Brokerage firm Prabhudas Lilladher has assigned a target price of ₹1,060 for Fractal Analytics following a strong Q2 FY27, where revenue grew 20% year-on-year. While robust demand in healthcare and finance sectors is driving growth, the company is managing short-term margin pressures from talent investments. Investors are now focusing on the recovery of the consumer goods segment and the long-term scalability of the company's product business.
Prabhudas Lilladher has issued a positive outlook on Fractal Analytics, setting a target price of ₹1,060 per share. This target comes after the company posted a strong performance in the second quarter of the 2027 fiscal year, with revenue rising to ₹9,565 million, a 20% increase compared to the same period last year. Net income also saw a significant boost, jumping 139% year-on-year to ₹792 million.
The growth was primarily supported by high demand in the Healthcare and Life Sciences (HLS) and Banking, Financial Services, and Insurance (BFSI) segments, which grew by 79% and 30% respectively. Additionally, the Technology, Media, and Telecom (TMT) vertical showed signs of a turnaround with a 5.6% sequential increase, ending a streak of contraction. However, the Consumer Packaged Goods (CPG) vertical faced headwinds, recording a 7.1% decline as the company dealt with vendor consolidation and broader economic pressures.
A key focus for the company is its product business, which is gaining traction. License revenue reached ₹380 million, representing a 39% increase from the previous year. The company is actively building its product-led revenue, with the annualized run rate crossing the ₹1.5 billion mark and remaining performance obligations exceeding ₹2 billion. Fractal Analytics aims to scale this to a USD 100 million annualized run rate over the next three years.
Financial discipline remains a key highlight, with the company maintaining zero long-term debt after utilizing its IPO proceeds to clear previous liabilities. However, operational costs have impacted margins. Gross margins contracted by 225 basis points year-on-year, largely due to strategic investments in hiring AI engineering talent and implementing wage hikes. Despite this, effective management of selling and administrative expenses helped the company maintain an adjusted EBITDA margin of 16.2%.
For investors, the immediate monitorables include the expected recovery of the CPG vertical, which management anticipates starting in the third quarter. Additionally, the market is watching whether the gross margin pressure eases in the second half of the fiscal year as the new engineering capacity becomes fully billable. While the product business offers a path to long-term growth, investors may also weigh the ongoing risks of margin volatility stemming from high R&D and talent acquisition costs as the company scales.