Infosys on Thursday narrowed the upper end of its FY27 revenue growth guidance, signalling that macroeconomic uncertainty continues to weigh on client spending despite artificial intelligence (AI) becoming a larger contributor to its business. The country’s second-largest IT services company now expects constant currency revenue growth of 1.5%-3% for FY27, compared with 1.5%-3.5% guided earlier, while retaining its operating margin guidance of 20%-22%.
The stock reacted negatively to the outlook, with Infosys ADRs falling 4.44% to $10.45 in US trading. The company also reported April-June quarter revenue and net profit marginally below Bloomberg estimates.
Revenue rose 3.9% sequentially to Rs 48,211 crore from Rs 46,402 crore, slightly below Bloomberg’s estimate of Rs 48,318 crore. Net profit declined 8.6% quarter-on-quarter to Rs 7,769 crore from Rs 8,501 crore, compared with the estimate of Rs 7,834 crore. Earnings before interest and tax (Ebit) increased 4.3% sequentially to Rs 10,163 crore, while the Ebit margin remained steady at 21%. Infosys reported constant currency revenue growth of 2.4% year-on-year during the quarter.
AI Momentum Grows
The company also disclosed that AI services now account for 8.2% of its quarterly revenue, up from 5.5% reported in February, underlining the growing contribution of AI-led projects to its business. Chief Executive Officer Salil Parekh said AI revenue has continued to grow at double digits over the past several quarters. “Back in February, we had announced that AI services accounted for 5.5% of Infosys revenue and now it has jumped again. With this momentum, we see the long-term relevance of our services for clients, driven through AI,” he said.
Explaining the decision to trim the upper end of the revenue guidance, Parekh said the company had earlier factored in a stronger recovery in client spending. “The upper end of the guidance was really based on if the macro was improving. We now see that there may be some improvement but not at the level that we were thinking initially,” he said. Management also acknowledged that AI-led productivity gains are creating pricing pressure in parts of its client portfolio, reflecting the deflationary impact of automation on certain technology programmes.
Sectoral Demand Divergence
Infosys, however, said demand remains healthy in financial services and energy and utilities, while retail and communications continue to lag. Large deal momentum also remained strong, with total contract value (TCV) rising to $3.6 billion during the quarter from $3.2 billion in the previous three months. Net new deals accounted for 61% of the total TCV. Parekh said six of the large deals were consolidation-led opportunities, while four were valued at just under $500 million. Most engagements were centred on building AI agents, data modernisation and deployment of AI coding tools. He added that clients are increasingly focused on optimising token costs and overall AI deployment expenses. “We see really good traction and the pipeline looking robust,” Parekh said, expressing confidence about the demand environment for the second quarter.