The country’s second largest IT services firm, Infosys, on Wednesday raised its revenue growth guidance for FY26, signalling that a prolonged slowdown in global corporate technology spending is beginning to ease, even as quarterly profit took a hit from the impact of the new labour codes.
The Bengaluru-based software services firm now expects revenue to grow 3%–3.5% in FY26 on a constant currency basis, up from its earlier forecast of 2%–3%. Bloomberg consensus had pegged growth at about 3.13%. The raised outlook comes on the back of a healthier demand environment and a strong pipeline of large deals, CEO Salil Parekh said.
“We have had a lot of large deals in the previous few quarters, plus we had a very strong execution in this quarter,” Parekh told reporters. He added that wins across financial services, energy, utilities and resource services, along with Infosys’ positioning as an artificial intelligence partner for clients, underpin confidence going into the next financial year.
“The way we have become an AI partner of choice with our clients, we see a good outlook even as we look into the next financial year,” he said.
The improved guidance was well received by the market. The American Depository Receipts of Infosys rose 2.2% in pre-market trading in New York on January 14 after the company announced the revised forecast.
For the October- December quarter, Infosys reported revenue of Rs 45,479 crore, up 2.2% on a quarter-on-quarter basis, and ahead of Bloomberg estimates of Rs 45,172 crore. Ebit came in at Rs 10,634 crore, up 0.9% sequentially. Bloomberg estimate had pegged it at Rs 10,803 crore.
Labour Code Impact
Net profit, however, declined 9.6% quarter on quarter to Rs 6,654 crore, missing Bloomberg estimates of Rs 7,393 crore. The company said profit was dragged down by the impact of the new labour codes, which resulted in a one-time hit of Rs 1,289 crore during the quarter.
Chief Financial Officer Jayesh Sanghrajka said that the labour code changes will continue to weigh on profitability. “There will be an ongoing impact from this change, which could drag down margins by about 15 basis points on a yearly basis,” he said.
Even so, Sanghrajka said margins had remained resilient over the full year as Infosys absorbed the impact of seasonal furloughs and adjustments to its operating model.
Demand conditions for Indian IT services firms have remained challenging since the post-pandemic surge in technology spending faded.
Elevated interest rates, inflationary pressures and geopolitical uncertainty have weighed on discretionary IT budgets in key markets such as the US and Europe, pushing firms like Infosys to lean more heavily on cloud and AI-led transformation work.
Infosys reported large deal wins worth $4.8 billion in the quarter, up sharply from $3.1 billion in the previous quarter. New deals accounted for 57% of the total.
According to Bloomberg Intelligence, the company’s 1.7% constant currency revenue growth in the quarter, compared with a 1.5% consensus, along with a sequential increase in headcount, suggests execution has been stronger than peers amid a tougher macro environment.
Vertical and Regional Performance
By vertical, financial services contributed 28.2% of revenue and grew 0.5% sequentially, while manufacturing rose 0.2%. Energy, utilities and services accounted for 13.2% of revenue but declined 0.2% from the previous quarter.
Geographically, North America, which contributes more than half of Infosys’ revenue, saw a 0.4% sequential decline, while Europe posted robust 7.2% growth on a constant currency basis compared with a year ago.
On AI, Parekh said Infosys has chosen not to separately disclose advanced AI revenue, unlike larger rival Tata Consultancy Services, because AI is already embedded across most client engagements.
“Around 90% of the work we do for 200 of our largest clients is AI. The technology has reshaped our existing services and is embedded in our offerings,” he said.
Infosys is also deepening its AI agentic capabilities and has identified six AI-led value pools, including AI engineering, data for AI and deployment of AI in physical devices, Parekh said. The company is working with about 90% of its top 200 clients on AI-driven services and expects the technology to be a significant growth driver over the next several years.
On Wednesday, Infosys shares closed up 0.07% at Rs 1,599.05 on the Bombay Stock Exchange. The results were announced after market hours.