Thank you. Ladies and gentlemen, we will now move to the Q&A segment. To ensure we provide space for as many participants as possible, we request you to limit yourselves to two questions per turn. Participants connected on Zoom, we request you to please use the raise hand icon located at the bottom toolbar on your screen. When called upon, you will receive

a prompt to unmute. We will wait for a moment while the question queue assembles. Our first question is from Gaurav Rateria of Morgan Stanley. Please go ahead.

Thank you for taking my question. Best wishes to Ashwath for the future endeavors. It has always been a pleasure talking to you, interacting with you. I have couple of questions. I will just maybe say them all in an order and then you can answer as per your convenience. The first is around the visibility that you highlighted in the TMT vertical of healthy growth sequentially in 2Q. What drives that visibility? Is it from the same existing clients, or have you won certain new clients or new deals which drive that visibility? Second is the Cogentiq pipeline. Really good to see the qualified pipeline number that you shared. Could you also highlight the nature of the deals in terms of the kind of engagement, whether it is going to be more like a product -led kind of a deals, whether it is kind of having a services component? That would be helpful. The last is that, from a visibility perspective, I understand that we start always small with the clients, then we scale up, and that reflects in your multimillion -dollar clients going up in numbers year -after-year. But at the same time, there has been a kind of volatility in the business, right? Maybe because the nature of the business is like we always start small, and these are small engagements, and it can be volatile between the quarters. Is there anything to think about, like what can be done in order to create more consistency and visibility? Is it the nature of the business automatically will evolve with the larger engagements with AI-related work, which automatically will provide more visibility? Thank you.

Thank you, Gaurav. Firstly, you are absolutely right that we are seeing the TMT issue bottoming out, and it is coming from new deals from existing clients. We have a pretty significant pipeline in that, and we know that our next quarter is going to look better because of what we already have in the bag. That is mostly newer deals from existing clients rather than completely new clients. Secondly, on your question around the Cogentiq pipeline and Cogentiq deals, we see these as product-led. Most of these revenues are product led. There could be some FDE or implementation component to it in some ways, but these are completely product-led. We have built Cogentiq for underwriting, which is seeing a pretty solid traction. We have built Cogentiq for e -commerce. That is also seeing some really solid traction and Cogentiq as a platform being used to build , is also seeing some traction as well. This is a very important part of our business, and we expect it to become significant. As the value of building the ontological knowledge layer on data becomes very, very crucial, platforms like Cogentiq are seeing a lot of interest from clients because these are built for the enterprise. They can use a multiple set of models. Like you have seen, people really want to control their outcomes inside the organization, regardless of whether they have or lose model access. That creates a very large opportunity for companies and products like Cogentiq , so t hat is really on the second one.

Third, on how business evolves from here , certainly, the deal sizes are going up. We are seeing some changes in dynamic. Number one, certainly there is competition, and there is RFPs. There are much larger RFPs coming through right now than we have seen in the past. The size of the deals are bigger and the ambition of what they want to get done are also much larger. As Fractal becomes more public, becomes more visible, and has a phenome nal track record behind us, we become very capable of addressing those very much larger deals that come through. You have not seen that yet in the numbers, but I expect that we will see them in the numbers in the coming few years. Secondly, on the volatility part, one has to sort of also understand that the shape of demand is dramatically changing. This is the largest opportunity in front of us. There are some things that are expanding like crazy. There is an insatiable appetite for helping companies re-imagine their workflow, building their AI foundations, and helping them re -imagine their workforce with AI. Those are just growing very rapidly. On top of that, any existing work, anything that feels like it is not as, let us say, relevant today than it was before, that could be completely vanishing as well. Things like ad hoc analysis, building dashboards, these are the kinds of things that are going to go to zero anytime soon. If not already zero. There is demand that will be vanishing as well, which will be a much smaller component, but it will go. The third thing is that if the kind of work that we do, which is really interesting and important, can also be done faster, quicker, and cheaper, which means that overall work can shrink in terms of compression. We will see compression, everyone will see compression. Everyone will see some work vanishing. But the work that is coming through is so huge that it more than makes up for that. That is really the way to process the change. There will be some changes in deal by deal, because there is something that we may be doing which is not relevant today in a much more AI-first world where things are much easier to do. Something that we would have taken a year to do could be done in a month, which means that that per se looks like it shrunk, but there are now 1,000 such deals rather than 10 such deals earlier. That is the kind of way in which we have to process this change overall.

