big On AI! CEO Reveals Why Demand Is Exploding | Business News | ET Now [Interview transcript]. ET Now. CEOInterviews.AI. https://ceointerviews.ai/interview/1157938/
MLA
Srikanth Velamakanni. "Fractal Analytics Bets Big On AI! CEO Reveals Why Demand Is Exploding | Business News | ET Now." ET Now, 24 Jul. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/1157938/.
BibTeX
@misc{velamakanni2026_1157938,
author = {Srikanth Velamakanni},
title = {Fractal Analytics Bets Big On AI! CEO Reveals Why Demand Is Exploding | Business News | ET Now},
howpublished = {Interview transcript, ET Now. CEOInterviews.AI},
year = {2026},
month = {jul},
url = {https://ceointerviews.ai/interview/1157938/},
note = {Speaker-attributed transcript with timestamps}
}
