01 — Opening Hook
The AI Company That IPO’d Into a Bubble
Imagine listing your stock at ₹4,500 per share, then immediately calling analysts to tell them you’ve been growing at 30% for the past decade, and by the way, gross margins are 47% (best-in-class), R&D spend is eating 4% of revenue, and you just snagged two of the Magnificent Seven as clients. Sounds good? Then someone asks: “If you’ve historically grown 30%, why are we only seeing 21% this quarter?” and the entire narrative shifts.
Fractal Analytics—fresh off its IPO in early 2026—delivered Q3 FY26 results showing 21% YoY revenue growth, ₹100 crore profit after tax (just crossed into triple-digit quarterly profit club), NRR of 114% (clients are expanding), and 127 “Must Win Clients” (a term that sounds made-up but apparently means fortune 500-style companies). Great metrics. Except the stock is trading at 67.6x P/E, which is approximately 3.3x the IT sector median. Management promises acceleration. Markets price in perfection. This gets delicious in the Q&A. Read on.
Read on: Analysts asked if 30% historical growth was coming back. Management said yes-ish. Also blamed CPG tariff headwinds and client-specific issues in TMT for the 21% miss. But here’s the thing: if you exclude CPG, growth was 25%. If you exclude one Australian telecom client, growth would’ve been much higher. Translation: We’re cherry-picking positives.
02 — At a Glance
The Numbers Play: Growth Engine on 75% Throttle
Q3 Revenue
₹854 Cr
+21% YoY. Up 7% QoQ. Organic growth only—no M&A sugar. But wait, let me explain what “tariff headwinds” actually mean.
Gross Margin
47.2%
+17 bps YoY. Expanded by mix shift toward output-based contracts. That’s code for “we’re charging more.”
Adj. EBITDA
17.8%
+43 bps YoY. SG&A came down. But R&D is 4.1% of revenue. Exclude that and it’s 22%. Marketing magic.
PAT (Q3)
₹100 Cr
+10% YoY. Crossed ₹1 billion quarterly milestone. Also: hidden deferred tax asset of ₹50 Cr created (USA losses).
NRR (Net Revenue Retention)
114%
Clients expanding. 14 pts of 21% growth came from existing clients. That’s 67% from expansion, 33% from new logos.
Stock P/E
67.6x
Sector median: 20.4x. Fractal: 3.3x higher. IPO hype is real. Reality check: in 2 years?
The Brutal Truth: Margins expanding, clients sticking around, PAT crossing ₹100 crore. But growth is 21%, not the historical 30%. Stock priced for 35%+ CAGR. Either growth accelerates or valuation compresses. There is no third option.
03 — Management’s Key Commentary
What They Said. What They Really Meant.
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