Investors on Dalal Street were eagerly awaiting the December 2025 quarter results of Infosys, the second-largest Indian IT services player, to analyse if the first signs of recovery were strengthening.
However, Infosys reported a disappointing growth of 0.6% on a constant currency basis on a quarter-on-quarter basis in its revenues from operations to Rs 45,479 crore in the December 2025 quarter.
It must be highlighted that the third quarter is typically a seasonally weak quarter, given the holiday season in North America and Europe.
Vertical Performance & Seasonal Headwinds
And while Infosys’ key financial services accounted for 28.2% of its revenues in the December 2025 quarter vis-a-vis 27.7% in the September 2025 quarter, however, it faced sluggish growth in other verticals like energy, utilities, resources, along with hi-tech.
The HCL Software Factor
Earlier, smaller rival HCL Tech reported a 4.2% q-o-q constant currency growth in its revenues to Rs 33,872 crore in the December 2025 quarter.
The Noida-based company has highlighted a strong 28.1% q-o-q constant currency growth in its smaller, HCL Software in Q3FY26 – this division includes subscription and support revenue including all term subscription revenues, support revenues (including those attributable to perpetual licenses) and software-as-a-service (SaaS) revenues.
This division contributed 11.2% of its revenues in the December 2025 quarter vis-à-vis 9.1% in the September 2025 quarter.
Operating margins have divergent trends
Infosys’ core operating profit margin shrank 30 basis points q-o-q to 23.4% in the December 2025 quarter.
And that’s because the Bangalore-based company’s employee expenses, which came in at 53% of revenues in Q3FY26 vis-à-vis 52.7% of revenues in Q2FY26. Infosys has grown the number of its software professionals by 4,864 on a quarter-on-quarter basis in Q3FY26.
Like other IT companies that have reported results, Infosys also had a one-time impact of labour code amounting to Rs 1,289 crore in the December 2025 quarter. As a result, its net profit fell nearly 9.6% quarter-on-quarter to Rs 6,666 crore in the December 2025 quarter.
Meanwhile, HCL Tech’s core operating profit margin was 21.7% in the December 2025 quarter, a growth of 120 basis points on a quarter-on-quarter basis.
Margin improvement for HCL Tech was helped by employee expenses as a percentage of revenues at 55.7% in the December 2025 quarter vis-à-vis 57.3% in the September 2025 quarter.
And despite the improved performance, HCL Tech’s net profit fell 3.6% q-o-q to Rs 4,082 crore in the December 2025 quarter, and that was due to a one-time impact of Rs 956 crore relating to the new labour code.
Future orders – TCV – new deal wins
With regard to future growth opportunities, Infosy’s TCV (new deal wins) was $ 4.8 billion in the December 2025 quarter vis-à-vis $ 3.1 billion in the September 2025 quarter.
And HCL Tech’s TCV (new deal wins) was at $ 3 billion in the December 2025 quarter, a rise of 17% on a q-o-q basis.
The Street will be keeping a close eye on these new deal wins how quickly they will translate into revenue for IT companies over the next few quarters.
The Talent War: Once again divergent trends
Infosys has highlighted its software professionals were 319,364 at the end of the December 2025 quarter vis-a-vis 314,500 at the end of the September 2025 quarter.
In contrast, HCL Tech’s head count was marginally lower at the end of the December 2025 quarter with 226,379 vis-à-vis 226,640 in the September 2025 quarter.
AI-related revenues
HCL Tech Advanced AI quarterly revenue at $146 million (nearly Rs 1,314 crore) in the December 2025, up 19.9% on a quarter-on-quarter basis on constant currency terms.
Infosys has not specifically provided information on AI-related revenues in Q3FY26.
Globally, AI- is driving growth in the IT sector and investors will also be monitoring AI-revenue growth for Indian IT service companies.
Guidance : A Glimpse into FY26
Infosys has provided for a marginally better guidance – it has now provided a revenue growth guidance of 3%-3.5% in constant currency for FY26 as compared to its revenue growth guidance of 2-3 % in constant currency for FY 26 while declaring Q2FY26 results.
Earlier, HCL Tech had also marginally raised its growth guidance – it expects its services revenue growth to be between 4.75-5.25 % y-o-y in constant currency for FY26 vis-à-vis its forecast of 4-5 % y-o-y in constant currency during FY26 while declaring its September 2025 quarter results.
Investors on Dalal Street
Infosys declared its results after the close of Wednesday trade, and the stock ended the day’s trade broadly flat at Rs 1,599.
Market Valuation & Investor Sentiment
The Infosys stock has recovered from its 52-week low of Rs 1,307 that was reached on 7 April 2025. Infosys trades at a consolidated P/E of 23 times, according to Screener.in.
HCL Tech results were declared after the close of Monday trade and on Wednesday, the stock was broadly flat at Rs 1,668.7. HCL Tech stock has also recovered from its 52-week low of Rs 1,304 that was reached on 7 April 2025. HCL Tech trades at a consolidated P/E of 26.4 times, according to Screener.in.
Investors on Dalal Street still have optimism of some signs of a sustained strong pick-up in IT spending, given the cuts in interest rates by the Federal Reserve. However, the current US government’s tariff war has made that difficult to predict.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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