Fractal Q2 profit jumps 139% to Rs 79 cr

BENGALURU: Enterprise AI company Fractal Analytics reported a 139% year-on-year increase in net profit to Rs 79.2 crore for the September quarter, compared with Rs 33.2 crore a year earlier, helped by growth in its healthcare and financial services businesses and improved operating profitability.The company’s total income rose about 20% to Rs 985.3 crore from Rs 819.4 crore a year ago, marking Fractal’s first quarter with revenue exceeding $100 million.Healthcare and life sciences was the fastest-growing business, with revenue rising 79% year-on-year. The segment accounted for 25.1% of quarterly revenue. Banking, financial services and insurance grew 30%, contributing another 13.6%.Fractal’s largest business, serving consumer goods and retail companies, grew 11% and accounted for nearly 35% of revenue. However, its technology, media and telecom business recorded an 18% year-on-year decline, although revenue recovered 6% from the preceding quarter.The Americas continued to account for the bulk of Fractal’s business, contributing 67.3% of revenue, followed by Europe at 21.5%. Revenue from these regions grew 22% and 20%, respectively.Fractal’s adjusted operating profit rose 30% to Rs 154.9 crore from Rs 119.5 crore, with margins improving to 16.2% from 15%. However, its gross profit margin narrowed to 44% from 46.2%, as spending on AI engineering talent increased.The sharp rise in net profit also came as employee stock option and retention bonus expenses declined to Rs 4.8 crore from Rs 22.6 crore. Finance costs fell to Rs 5.3 crore from Rs 11.5 crore.Fractal’s AI products business, which includes its Cogentiq platform, recorded 39% revenue growth to Rs 38.3 crore. The business contributed 4% of group revenue and added eight clients during the quarter. Its annualised revenue run-rate crossed Rs 150 crore.The company also expanded its relationships with large customers. The number of clients generating more than $1 million in annual revenue increased to 58 from 52 a year earlier. Those contributing over $20 million rose to six from four.“AI models are getting more capable every week and cheaper every quarter,” said Srikanth Velamakanni, co-founder and group CEO. “Within the next few quarters, we will cross a threshold where it becomes irresponsible and downright risky for companies to leave their most important decisions unchanged.”Fractal had cash and investments worth Rs 1,727.7 crore at the end of September, including Rs 607.8 crore in net IPO proceeds. It reported no long-term debt. However, cash generated from operations during the quarter declined to Rs 79.3 crore from Rs 107.4 crore a year earlier.You use AI every day. Now get your AI Quotient. Take the AIQ test.