Infosys’ October–December quarter numbers drew a measured endorsement from brokerages, which focused on the upgraded revenue guidance for FY26, a strong large-deal pipeline and broad-based sequential growth, even as a one-time labour code charge weighed on net profit.
Revenue rose 0.6% quarter-on-quarter in constant currency to $5.1 billion, beating expectations of flat growth in what is typically a seasonally weak quarter. In rupee terms, revenue came in at Rs 45,479 crore, up 2.2% sequentially. Adjusted operating margins were steady at 21.2%, while net profit fell 9.6% quarter-on-quarter to Rs 6,654 crore, a decline that the street attributed largely to the Rs 1,289 crore exceptional charge linked to labour law changes rather than any deterioration in core operations.
Guidance Upgrade
Total contract value from large deals stood at $4.8 billion during the quarter, with 57% classified as net new. Brokerages said this underpinned confidence in execution over the second half of the year and supported the company’s decision to raise its constant currency revenue growth guidance for FY26 to 3–3.5% from 2–3% earlier.
Nomura highlighted the revenue beat in Q3FY26, although it witnessed a modest miss on margins, noting that the 20 basis points sequential expansion in adjusted Ebit margins was driven by Project Maximus realisations and a favourable 40 basis points foreign exchange tailwind, partly offset by furloughs and variable payouts. “Ebit margins (are expected to) remain stable at around 21% for the full year FY26, within the guided band of 20–22%,” the brokerage said, adding that strength in banking, financial services and insurance, energy, utilities, resources and services, and AI services could act as key growth drivers in FY27. Nomura said the guidance hike factors in a range of macro scenarios, with the lower end reflecting continued uncertainty and the upper end assuming some recovery.
Sectoral Performance
Nuvama Institutional Equities pointed to “consecutive quarters of solid deal wins that provide clear growth visibility for the coming periods”. It flagged a 13% quarter-on-quarter jump in healthcare revenues, aided by the NHS deal, and a 2.3% rise in BFSI, driven by acquisitions and a pickup in discretionary spending. Manufacturing and retail, however, continued to face tariff-related pressures. “Future growth will be contingent on the exit rate from Q4 FY26, hoping for a better performance compared to the previous two years,” Nuvama said.
Jefferies termed the performance an “all-round beat”, with revenues and normalised profit ahead of estimates. It highlighted 3.6% quarter-on-quarter growth in Europe and described large-deal bookings as healthy. “Revenues and normalised profit were ahead of estimates… large deal bookings were healthy, helping justify the lift in FY26 guidance to 3%–3.5%,” it said.
Brokerages also noted strong free cash flow conversion, at over 113% of adjusted net profit, as a positive indicator of capital discipline. While some houses cautioned that wage hikes could pressure margins in the first half of the next financial year, they said Infosys’ ability to navigate seasonal softness while building AI and digital transformation pipelines leaves it well placed as sector growth expectations reset.