Fractal Analytics (FRACTAL) Q2 26/27 earnings summary

Executive summary

• Q2 FY27 revenue reached INR 9,565m, up 20% YoY and 10% in constant currency, marking the first quarter above $100m; net income rose 139% to INR 792m.

• H1 revenue was INR 18,690m, up 20% YoY, and net income rose 114% to INR 1,515m.

Financial highlights

• Q2 adjusted EBITDA increased 30% to INR 1,549m, with margin up 123 bps to 16.2%; operating EBIT rose 62% to INR 1,029m.

• Q2 gross profit rose 14% to INR 4,205m; gross margin was 44%, down 225 bps YoY.

• Q2 net income margin expanded 413 bps to 8.3%; excluding associate losses, net income was INR 1,024m, or 10.7% of revenue.

• H1 adjusted EBITDA grew 32% to INR 3,086m, with margin up 155 bps to 16.5%; operating EBIT increased 51% to INR 2,060m.

• H1 net income excluding associate losses was INR 1,981m, or 10.6% of revenue, versus reported net income of INR 1,515m.

Outlook and guidance

• Management expects gross margin to recover significantly in Q3 and Q4 as wage-hike timing normalizes and forward-deployed AI engineering capacity is deployed.

• CPG is expected to grow sequentially in Q3 and Q4, with stronger overall growth by next fiscal year; TMT is also expected to continue sequential recovery.

• SG&A operating leverage is expected to continue through this fiscal year and next; profitability is expected to improve YoY and sequentially in H2.

• Fractal Alpha is expected to approach break-even by year-end and reach break-even next year; product revenue targets a $100m run rate in ~12 quarters.

• Management anticipates meaningful enterprise AI scale-up as early as FY2028, citing more capable models and declining AI operating costs.