It is quite ironical, right? The deal sizes are also increasing, the kind of engagements that are coming our way is also of the nature where the work can be done much faster and better.

Yes.

Which also creates larger workflow, but probably a smaller kind of work to be done in the beginning. Thank you really for your detailed answers and great explanation. Very helpful. All the best for future.

Thanks, Gaurav.

Thank you. Our next question is from Aditi Patil of ICICI Securities. Please go ahead.

Thank you for the opportunity. My first question is on the technology vertical. Was there any unexpected client-specific issue which may have come up during the quarter apart from the ones which we had called out in the previous quarters? On the annual wag e increment, can you again explain, have we done the annual wage increment for FY 2027 in Q1, or it was of the previous year, which had some impact in Q1?

Thank you, Aditi. Really appreciate this. Number one, on the TMT vertical, it is not that it was unexpected or something. One thing that we have sort of told ourselves is that we are no longer going to talk about client -specific issues unless something very dramatic has happened. There are client-specific issues that happen all the time in every client relationship, and therefore, we have chosen to not talk about that in future because it is distracting. We have to sort of take more accountability for our own performance. Having said that, the quarter TMT did perform worse than we expected, for sure. We think that the worst is behind us. Now TMT will start to look better, at least on a sequential basis for the next quarter and thereon. On the second question was on the wage increase. It has been done. It is effective June 1 st. You are only seeing one month of impact on that in this quarter, April, May, June , but w e have done the overall merit increases for the year as of June 1 st. This is sort of slightly unexpected. Normally, we do it on April 1st. This year, we made it effective June 1st, but one month of that is already in play.

Okay. Got it. Can you share contribution of Cogentiq revenue, or how big you expect it to become by end of FY 2027?

Yes. Our overall license revenues are 3% of revenue. We expect that to go north of that. We are seeing a lot of interest, just remember that the deal sizes are much smaller when it comes to product revenue versus services revenue, and therefore you are see ing some of that. As a fraction of overall revenue, it’s still at only 3%. We want it to go up. It will go up soon. Number one. Number two is that specifically within Cogentiq, we are seeing a lot of pipeline and a lot of interest. We have to convert them significantly in order to make that a much larger part of the pie. What we are seeing is the need for something like that becomes stronger and stronger as the need for trusted AI, where you are not completely dependent on a model, becomes more important and your organizational context, your organizational data, and the ontological layer becomes very, very crucial as well. In that context, when people are trying to re-imagine their workflow, they need a platform that they can rely on and Cogentiq fits in really nicely with

that. So, we expect this to become even more crucial for clients in the coming few quarters. What we are doing is, apart from building the Cogentiq platform, which can help you solve any problem with and re -imagine workflows with AI. We are building specific products on top of the Cogentiq platform which go to a certain industry and solve a certain problem. For example, what we have done with Cogentiq Underwriting is, it helps insurance companies underwrite better using Cogentiq, and we are seeing a few clients sign up for that. Similarly, our Cogentiq e -commerce product is helping companies re -imagine how they grow their revenue with e -commerce. Similarly, we are doing it for supply chain, we are doing it for customer service, and a few other places. These are now, we have identified our top leaders to come and take charge of those products that are being built on Cogentiq platform. That build-out has happened over the last year or so, and now we are beginning to see the rollout and some traction because of that. We expect this number to go up, and become a more significant part of our revenue going forward. We will come back with a Cogentiq revenue number every quarter, but we are just figuring thi s out exactly how to do. Cogentiq revenue, license revenue, Cogentiq revenue might have license revenue and some of the FDE revenue, so e xactly how we will report it, we will figure it out and come back to you next quarter with the Cogentiq revenue, as well as the overall license revenue for Fractal.

Okay, got it. Thank you for answering my questions, and all the best, Ashwath, for your future endeavors.

