Synopsis
Infosys, India's second-largest IT firm, announced robust revenue and net profit figures for the fourth quarter of FY26. Despite outperforming rivals, the company issued a wider annual revenue forecast for FY27. This cautious outlook reflects global economic shifts and the impact of artificial intelligence on the IT sector.Listen to this article in summarized format
While surpassing net profit expectations, it missed the street estimate for revenue. It also widened the band of its annual revenue guidance to 1.5-3.5% from 3%-3.5% for FY27 in constant currency terms, signaling uncertainty due to the West Asian conflict. IT companies have been hit by AI-led compression in revenue and unprecedented competitive intensity for deal wins. Infosys had revised FY26 guidance upwards twice last year. An ET poll of seven brokerages had estimated sequential growth of 2.7% in revenue to Rs 46,723, while net profit was estimated to grow 12.7% to Rs 7,501 crore.
Infosys CEO Salil Parekh was more optimistic about technology demand than his peers while sounding a warning on FY27 if the current geopolitical tensions aren’t resolved soon.
“At the start of the calendar year, we were starting to see the global environment, the growth, especially in our strong markets, looking good,” Parekh said. “Now, with the Iran war, there is a change in the economic environment... We will see how it plays out.”
While acknowledging revenue compression from AI, business from “growth areas” is offsetting this, he said.
“As we look ahead to the financial year 2027, we also see large opportunities in AI services,” Parekh said. “We also see continued competitive intensity, and we see an AI productivity impact.”
Parekh did not comment on board discussions regarding succession planning at the company. His term expires in March 2027.
In constant currency terms, March quarter revenue was down 1.3% sequentially, while it was up 4.1% from the year before.
The Bengaluru-headquartered firm’s muted guidance is in line with that of India’s other big IT companies such as Tata Consultancy Services, HCLTech and Wipro as the $300 billion industry grapples with tepid demand for traditional services and increased vendor consolidation, along with geopolitical and macroeconomic uncertainties. All three have already reported fourth-quarter earnings.
Infosys said FY26 revenue rose 4.6% to $20.1 billion, up 3.1% in constant currency terms, despite AI-led deflation and macroeconomic challenges, compared with the 2.4% drop registered by larger rival TCS and a 1.6% fall at Wipro. Net profit for the year rose 4.9% to $3.3 billion.
Operating margin, a key metric for IT firms, stood at 20.9% in the fourth quarter, having contracted by 10 basis points year-on-year. Sequentially, however, it sharply expanded by 250 basis points. It maintained the margin band of 20-22% for FY27. A basis point is 0.01 percentage point.
Infosys reduced headcount by 8,440 in the March quarter to 328,594 from the December quarter. Chief financial officer Jayesh Sanghrajka said headcount rose 5,000 from the year before.
“There's always some quarterly seasonality,” he said. “But if you keep that aside for a moment, headcount is a function of the number of people that you have, the utilisation that you have and the (demand) volumes that you see this quarter. It's all the demand supply equation and that's how it will play out.”
The company hired the 20,000 freshers it had set as a target in FY26. Sanghrajka said the same number will be maintained for FY27.
The acquisition of insurance tech consulting firm Stratus was baked into the guidance, contributing about 25 basis points. The acquisition of Versant and Optimum, however, are pending approval and were not included in the guidance.
Large deal wins were at $3.2 billion for the quarter, down from $4.8 billion in Q3, but up from the year before, when it was $2.6 billion.
“In this environment, to be able to convince customers, to give them more book of business... it's very healthy,” said Praveen Bhadada, chief executive of consulting firm Neovay Global. “And, if you look at the quarterly results, this is the third consecutive quarter of $5 billion and above. But Q4 is also a seasonally weak quarter, so from that perspective, it is not a very surprising quarter.”
All geographies except India registered growth in constant currency terms. North America, accounting for 55.7% of revenue, led growth with a 4.1% gain from the year before. India was flat.
Among verticals, communications and energy & utilities led growth in constant currency terms, up 9% and 6.7%, respectively. Together, they accounted for 25% of revenue. Its largest vertical, financial services, grew just 2.9% from the year before in constant currency terms in the quarter.
“What we are seeing is accelerated growth in financial services and energy & utilities (vertical),” Parekh said. “But if you look at manufacturing, telco, there are large programs that are in the pipeline within the six areas (of AI-led services. We are not seeing something that has unusually changed from the last quarter.”
