Fractal bets big on enterprise AI despite TMT weakness dragging revenue growth

The rise of enterprise artificial intelligence is reshaping growth trajectories across industries, and analytics major Fractal believes the momentum is only beginning. Even as the company reported a softer-than-expected revenue performance due to challenges in its technology, media, and telecom (TMT) vertical, management remains optimistic about the broader demand environment, especially in banking, healthcare, and life sciences.

Speaking to ET Now, Fractal co-founder, Group Chief Executive & Executive Vice-Chairman, Srikanth Velamakanni said the company’s overall growth trajectory remains healthy despite client-specific disruptions affecting one segment of the business.

“Overall, our revenues have grown by 19% for the year and 17% for the quarter year-over-year. We have had specific issues in the TMT vertical where we had a minus 19% year,” Velamakanni said.

According to him, the weakness in the TMT business stemmed from two major customer-related developments rather than a broader slowdown in demand. One client significantly reduced engagement after entering into a joint venture, while another enterprise software client underwent a restructuring exercise that impacted business volumes.

“This is because of two client-specific issues. One of those clients did a joint venture because of which they stopped working with us or have dramatically reduced working with us. Another situation involved a client in an enterprise software company that is essentially reorganising itself, because of which that business has gone down,” he explained.

Excluding the TMT segment, Fractal’s growth numbers appear considerably stronger. Velamakanni noted that the company delivered 27% growth for the full year outside the troubled vertical, with quarterly growth running even higher.
The strongest momentum came from banking, financial services, healthcare, and life sciences — sectors where enterprises are aggressively deploying AI to improve efficiency, automate repetitive tasks, and accelerate innovation.“Our banking and finance vertical is growing at 40%, and our life sciences and healthcare segment is growing at 80%,” Velamakanni said. “Overall, growth is pretty robust and we expect enterprise AI to take off.”

The company believes industries with high levels of cognitive and process-intensive work are likely to emerge as the biggest beneficiaries of AI adoption. Healthcare firms are increasingly turning to automation to streamline operations, while life sciences companies are investing heavily in AI-led drug discovery and research productivity.

Velamakanni also pointed to rising demand from financial institutions, where AI applications are being used to improve productivity, enhance customer experiences, and drive growth initiatives.

“Banking and financial services is the area where there is massive potential for AI to help companies improve their productivity, improve their overall growth rate and we are seeing that as well,” he said.

Another metric that underscored the company’s client stickiness was its net revenue retention rate, which stood at 112%. The figure indicates that existing customers expanded spending with Fractal by 12% on average compared with the previous year.

Velamakanni described the metric as one of the company’s key growth indicators, reflecting deeper client relationships and continued adoption of Fractal’s AI offerings, including its Cogentiq platform.

“Existing clients are expanding their business with us by 12%, which means that there are some clients which are expanding much more than that, some clients much less than that, the net average is 112%,” he said.
He added that Fractal continues to benefit from strong customer satisfaction and long-term partnerships.

“Our client relationships are very important to us. We continue to grow with them and this is one of the most important vectors of Fractal’s overall growth because they like what we do. We have a very high net promoter score and therefore they expand their business with us every year,” Velamakanni said.

While the company refrained from issuing formal revenue or margin guidance for FY27, management expects the ongoing enterprise AI boom to remain a significant growth driver. At the same time, macroeconomic uncertainties could create intermittent headwinds across global markets.

“So, we do not provide specific revenue growth or margin guidance as a company. However, what we can say is that the enterprise AI space is taking off very nicely,” Velamakanni said. “Overall, we expect our growth to be very good and our margins to expand through the year.”