Thanks, Aditi.

Thank you. Our next question is from Pritesh Thakkar of PL Capital. Please go ahead.

Thank you so much for taking my question. I have a first question on the vertical front. Again, we have a weakness coming in on the TMT side of the vertical. At the same time, I am seeing HLS growth has been decelerating, if I look at over the last two to three quarters now. How should we anticipate FY 2027 growth trajectory there, and which verticals would likely to contribute meaningfully to that growth?

Thank you for that. Pritesh, thank you. Firstly, yes, our growth rate in HLS is very impressive, but it is lower than the previous quarter what we reported to you. One thing I should mention is that the overall growth, excluding TMT, is 35%. Because of TMT, it has come down to 20 because TMT is showing negative growth. As soon as the negative growth gets arrested, we will start to see the overall growth rate go up. That is really the expectation, that every other part of the business is growing nicely as of today. If the TMT vertical solves for itself, it should address the overall growth and improve our overall growth rate in the coming few quarters.

How we should anticipate which vertical should contribute meaningfully to the growth for FY2027?

It will be across all verticals. We are seeing growth all across. HLS will be a very important part of that. Our Banking and Financial Services continues to grow very nicely. Some of these places, we have also brought in new leaders. We have Leandro, who has taken on the role of the Chief Practice Officer for Banking and Financial Services. We are also finding a new head of Europe. We are making some progress on that hire. This new head of Europe also might help us expand our Europe growth even faster. Today, Europe is growing at 25%, and we expect that growth rate can be meaningfully acce lerated with some additional new leadership that we hire. In a similar way, we are hiring new leaders in parts of the business where we feel like we have significant growth opportunities. But growth opportunities are across verticals. AI is not doing well in one industry or the other . It is creating opportunities in every vertical. It is our execution that has to improve so that we are growing across all verticals. I will say that the opportunity exists across each and every vertical for Fractal. As we execute better, we will see our growth rate pick up.

Mr. Thakkar, do you have any more questions?

Yes. I just have a question on the partnership that we called out in our PPT. We are calling out 42 TTM joint engagements. Are we also calling out the revenues that we are fetching out of this partnership?

We do track the revenues that we generate through our partnerships with the most impressive foundation model companies as well as some of the AI foundation layer companies that we work with. We look at that internally both in terms of what revenues are we originating because of our partnerships, and what are the joint work that we do, either because we have brought the deal to them or otherwise. We have not yet reported that to you, but we will consider bringing some of that information to you. Suffice it to say that the overall partnership -led revenue for Fractal has been small. Like I have said in the previous quarter also, it is a new muscle that we are building. As the market shifts to more partner-led kind of growth, and partners become very crucial to how companies are making their overall decisions. This is something that is a growth vector for us. It was not a big part of our revenues overall. Most of our revenues used to come from direct client relationships. What we are seeing is that these partnerships create a very nice window of additional growth, and it has become very strategic to us. We are building out our partnership capabilities and overall partnership execution muscle, and you will see some of that coming through in the next few quarters.

Understood. Lastly, on the expense side, I heard Ashwath calling out we had integration cost this quarter, which led the incremental cost to fall in this quarter. What is that one-off cost, if I just want to understand?

Srikanth, I will take that. Pritesh, sorry, it is not really an integration cost. What we have done is, we have re-classed or restated between the segments. We are building this product called iqigai. It is going to be Cogentiq iqigai. [We have moved it] f rom the Fractal.ai segment to Fractal Alpha segment under Analytics Vidhya. It is just movement of investments from one side of the segment to the other side. We have restated last year to reflect the right numbers year-on-year. It is not a one-time cost. It is an investment that we have been doing in Fractal.ai side of the business, which has been moved over to now Fractal Alpha under Analytics Vidhya. Hence you see higher investments in Fractal Alpha under Analytics Vidhya, hence the increased loss in Analytics Vidhya. As that Analytics Vidhya, which is mainly AI for Work and Workforce, grows, and we have seen pretty good growth there, then operating leverage will kick in and that loss will go down. It is not a one-time cost, it is a restatement of costs or investments from one side of the P&L to the other.

