Infosys (NYSE:INFY) reported what management described as a “strong performance” for fiscal 2026, led by higher large-deal activity and continued investment in artificial intelligence capabilities, while also outlining a cautious growth outlook for fiscal 2027 amid persistent client focus on cost optimization and rising competitive intensity.
FY 2026 growth driven by large deals and select vertical strength
CEO and Managing Director Salil Parekh said the company delivered 3.1% full-year revenue growth in constant currency, with fourth-quarter revenue up 4.1% year-over-year in constant currency. He highlighted strength in financial services, communications, manufacturing, and Europe for the year.
CFO Jayesh Sanghrajka said fiscal 2026 revenue “crossed $20 billion” and that acquisitions contributed about 70 basis points to full-year growth. He added that communications, manufacturing, and Europe grew more than double the company average, “led by ramp-up of the large deal wins,” and that financial services and the energy, utilities, resources and services (EURS) segment grew above the company average.
Margins stable as currency and productivity gains reinvested
Sanghrajka said adjusted operating margin was stable at 21% for fiscal 2026. He attributed growth for the year to higher realization, citing “Project Maximus,” while noting volumes were “flattish.” He said gains from currency and Maximus were reinvested into “talent, AI investment and sales and marketing.”
In the fourth quarter, Sanghrajka said operating margin was 20.9%, down 0.3% sequentially (adjusted for a labor code impact in the prior quarter). He described several quarter-on-quarter margin drivers, including headwinds from acquisition-related amortization and compensation costs, partially offset by currency benefits and Maximus initiatives.
On a question about why productivity improvements can still pressure margins, Sanghrajka pointed to competitive dynamics, saying “the competitive intensity in the market has gone up and the productivity will get passed back to the client largely.”
AI strategy: six service areas and client examples
Parekh reiterated the company’s AI positioning following a recent AI Investor Day, describing a “large addressable market” across six areas: AI strategy and engineering, data, process, legacy modernization, physical AI, and trust. He said Infosys is using its Topaz Fabric platform for AI and Cobalt for cloud to deliver across these areas.
As examples, Parekh cited work with Ralph Lauren to build a conversational and personalized AI tool that he said increased revenue by 12% and customer engagement by 50%. He also described work with Hertz to migrate “3 million lines of COBOL code” to microservices using AI foundation models, which he said was “60% lower” cost and “60% quicker” versus a non-AI approach. Parekh further highlighted an AI agent program at BP, describing “50 AI agent initiatives” and stating the effort resulted in 95% payment accuracy, 50% faster contract validation, and an 18% improvement in IT operations efficiency.
Management also discussed partnerships and internal adoption. Parekh said Infosys has collaborations with foundation model companies such as Anthropic and OpenAI, and additional strategic collaborations with Google Gemini, NVIDIA, Microsoft, AWS, Google Cloud, and Intel, among others. He added the firm has deployed “over 30,000 deployer developers on GitHub Copilot.”
Cash flow, capital return, and workforce metrics
Sanghrajka said collections improvements helped reduce days sales outstanding (DSO), including unbilled net of unearned, to 78, which he said is the lowest level in seven years. He also reported that consolidated cash and investments ended the year at $4.5 billion after the company returned “over $4 billion” to shareholders in fiscal 2026.
On shareholder returns, Sanghrajka said the board proposed a final dividend of INR 25 per share, which would bring the total dividend to INR 48 per share, representing an 11.6% increase over last year once approved by shareholders.
Workforce-related updates included total headcount of “over 328,000” at year-end and voluntary attrition of 12.6%, down 1.5 percentage points for the year. Sanghrajka said Infosys onboarded more than 20,000 freshers in fiscal 2026 and expects to hire a similar number in fiscal 2027, while continuing to “calibrate” based on growth and attrition trends.
Asked whether overall headcount could decline, Parekh said, “I don’t see that our headcount is going to be less. We don’t have a plan that the headcount will be less at the end of the year.” On subcontracting, Sanghrajka said the company does not expect subcontractor usage to “significantly change” in the near term, though it may trend lower over the medium term.
FY 2027 guidance: AI opportunity tempered by compression and specific headwinds
For fiscal 2027, Parekh guided for revenue growth of 1.5% to 3.5% year-over-year in constant currency and operating margin of 20% to 22%. He said the company expects acceleration in financial services and the EURS vertical from fiscal 2026 to 2027, and expects the first half to be stronger than the second half, consistent with normal seasonality.
Sanghrajka described fiscal 2027 as a period where clients remain “guarded” and more focused on cost optimization than “growth-led transformation programs,” while AI-driven initiatives around productivity and automation are gaining momentum. He said the company’s guidance reflects both growth in AI services and “compression” from productivity expectations in existing portfolios.
Management also cited specific items affecting the outlook. Sanghrajka said the fiscal 2027 guidance includes contribution from Seterus, which he said closed earlier in the week, but excludes the Versent JV and Optimum Healthcare acquisitions that are “yet to be closed.” He also outlined factors reducing growth assumptions, including:
- A “0.75%-1%” reduction due to lower revenue from “one of our large European manufacturing clients,” driven by reduced client spend amid a challenging macro environment and Infosys’ decision not to pursue a deal that was “not aligned to our return expectations,” according to Sanghrajka.
- A further “0.75%-1%” reduction tied to a continued reduction in on-site mix, which management said impacts reported revenue.
In segment commentary, Sanghrajka said financial services demand and sentiment remain positive, citing continued consumer spending and expected budget growth in the U.S. He also said manufacturing clients remain cautious, pointing to softer demand—especially in automotive and parts of Europe—along with uncertainty from tariffs and the Middle East conflict, contributing to delayed decision-making. In retail, he said muted consumer demand and tight budgets are pushing clients to seek AI-led productivity savings. In communications, he said budgets are “flat to negative” and spending is increasingly “AI-led,” with a shift “from generative to agentic AI.”
On the macro environment and guidance visibility, Parekh said the company has “better clarity” now than a year ago because the environment has been consistent for several quarters, while noting that client behavior could still change if conditions shift.
Looking ahead, Parekh summarized fiscal 2026 as “3.1% growth, 21% margin” with “very good large deals,” and said the company’s AI services strategy “is resonating with our clients very well,” as Infosys balances AI-led growth drivers with ongoing pricing and productivity-related compression.
About Infosys (NYSE:INFY)
Infosys Ltd. is a digital services and consulting company, which engages in the provision of end-to-end business solutions. It operates through the following segments: Financial Services, Retail, Communication, Energy, Utilities, Resources, and Services, Manufacturing, Hi-Tech, Life Sciences, and All Other. The company was founded by Dinesh Krishnan Swamy, Senapathy Gopalakrishnan, Narayana Ramarao Nagavara Murthy, Raghavan N. S., Ashok Arora, Nandan M. Nilekani, and S. D. Shibulal on July 2, 1981 and is headquartered in Bangalore, India.
