AI tailwind real, but Q1 execution soft; TMT bottoming claimed

Delivered ₹912.5 Cr confirmed; 20% headline matches. Constant currency only 9%.

Delivered ₹72.3 Cr, NPM 7.9%. QoQ PAT declined 37.6%.

Confirmed. But 273 bps FX benefit; merit/headcount added 244 bps drag.

TMT down 22% YoY this quarter. Visibility claimed but not yet proven.

Delivered 46% confirmed. FX-flattered; operational leverage still modest.

Currently 3% and 42% respectively. No timeline specificity for 60% target.

Prior: Expected recovery. Actual: Down 22% YoY in Q1. New: Mgmt claims bottoming, expects sequential recovery Q2. Unproven.

New Chief Commercial Officer (Matt) appointed to lead three-pillar strategy (AIT, AIF, AIW). Reflects execution urgency. Not baked into Q1 results yet.

Prior: Outcome/license goal was 60% in 2–3 years. Now: 42% of mix, targeting 60% in 'next few quarters.' More aggressive timeline, but definition still vague.

No formal revenue/margin targets given. Prior calls included growth and margin outlook. Mgmt cites market fluidity and execution uncertainty.

Will increase to 10% of revenue, backed by gross margin expansion. Q1 R&D was ₹61 Cr (+31% YoY). Prior: disciplined but unspecified target.

New deals from existing clients; significant pipeline already in hand. TMT bottoming; sequential growth expected Q2. Deal sizes increasing overall, but Fractal has to prove execution.

Mostly product-led. Cogentiq for underwriting, e-commerce, supply chain seeing traction. Built for enterprise trust (control, ontology, security). Few clients signed. Will become significant revenue engine.

Demand shape shifting rapidly. Old ad hoc work vanishing. Large AI deals coming through, but volume compression also real. Larger RFPs incoming; Fractal better positioned as it grows. Deal velocity to improve with new go-to-market.

No new dramatic client loss called out. Mgmt won't detail client issues going forward. TMT did worse than expected; worst behind us. Expects sequential improvement Q2.

License revenue is 3% of total. Cogentiq pipeline strong; deal sizes smaller than services. Will report Cogentiq revenue separately next quarter. Expected to grow materially.

Excluding TMT, growth is 35%. With TMT recovery, overall growth will improve. Hiring new leaders (Chief Practice Officer BFSI, new Europe head). Growth opportunities across all verticals. Execution critical.

AI demand enormous, growing fast, taking share from consulting/research/ads. Total TAM increasing. Tech budget share going from 4.5% to 6% of revenue. AI addressable market dramatically expanding. Execution challenge, not demand shortage.

Big tech capex doubled; opex pressure result. Allocating more to capex, less to opex. Some TMT sector shift playing out, but Fractal taking accountability for execution.

Yes, one TMT client slipped below ₹20M. Best viewed year-over-year, not TTM. By year-end, will assess if count went 6→7 or held at 6.

Currently 42% outcome/license, targeting 60% in next few quarters. R&D to rise to 10% of revenue, only on back of gross margin expansion. R&D to revenue conversion to accelerate. Work backwards from revenue.

Three pillars: AI-led business transformation, AI Foundations, AI Workforce transformation. Hiring leaders across verticals. Talent upgrade to meet shifting demand shape. Partnerships critical (Databricks, OpenAI, Anthropic).

Balance sheet solid. DSO 71 days, cash conversion 70% of EBITDA. ROCE ~13%. Hedge forex only on cash flow. Data security top priority (Black Kite highest rating). No major financial risks flagged.

Loss increase from investments in Analytics Vidhya products (EdTech, iqigai reclassification). Asper ARR up 59% but revenue lag due to contract/recognition timing. Expect profitability recovery as scale increases.

Q1 is seasonally weak for profitability. YoY comparison more relevant: 15% to 17% is positive trend. Margins improving sequentially. As TMT recovers, margin headwinds ease. Long-term trajectory positive.

Significant pipeline claimed from existing clients. But Q1 was -22% YoY; evidence only in mgmt words, not data.

Delivered result validates ex-TMT growth. Proof of concept exists, but TMT recovery timing uncertain.

Q1 showed +29 bps YoY, but FX accounted for 273 bps; operational gain modest. Dependent on deal mix and cost absorption.

Achieved 189 bps improvement Q1 YoY. Q1 seasonally weak; Q2+ comparisons more relevant. Sustained leverage requires consistent revenue growth.

TMT down 22% YoY, dragging overall growth from 37% ex-TMT to 20% headline. Tech capex/opex shift durably changing demand. Recovery timing uncertain.

Weaker rupee added 273 bps to gross margin and ~11pp to revenue growth headline. If rupee strengthens, both margins and growth rates will compress.

License revenue only 3% of total; target is 60% over 'next few quarters' (vague). Deal sizes smaller than services. Risk of product-market fit challenges or longer sales cycles.

New Chief Commercial Officer (Matt) hired; reorganized under three pillars (AIT, AIF, AIW). Srikanth acknowledges execution challenges and need to move faster. Restructuring can cause short-term friction.

Qure.ai share of loss ₹23 Cr (up from ₹22 Cr YoY). Fractal Alpha segment loss ₹14 Cr (up from ₹4 Cr). Both temporary but material to net income.