Understood. Lastly, a question on the merit cost that we incurred this quarter. Is it a full quarter on our cost that we incurred across company -wide, or are we expecting any residual impact coming in quarter two?

We gave merit increases as of June 1st and across the company. It was not limited to a part of the company. It was across the company. Since it was done effective June 1 st, in the next quarter, there will be three months impact. The 75 bps that I called out was gross margin - related impact in Q1. The full P&L level, it will be more close to 120 to 130 bps impact. It is for one month in the first quarter. Again, it is effective 1st of June, so it will have three months impact in the second quarter.

Mr. Thakkar, we would request you to return to the queue. There are several participants waiting for their turn.

Thank you so much. All the best to Ashwath.

Thank you. Thanks, Pritesh.

Thank you. Our next question is from Moez Chandani from Ambit. Please go ahead.

Good morning, and thank you for taking my questions. First question in terms of industry growth. Any qualitative sense in terms of how you are seeing industry growth shape up?

Because you did mention that while there could be some volume compression due to AI that would be more than compensated for by the huge multiplication of use cases. Is there any sort of slowdown in terms of the broader industry while volume compression works its wa y through, but the new use cases take time to show up? Is industry growth still, say possibly at high levels of 16%, 17% that was expected earlier?

I think overall, the demand for AI -led problem -solving and AI -led transformation is enormous. It is growing very fast. It is sort of taking share from many other industries. Management consulting, market research, advertising, technology services, business process services. They are all being influenced by AI. The total addressable market is increasing. It is growth rate. Companies are increasing their tech spends. They are going from 4.5% of revenue to maybe up to 6% of revenue, if you look at the overall tech budgets. That has its own momentum. But if you see the AI addressable part of that, it is dramatically changing. From Fractal’s standpoint, the addressable spend that we can chase is just going up quite well. I think the key thing is how do we execute against that? It is not easy to execute well, because there are also many players who want a piece of this pie right now. Everybody is interested in this AI -led growth that is happening. It is not that industry is not expanding. Industry is expanding dramatically. It is also becoming more competitive. Therefore, our execution has to really get better to improve our growth. That is really the best way to think about this. I hope I have answered your question.

Got it. Yes. Thank you. That is very helpful. The other question that I had was also, on this TMT decline which we saw. Was this again maybe an impact of the competitive intensity that you just mentioned, or was this just particular clients may be pausing discretionary spends for their own reasons? Any specific reasons that you may want to call out?

I do not want to get into blaming anyone for our performance, right? Just one way to think about that is that companies, if you look at the big tech firms that we serve, they are very impressive, very big companies, and they have been spending tremendously on AI capex. You have seen that their AI capex has gone up, almost doubled. There is a lot of opex pressure when capex has gone up by this much. Therefore, you are seeing big adjustments taking place in the TMT industry in terms of how they look at the overall spends and allocating more of that to capex and less of that to opex. Some of that could be playing out in the way our performance is showing up in that vertical for now. Again, still the TAM is expanding there as well. I think it is about how we address this and how we re -imagine ourselves in order to become even more relevant to TMT. But there is definitely a massive shift happening in the way TMT companies think about their overall spends relative to other industries. That could be playing some role. I will take most of the blame on our own execution, but there is some of that playing out, as I explained. I hope that answers your question, Moez.

Thank you.

Thank you. Our next question is from Om Kavadi of Avendus Spark. Please go ahead.

Thank you. Could you guys hear me?

Yes.

Thank you for the opportunity. A couple of questions. The first one is on TMT vertical. Sorry to pester on this. Just one clarification, when I look at number of clients beyond INR 20 million, it has come down sequentially from six to five. I am assuming it is in the TMT vertical, but please clarify on that. A connected question is, when you look at this TMT vertical, you have indicated that things have bottomed out, and you could s ee a good acceleration from second quarter, is what I understand. From that point of view, from the point you started this quarter, you would have thought about some outlook for the year, right? I am not asking of the guidance, but from a qualitative point of view, that outlook for FY2027, has it changed when you see at the end of this quarter? Or broadly, you feel because things are recovering from a full-year point of view, nothing would have changed drastically. Could you just comment on that? I would come back on the second question.

