Infosys lowers annual revenue forecast as AI revenue grows 29%

Infosys lowered its full-year FY27 revenue growth forecast to 1%-2% in constant currency, down from 1.5%-3%, as corporate clients curb IT spending amid macroeconomic headwinds. Despite the guidance cut, the company reported Q2 revenue of $5.145 billion with an operating margin of 21%. AI-related business grew 29% quarter-on-quarter to represent 10.5% of total sales, supported by $5.2 billion in large deal bookings including a $2 billion mega deal, as the IT sector adapts to productivity-based fee structures.

Financial results and revenue guidance

• ▪Infosys generated second-quarter net profit of 78.2 billion rupees ($824 million), reflecting a 6.2% to 6.3% year-on-year increase
• ▪Infosys reported second-quarter revenue of 492.4 billion rupees ($5.145 billion to $5.19 billion), representing a 1.5% year-on-year increase in constant-currency terms
• ▪Infosys maintained its operating margin guidance at 20%-22% for FY27 after reporting an operating margin of 21% in the second quarter
• ▪Infosys lowered its full-year FY27 revenue growth forecast to 1%-2% in constant-currency terms, down from its previous guidance of 1.5%-3%

Energy and utility sector performance

• ▪Infosys' revenue from its energy and utility clients rose 7.3% year-on-year in constant-currency terms during the second quarter
• ▪Picked-up demand from energy and utility clients helped Infosys report second-quarter revenue of 492.44 billion rupees, marginally beating analysts' estimates of 491.32 billion rupees

Infosys share price performance

• ▪Shares of Infosys have declined by approximately 30% in 2026 as investors evaluate the company's ability to navigate AI-related challenges
• ▪Mumbai-listed shares of Infosys closed flat on 23 October 2026 ahead of its earnings announcement, while a broader index of Indian IT stocks dropped 0.3%

AI revenue growth and partnerships

• ▪Infosys partnered with Cognition to deploy Cognition's Devin AI software engineer across internal engineering operations and client engagements
• ▪Infosys' AI-related revenue grew 29% quarter-on-quarter in the September quarter, accounting for 10.5% of the company's total revenue

Large-deal contract values

• ▪Infosys recorded $5.2 billion in large-deal total contract value during the second quarter, compared with $3.1 billion in the year-ago quarter
• ▪Infosys CEO Salil Parekh confirmed that the company's $5.2 billion in large deals included a single mega deal valued at over $2 billion, with 62% of overall deal TCV classified as net new business

Impact of AI on IT outsourcing

• ▪AI adoption is disrupting India's IT outsourcing sector as clients increasingly tie vendor fees to technology-led productivity gains rather than billable hours worked
• ▪Infosys Chairman Nandan Nilekani stated that AI will not eliminate jobs but will galvanize small businesses and create demand for skills in client collaboration

Enterprise client spending trends

• ▪Enterprise clients are curbing IT project spending due to geopolitical crises, surging energy prices, elevated inflation, and cautious budget allocations
• ▪Financial services enterprise clients represent a bright spot in IT spending, driven by demand for modernization and artificial intelligence projects with tangible returns

Tata Consultancy Services performance and AI

• ▪Tata Consultancy Services reached an annualized AI revenue of $3.1 billion and partnered with OpenAI to build AI data centers
• ▪Tata Consultancy Services met its revenue estimates in October 2026 as investors cheered an uptick in its AI revenue, sending its stock surging