Infosys has adjusted its financial year 2027 revenue growth forecast downwards, citing ongoing macroeconomic uncertainty and a specific client decision, despite reporting a rise in net profit and revenue for the first quarter.
Key Points
- Infosys has lowered its FY27 revenue growth guidance to 1.5-3 per cent, down from the previous 1.5-3.5 per cent, due to uncertain macroeconomic conditions and a specific client decision.
- The company's net profit for Q1FY27 rose 12.2 per cent year-on-year to Rs 7,769 crore, with revenue up 14 per cent to Rs 48,211 crore, though both figures missed analyst estimates.
- Large deals, valued at $3.6 billion this quarter, are primarily focused on cost optimisation and vendor consolidation, which can be slow to ramp up and intensify competition, potentially impacting margins.
- AI revenue now constitutes 8.2 per cent of Infosys's topline, showing double-digit sequential growth, highlighting the company's focus on this $300 billion market opportunity.
- Operating margin increased to 21.1 per cent, but future pressure is anticipated from wage hikes and project losses, while employee count saw a slight decrease and attrition rose to 13 per cent.
Bengaluru-headquartered Infosys’ American Depository Receipts (ADRs) were down almost 5 per cent from the previous close, as the company trimmed the upper end of its financial year revenue growth target.
India’s second largest IT services company gave a revenue guidance of 1.5-3 per cent for financial year 2027 (FY27), down from 1.5-3.5 per cent, it expected three months ago.
Infosys’ net profit for the first quarter rose 12.2 per cent year-on-year (Y-o-Y) to Rs 7,769 crore, while revenue was up 14 per cent at Rs 48,211 crore, helped by its financial services and manufacturing businesses.
Both the numbers missed estimates by analysts polled by Bloomberg, who expected net profit and revenue to be Rs 7,927 crore and Rs 49,152 crore, respectively. On a dollar basis, revenue rose 2.8 per cent Y-o-Y, while on a constant currency basis, it was up 2.4 per cent.
On a sequential basis, revenue grew by 1 per cent.
Macroeconomic Headwinds and Client Decisions
“The macros continue to remain uncertain,” Chief Executive Officer and Managing Director Salil Parekh said on Thursday in the media briefing.
“The upper end of the guidance last time was based on the macroeconomic situation improving, but it has not at the level we thought initially.
"Also, there was a one-time impact from a client decision during the quarter,” he added without elaborating.
Total contract value of large deals won during the last three months was $3.6 billion, with four of the six large deals just shy of $500 million.
Such deals, which are chased after by all companies, are heavily skewed towards cost optimisation and vendor consolidation projects.
The challenge with such deals is they are often slow to ramp up and take time to materialise.
In a demand environment which is already subdued, large deals would also mean fierce competition among IT services players, which usually eats into the margins.
Growth Drivers and Operational Performance
Infosys also said its AI revenue accounted for 8.2 per cent of the topline, up from 5.5 per cent when it first disclosed it in February, and growing in double digits sequentially.
That market opportunity, which Parekh has often touted as a $300 billion opportunity, consists AI strategy and engineering, data for AI, process AI, agentic legacy modernisation, physical AI and AI trust.
Financial services, the main contributor of revenue, was up 2.4 per cent in constant currency (CC) Y-o-Y, with the segment expected to perform better than the company growth moving ahead.
Energy, utilities and resources, grew at 1.3 per cent and is also expected to drive growth.
Retail, which still faces headwinds, was down 1.8 per cent.
Both North America and Europe were up 3.2 per cent and 2.8 per cent, respectively.
Operating margin went up 30 basis points to 21.1 per cent, even though Chief Financial Officer Jayesh Sanghrajka said it will be under pressure as the company provides wage hikes in the second half of the year and deals with the impact of some project losses.
“Our resilient margins and consistent strong cash generation reflect the strength of our business model, disciplined execution and continued focus on operational excellence in a challenging business environment.”
Total employee count at the end of the quarter stood at 328,062, down 532 people.
Attrition for the quarter was at 13 per cent, up from 12.6 per cent reported in Q4FY26.
