The enterprise AI market is still in its early stages of growth and offers a long runway for multiple players to compete, said Srikanth Velamakanni, chief executive of AI services firm Fractal Analytics, after the newly-listed firm announced its Q4 result.
The firm more than doubled its net profit to Rs 116 crore in the January-March quarter, helped by improvement in margins and decline in ESOP-related costs. The company posted revenue from operations of Rs 886.3 crore in the quarter, up 17% year-on-year.
Addressing concerns around AI firms like OpenAI and Anthropic directly entering enterprises via private equity-backed deployment models, Velamakanni said the opportunity is not a zero-sum game. “The pie is expanding so fast… no matter how many such companies we create, there is still a lot of opportunity,” he said. In fact, the emergence of such models validates the need for specialised AI services firms to bridge the gap between frontier models and enterprise deployment.
Fractal in its investor presentation added that it continued to invest heavily in research and development, with R&D spending at 6.4% of annual revenue. The company highlighted its enterprise AI platform Cogentiq, alongside products such as PiEvolve, Flyfish.ai and Vaidya.ai, as part of its push to build reusable AI assets and agentic AI systems.
The company’s healthcare and life sciences vertical emerged as the fastest-growing segment, rising 82% year-on-year in Q4 and 66% in FY26. Banking, financial services and insurance grew 42% in Q4 and 32% during the year.
Velamakanni acknowledged that AI is inherently deflationary and is reducing the cost of performing tasks. This is reflected in the company’s net revenue retention--key metric indicating increased spending from existing customers--of around 112%, indicating that clients are increasing spending despite lower per-unit costs, the CEO explained.
AI is already transforming productivity within the company. “Almost no code is being written without AI assistance… every line of code is AI-assisted,” Velamakanni said. He added that revenue per employee will become a key metric as "machine time begins to outweigh human time in value creation.” This means revenues will grow faster than headcount, he added.
Fractal now has 59 clients contributing over $1 million in annual revenue, up from 53 in FY25, with increased enterprise adoption of AI-led transformation services. The CEO added that going forward, its engagements will be more outcome, and license-driven models. Its current share of outcome plus license revenues has reached 40% and the company aims to take the number to 60% in the next 2-3 years.
Velamakanni dismissed token-based pricing as a primary model, saying it resembles input-based billing. “We think in terms of value delivered, not token-plus models,” he said. Token-based pricing, widely used by AI model providers, charges customers based on AI usage volumes rather than business outcomes delivered.
Despite global macro uncertainties, Velamakanni said demand remains strong with FY27 growth expected to be better and non-margin dilutive.
Fractal is also strengthening its financial position, with over Rs 2,000 crore in cash. The company became debt-free in April after repaying acquisition-related borrowings of $32 million. It posted consolidated revenue of Rs 3300 crore for fiscal 2026, up 19% on-year and net profit of Rs 287 crore. The company had listed on Indian stock exchanges on February 16, with an initial public offering of Rs 2,834 crore.
