The country’s second largest IT services firm, Infosys, on Thursday forecast a slower pace of revenue growth for FY26, as corporations globally pull back on large-scale technology investments amid mounting geopolitical and economic uncertainties. The Bengaluru-based firm said it expects its revenue to either remain flat or grow up to 3% in constant currency terms in FY26, a sharp deceleration from the 4.5% to 5% growth it had guided for FY25 and well below analysts’ expectations of a 6.3% rise.
“There’s uncertainty in the environment,” chief executive officer Salil Parekh said. “The fact that we gave a three-point guidance reflects that. At the bottom end of the guidance, we have factored in some deterioration in the environment and heightened uncertainty,” he said.
The $280-billion IT industry, already grappling with inflationary pressures and sluggish macroeconomic trends, is also navigating client hesitancy driven by elevated interest rates and geopolitical shifts. While Indian tech firms like Infosys are leaning on emerging technologies such as generative AI to spark client interest, customers remain wary of committing to large transformation deals. Infosys’ muted outlook echoes comments made by larger rival Tata Consultancy Services last week, which pointed to delayed decision-making among clients.
For the January-March quarter, Infosys reported consolidated revenue of Rs 40,925 crore, down 2% sequentially and significantly below the Bloomberg consensus estimate of Rs 42,117 crore. The company attributed the drop to weakness in large project spending, particularly in North America, which makes up over half of its revenue.
Profit, however, grew sequentially by 3.3% to Rs 7,033 crore, beating analyst expectations of Rs 6,698 crore. The company maintained its operating margin guidance for FY26 at 20%-22%, with the March quarter Ebit margin falling 30 basis points to 21% due to wage hikes and acquisition-related costs.
Soon after the company announced its earnings, its American Depository Receipts dropped 5% on the New York Stock Exchange. In India, the results were announced after the close of market hours, where the company’s shares closed up 1% on the NSE at Rs 1,427.7.
“The biggest headwind we had was employee compensation, which impacted the margins by 140 basis points,” chief financial officer Jayesh Sanghrajka said. “This was partly offset by lower post-sale support and third-party costs,” he added.
On the deal pipeline, Infosys reported a total contract value of $2.6 billion in large deals for the quarter, marginally higher than the $2.5 billion recorded in the December quarter. Of the $11.6 billion in total large deals signed in FY25, 56% were net new contracts, indicating continued momentum in acquiring fresh business despite the overall slowdown.
Regionally, revenue from North America declined 0.4% year-on-year in constant currency terms, now contributing 57.1% to total revenue. On the other hand, Europe and India posted robust gains, rising 15% and 43.7% year-on-year, respectively, while revenue from the rest of the world dropped 2.2%.
Vertical-wise, the financial services segment, Infosys’ largest, posted a 12.6% year-on-year rise in constant currency. Manufacturing revenue grew 14%, and the energy, utilities, resources, and services segment was up 1.5%. However, revenues from retail, hi-tech, and life sciences segments declined between 1% and 3.5%.
“In many sectors, we are seeing international services grow even amid volatility,” Parekh said, citing deregulation and seasonal demand as tailwinds for some verticals.
Infosys is also betting on artificial intelligence to spur future growth, stating that it is currently working on more than 400 projects involving generative AI. “There is a huge move in AI and we are part of it in terms of working with our clients on AI transformation,” Parekh said. “We have built 200 agents that are being deployed within clients,” he added.