What is it? I forgot your question.

That on INR 20 million plus.

On the INR 20 million. Yes. That is right. Your guess is correct. The six, one of them which was 20 million -plus, a TMT client, is now less than that. Therefore, that is what it is. The only additional thing I will add to that is that taking a full -year view of this versus a TTM view of this, there could be some changes. Therefore, the best way to look at it is that at the end of this year, how many clients do we have which are INR 20 million plus, and is that gone up from six to seven, or stayed at six, or gone from six to five? That is best seen on a year-over-year basis. On a TTM basis, you are right. One client has slipped below the INR 20 million number, and that is part of the TMT vertical. That is correct. Secondly, on the outlook for the year, certainly our first quarter, we feel like we have certainly underachieved what we could have achieved. Part of this is also because what we have seen is that the shape of the demand is shifting quite rapidly. Everything is changing at a very rapid pace. We are very competitive and very capable, yet we have to make sure that we move extremely fast to capture the enormous opportunity that is in front of us. That execution is crucial to us. Part of the way we have done that execution is by reorganizing our own go -to-market, bringing it under a new Chief Commercial Officer, Matt, and then building these AIT, AIF,

and AIW vectors. AIT for AI-led Transformation, AIF for AI Foundations, and AI for Work and Workforce Re-imagination, AIW. This change and bringing in the new leaders, and organizing ourselves to go to market much more rapidly, is playing out as we speak. Once this whole thing settles down, we think that our growth rate will dramatically accelerate from there. That is really how we are thinking of it. It is improving our execution in light of where the market opportunity is shifting. The opportunity is very, very huge, and I will reconfirm that . It is completely left to our execution to become as big as we can be. There is no other law of gravity applying to us. We have an enormous opportunity in front of us. As far as the outlook for the year is concerned, of course, our quarter one is not as great as we would like it to be. We hope that some of that will start to get addressed in the coming quarters.

Sure. One other question is on the operating profitability front. How would we see R&D spends as a percent of sales over the medium term? Is there a possibility that it would increase? The second part to the question is, where are we in our journey in terms of increasing the mix of output/outcome/license? I believe that is roughly around 40-odd%. How are we seeing this number going in the next one or two years? Thank you.

Yes. We are at 42 right now. That outcome/output/license as well as license revenue is at 42, and 58 is the input-based pricing. We are inching gradually forward on that number, and we want to get it to 60 over the next few quarters. We are moving in the right direction. What AI is also creating as an opportunity is to go and be very bold in looking at a process, reimagining the process, and doing it on an outcome basis, therefore crunching the overall budgets that are required to do so. Those will be output outcome -based deals, and we are seeing, as Fractal’s appetite to do such deals and capability to do such deals increases, we expect this number to substantially go up. Now, second question is on R&D as a fraction of sales. We have said that we will continue to increase R&D spends as a percentage of revenue, and we will take it to as much as 10% of revenue. We have also been very clear that we will do it only on the back of expanded margins. As gross margins expand, part of that expanded gross margin we will put into higher R&D. We have set up a system by which we will be pretty disciplined about that, and only expanded gross margins, a part of that will flow through to higher R&D spends the next quarter. Because of that system, while R&D spends as a fraction of revenue might increase, it will happen only on the back of higher overall gross margins. Our gross margins are expanding, and therefore, we expect that we will also be able to increase our overall R&D budgets in proportion to that. Last point I will mention is that our R&D is getting more and more disciplined. One of the things that we have done in this space of AI, what we are seeing is R&D to revenue conversion

should be faster. It should not be slower. That is a push that we are also saying, is that the enormous amount of R&D that we are doing should convert to revenues at a faster pace. Therefore, even with the R&D team, my conversation is that [you] work backwards from revenue, right? Yes, R&D is super important, but you have to have revenue in mind and work backwards from revenue, and you will see some of that alignment also kind of streamline and improve our overall R&D productivity as we go forward.

Mr. Kavadi, we would request you to please join the queue back.

