Infosys has stopped trying to impress the market.
And that may exactly be why it is starting to matter again.
The Boring Reality: Why Investors Are Looking Away
For much of the last three years, India’s information technology services industry has been stuck in a long pause.
Not a collapse, not a boom, just a grinding phase where revenue growth slowed, clients delayed decisions and stock prices steadily bled while other sectors captured investor attention. Infosys has lived through this phase without much drama. It protected margins, kept its balance sheet clean and continued to win large contracts. What it has not done is talk up growth.
That is now becoming the most interesting part of the story.
At a time when optimism around artificial intelligence is bordering on excess in some corners of the market, Infosys has chosen to guide for just 2% to 3% constant currency revenue growth for the financial year 2026.
Management language remains cautious. Discretionary demand is still uneven. Some verticals remain weak. Clients are pushing for productivity gains to be passed through in pricing. The message is one of disciplined growth rather than excitement.
Yet when you step back from the guidance and look at how the business is actually behaving, a different picture begins to emerge. One thing is clear. This is not a company preparing for stagnation. It is one quietly positioning itself for a cycle that has not yet shown up in quarterly headlines.
The Contrarian Signal: Hiring While Peers Freeze
One of the most effective ways to gauge demand in information technology services is to disregard what management says and instead observe what it does. Infosys continues to add people. Employee headcount rose by 8,203 sequentially in the September quarter. Management has also reiterated plans to hire 15,000 to 20,000 fresh graduates during the year, broadly in line with last year’s numbers.
Companies facing prolonged demand weakness do not expand their workforce meaningfully. They cut, or at least freeze.
Infosys is doing neither.
Now, that alone does not guarantee a growth rebound. But it does suggest that the management sees enough medium term visibility to invest in capacity. It also signals confidence that the current softness is cyclical rather than structural.
The Order Book: $3.1 Billion in Wins Signals Future Revenue
The large deal momentum supports that view. The company continues to report strong total contract value wins, with a growing share coming from net new deals rather than renewals. In the September quarter, large deals were at US$3.1 bn, out of which 67% was net new work. Additionally, the company announced a mega deal worth $1.6 bn after the close of the quarter, but before results announcement.
That matters because the net new deals typically reflect forward looking technology and transformation spending. In other words, while clients remain cautious on near-term discretionary budgets, they are still committing capital to multi-year programmes.
Margins tell a similar story.
Infosys has held its earnings before interest and tax margin around 21%, comfortably within its 20 to 22% guidance band for FY26. This has been achieved despite wage hikes, ongoing investments in digital platforms and higher third-party and subcontracting costs. Productivity gains, offshoring and automation are doing the heavy lifting.
The result is a business that may not be growing fast, but is operating from a position of strength.
Artificial intelligence as an operating reality, not a slogan
Much of that strength increasingly comes from artificial intelligence.
Infosys is already running thousands of artificial intelligence led projects across clients. Management says about 90% of its employees are trained on artificial intelligence tools and use them in day-to-day work. Developers have already produced more than 25 million lines of code using artificial intelligence based coding assistants. Internal small language models are being deployed across delivery teams. Partnerships with platform providers like Nvidia and Microsoft are expanding.
None of this, of course, shows up as explosive revenue growth immediately. In fact, in the short run, artificial intelligence is deflationary. Clients see productivity improvements and demand lower pricing at renewal. Routine work gets automated. Billing rates come under pressure.
This is where many investors get uncomfortable. If artificial intelligence makes software development faster and cheaper, why should an information technology services company benefit at all?
The answer lies in where Infosys sits in the value chain. The company has spent the last decade moving up the software development life cycle, away from pure commoditised coding towards consulting led transformation, data, cloud architecture and enterprise modernisation. These are precisely the areas where artificial intelligence is increasing complexity rather than reducing it.
Enterprises do not struggle with writing code. They struggle with figuring out what to modernise, how to integrate legacy systems with new models, how to govern data, how to secure workflows and how to ensure regulatory compliance. Artificial intelligence makes these questions more urgent, not less.
That is why Infosys continues to see deal flow in banking, financial services and insurance, manufacturing, telecom and healthcare even as retail and automotive remain soft. These are verticals with large data estates and a clear need to embed artificial intelligence into core systems, not just experiment at the margins.
The Efficiency Engine: How AI Protects Margins
What artificial intelligence is quietly doing for Infosys today is not driving top line acceleration, but protecting margins and strengthening client relevance. It is making the company stickier at the same time that it takes cost out of delivery.
The guidance that refuses to get optimistic
Against this backdrop, the 2-3% growth guidance for financial year 2026 feels deliberately conservative. Even though it is up from 1-3%.
Mathematically, it implies a very muted second half, even after accounting for large deal ramp-ups. Management has not changed its margin outlook. It has not upgraded the medium-term commentary. If anything, it continues to emphasise uncertainty around discretionary spending.
There are rational reasons for this. Currency volatility, tariff risks, uneven recovery across geographies and delayed client decision making are all real factors. Over-promising in this environment would be reckless.
But there is also a strategic dimension. Infosys has been here before. It understands that earnings upgrades driven by execution tend to be rewarded far more than optimistic guidance that needs to be walked back later. In this market, credibility is itself a competitive advantage.
For long-term investors, this conservatism creates an interesting asymmetry. If demand remains weak, the downside appears limited by strong margins, cash generation and a disciplined cost structure. If discretionary spending improves even modestly, operating leverage kicks in quickly.
This is especially relevant in the context of interest rates. A stable or declining global rate environment has historically been supportive of information technology spending, particularly in discretionary digital transformation. Infosys, by virtue of its exposure to higher value work, stands to benefit more than peers if that shift materialises.
Buying the Transition, Not the Peak
Infosys today is not the star of the Indian market. It is not driving index returns. It is not a stock everyone is crowding into. The stock trades at a lower price to earnings multiple than its five-year average, even as return on equity remains close to 30% and free cash flow stays healthy.
That combination tends to appear near transition points, not peaks.
The last time Infosys went through a similar phase was after the global financial crisis, when years of caution were followed by a prolonged period of steady compounding as technology spending recovered. The triggers this time may be different. Artificial intelligence is a new variable. Client behaviour is evolving. Pricing dynamics are more complex.
But the pattern rhymes.
A large, well-run services company with deep client relationships, strong execution muscle and a conservative management is guiding as if nothing exciting is about to happen. At the same time, it is hiring, investing, training and signing long duration contracts in areas that are likely to define enterprise spending over the next decade.
That tension between words and actions is where the story lies.
Infosys may not be ready to call the next cycle yet. But it is clearly preparing for it.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
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