I am done with my questions. Thanks a lot.

Thank you.

Thank you Om.

Our next question is from Sucrit Patil of Eyesight Fintrade. Please go ahead.

Hello, am I audible?

Yes, Sucrit.

Thank you. First of all, my name is Sucrit Patil. My first question to Mr. Pranay is, just beyond the regular outlook, what are the top two and three priorities you are focusing on the next few quarters? Along that, what do you see as the biggest risk in client adoption and industry competition, and how are you preparing to manage them while sustaining the company’s competitive position in AI and analytics? That is my first question. I will ask my second question after this. Thank you.

Pranay?

Yes, I am there. I am sorry. Could you please repeat the question once?

Beyond the regular outlook that you have given, I just want to understand what are the top two and three execution priorities you are focusing on in the next few quarters. Along that, what do you see as the biggest challenge in client adoption or industry competition, and how are you preparing to manage them while strengthening the company’s competitive position in AI and analytics? Just a forward guidance on this.

Okay. Excellent. Great. Firstly, we are approaching the market with a three-pronged strategy. One is AI-led business transformation, second is AI Foundations, and third is AI Workforce transformation. The first really implies that we are building specific applications to solve key business problems or improve key business processes, which could be on the side of demand,

supply, operations, and which really depend on the specific industry. These drive your core metrics, whether that is revenue or profitability, customer retention, etc. To ensure that these applications scale rapidly and securely at the scale of Fortune 500 companies, this requires very robust foundations. That implies strong data foundations, the ontology and knowledge layer, security layer, the orchestration layer, and the application layer. The third is that ensuring that how does the workforce deploy and use this? For that, we do the AI workforce and workplace transformation. Again, we are seeing a lot of traction in that. Continuing to enhance what we are building and deploying for our clients across these three areas, that is one of the core initiatives. The second big thing is around, as Srikanth mentioned, we are bringing in more leadership across industry verticals. Then the third, as Srikanth said, that the shape of the demand is changing quite rapidly, and that also has implications just operationall y in the talent that we are bringing in and also the internal talent upgrade that we are doing to be able to meet the shape of demand.

My second question to Mr. Bhat is, I know you are taking the exit, just want to understand a forward guidance on what you think about this. From a financial point of view, what key risks or challenges do you anticipate in the coming quarters, and what specific measures are being taken to manage margins, cash flow and balance sheet strength, especially in areas like data privacy compliance, cost pressures, or client payment cycles. Thank you.

Thanks, Sucrit. I think in terms of the overall balance sheet, balance sheet is in a pretty good shape. Our DSO has come down both year -on-year and even quarter-on-quarter to 71 days. Even within the 71 days, it is around 54 days is the billed AR, because a lot of companies do report only bill ed AR. That compares favorably to some of the industry benchmarks. The balance sheet has been in good position. Again, our cash conversion to EBITDA of around 70% has also been in good condition. In first quarter of the year, we always pay variable pay for the previous year, hence you see a negative cash flow. Otherwise, all the ratios there are. ROC E is close to 13%. Overall, the balance sheet is in a very good place. We do hedge, only take the forward cover for cash flow hedge. That also, again, helps us with some of the cash flow management. I do not think of any additional financial risk. In terms of the data privacy and security -related stuff, ye s, we take our, obviously, cybersecurity extremely seriously. We have invested a lot behind it. Recently, we were again rated by Black Kite in the highest category in terms of cybersecurity. That risk has been kind of addressed over the period of last three or four years by us.

Mr. Patil, we request you to please return to the queue as several participants are waiting for their turn. We now move to our next question that is from Anish Khanal of Eternalis Capital Trust. Please go ahead. Anish, could you please ask your question?

Am I audible?

Yes.

Hi, Srikanth. Thank you for the opportunity. My first question is on the Qure.ai. So how are you seeing the growth on the Qure.ai, given the Fractal Alpha segment loss has increased to Rs.14 crore in June 2026 from Rs.4 crore in June 2025? So how is the growth in that particular segment, and especially in Qure.ai segment, plus Vidhya Analytics segments? So that is my first question. Next question is on adjusted EBITDA margins. While we have grown from 15% to 18% on a Y-o-Y basis, though marginally declined from the Q4 FY2026 from 22% to 18%. Sorry, 17% I think June 2026. So how are you seeing the adjusted EBITDA margin growth trajectory? As Srikanth has mentioned that TMT has bottomed out, so can we see the EBITDA margin improvement also once that TMT segment will grow in upcoming quarters? Thank you. These are my two questions.

I will answer, Srikanth, on the segment profitability. Fractal Alpha, which includes only Asper.ai and Analytics Vidhya, that is the place where the loss is up from Rs.4 crore to Rs.14 crore. As I mentioned in my remark s, it is mainly because of the investments that we are making in some of the products within Analytics Vidhya. That is what is driving it. If you again look at the last four years, our loss in Fractal Alpha segment has come down substantially as the revenue has been scaling up. In this quarter specifically, as I mentioned, Asper revenue growth was flat, which should accelerate in the second half of the year because the annual recurring revenue has gone up by 59% in dollar terms in Asper. There is always a timing gap between the contract signing, and when the revenue starts getting recognized for the subscriptions. Once the Asper gets back to growth, Analytics Vidhya has also seen good growth in the first quarter, and that should continue. With that, we expect the profitability to kind of keep improving as, again, how it was done historically. That is a good indicator of what we can achieve in terms of the profitability in Fractal Alpha. Qure.ai is an associate company. We only consolidate 31.5% of our share of the losses. There, as I mentioned, the revenue for Qure.ai went up year -on-year basis by 160%. Losses in Qure.ai was R s.22 crore last year, our share of the loss. It was R s.23 crore this year, same quarter. Qure.ai does have a big jump from first half of the year to second half of the year. We have also seen their backlog kind of go up quite substantially to R s.100 plus crore right now where they stand, versus around Rs.20 crore at the same time last year. So we have seen a big improvement in the revenue and also big improvement in the backlog revenue that Qure.ai has as of now. With that, the Qure.ai profitability situation should also be improving.

Just last point I want to mention here also is that our profitability in the first quarter is always a little lower than the following quarters. Just from a sequential basis, it is not a great comparison. Our year-over-year is a better comparison, and we will see that year -over-year, our profitability will continue to improve. One of the most frequently asked questions at the time we went public was that, your margins are inconsist ent and I always answered that by saying that we have very healthy gross margins. But over the last three earnings calls, we have also shown that our gross margins, our EBITDA margins, all of them are improving quarter-over-quarter. We have become much more steady in terms of managing profitability. It is a muscle that we have built now, and we expect that profitability will continue to improve over the next few quarters as we continue to expand our growth. That is really the best way to think about it.

Thank you and all the best Ashwath.

Thank you Anish.

Thank you, everyone. That concludes the question and answer session. Before I hand the conference over to Anjali Garg from Fractal’s Investor Relations team for closing comments, request Srikanth to share his final remarks.

Thank you, Inba. You know that the growth this quarter was not as high as we would like it to be. Excluding TMT, growth was much better. When you look past that number, you will see that our clients are growing with us. They are deepening their relationship with us. Our margins are expanding. Our revenue mix is shifting towards more outcomes as well. Zoom out further and the tailwind gets better. We have seen that enterprises are moving AI into their core budget. The AI addressable spend is dramatically improving overall, which means that amazing days are ahead of us. We have never been more optimistic about where this business is going. The market in a lot of places is still making up its mind. What comes after that, we believe, is much bigger version of the business that you are looking at today. We look forward to building that and making you part of that growth journey for us. Thank you again for your trust that you have extended to us. We look forward to building Fractal along with you in the future. Back to you, Anjali.

Thank you, Srikanth. Thank you everyone for joining us today. If you have any further questions, including any that we were unable to address during the call today, feel free to reach out to us at investorrelations@fractal.ai. We look forward to seeing you again next quarter. Thank you once again. We wish you a good day.

Thank you, ladies and gentlemen, for joining us today. You may now click on the leave icon to exit the meeting. Goodbye.

This transcript has been edited for readability and does not purport to be a verbatim record of the proceedings.