The IT consulting company meets quarterly earnings expectations and boosts its fiscal-year guidance. ...

Core Insights - Infosys reported revenue of $5.1 billion for the quarter ended December 2025, reflecting a year-over-year increase of 3.2% and a surprise of +0.33% over the Zacks Consensus Estimate of $5.08 billion [1] - The earnings per share (EPS) for the quarter was $0.21, up from $0.19 in the same quarter last year, but did not exceed the consensus EPS estimate of $0.20 [1] Financial Performance - The stock of Infosys has returned -1.4% over the past month, while the Zacks S&P 500 composite has increased by +2.1% [3] - Infosys currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3] Employee Metrics - The number of software professionals at Infosys reached 319,364, surpassing the average estimate of 258,655 based on two analysts [4] - Consolidated utilization including trainees was reported at 80%, lower than the average estimate of 82.1% [4] - Consolidated utilization excluding trainees was 84.1%, compared to the average estimate of 85.6% [4] - The number of employees in sales and support was 17,670, exceeding the average estimate of 14,933 based on two analysts [4]

Financial Data and Key Metrics Changes - Revenues for Q3 FY 2026 were $5.1 billion, reflecting a sequential growth of 0.6% and a year-on-year growth of 1.7% in constant currency terms [5][11] - Adjusted operating margin for Q3 was 21.2%, with a reported margin of 18.4% impacted by changes in labor codes [11][12] - Free cash flow generated was $915 million, with an adjusted free cash flow conversion for nine months standing at 118% [15][16] - The company revised its revenue growth guidance for FY 2026 to 3%-3.5% in constant currency [9][21] Business Line Data and Key Metrics Changes - Large deal total contract value (TCV) for Q3 was robust at $4.8 billion, with 57% being net new deals [14][17] - Financial services vertical saw a year-on-year growth of 3.9% in constant currency terms, with Europe leading growth at 7.2% [12][17] - The healthcare sector benefited from a significant $1.6 billion deal with the National Health Service in the UK, contributing to incremental revenues [5][39] Market Data and Key Metrics Changes - The company signed 26 large deals during the quarter, with 10 in financial services and 16 in the Americas [17][18] - There is a noted shift in client priorities towards AI-led transformation and vendor consolidation across various sectors [19][20] - The manufacturing vertical is facing challenges due to tariff uncertainties, while the energy sector is witnessing increased demand driven by infrastructure investments [18][19] Company Strategy and Development Direction - The company is expanding its strategic partnerships with AI companies and has deepened its AI capabilities with the Topaz AI suite [6][8] - Six AI-led value pools have been identified as significant growth opportunities, including AI engineering services and legacy modernization [8][9] - The company aims to position itself as a leading AI value creator for global enterprises, with a focus on driving value realization from AI investments [9][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory for FY 2027, particularly in financial services and energy sectors, driven by strong deal wins [9][21] - The operating environment remains challenging, with a focus on cost discipline and efficiency among clients [20][21] - Management highlighted the importance of AI in driving future growth and the increasing demand for AI infrastructure and services [19][20] Other Important Information - The company completed its largest-ever buyback, returning INR 18,000 crores to shareholders, which is expected to aid in EPS accretion [16] - The labor code changes had a notable impact on operating profit, net profit, and free cash flow for the quarter [11][12] Q&A Session Summary Question: Why is the implied outlook for Q4 not stronger despite strong signings? - Management indicated that while there is strong momentum, the lower working day calendar in Q4 presents a headwind [25][29] Question: Are there signs of discretionary spending expanding beyond financial services and energy? - Management confirmed that growth is expected in financial services and energy, but other sectors are still emerging [25][26] Question: Is AI a headwind or tailwind for margins? - Management stated that AI projects are not negatively impacting pricing and are seen as accretive [30][32] Question: What is the outlook for North America and specific industries? - Management noted a contraction in North America due to lower third-party costs across segments [35][36] Question: How is the healthcare sector performing? - The healthcare sector saw significant growth, partly due to the NHS deal, with expectations for continued contribution [39][41] Question: What is the impact of new labor laws on margins? - The recurring impact of new labor laws is expected to be approximately 15 basis points on an ongoing basis [61][62]

Financial Data and Key Metrics Changes - Revenues for Q3 FY 2026 were $5.1 billion, reflecting a sequential growth of 0.6% and a year-on-year growth of 1.7% in constant currency terms [11][12] - Adjusted operating margin for Q3 was 21.2%, with a reported margin of 18.4% impacted by changes in labor codes [12][16] - Free cash flow for the quarter was robust at $965 million, representing 113% of adjusted net profit [16] - The company revised its revenue growth guidance for FY 2026 to 3%-3.5% in constant currency [9][22] Business Line Data and Key Metrics Changes - Financial Services saw a year-on-year growth of 3.9% in constant currency terms, with strong momentum in large deals and discretionary projects [12][17] - The healthcare sector benefited significantly from a $1.6 billion deal with the National Health Service in the U.K., contributing to incremental revenues [5][40] - The manufacturing vertical is facing challenges, particularly in the automotive sector, while some strength is noted in data center supply capabilities [57][58] Market Data and Key Metrics Changes - Europe led growth with a 7.2% year-on-year increase in constant currency terms [12] - The Americas experienced a contraction of approximately 1% year-on-year, attributed to lower third-party costs across segments [35][36] - The energy and utilities sectors are expected to see growth acceleration in FY 2027, driven by increased discretionary spending [20][22] Company Strategy and Development Direction - The company is focusing on expanding its AI capabilities, with 90% of its largest clients engaged in AI projects and a total of 4,600 AI projects underway [6][9] - Infosys aims to capture market share across six identified AI value pools, including AI engineering services and legacy modernization [8][9] - Strategic partnerships with AI companies, such as Cognition, are being pursued to enhance service offerings [6][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain environment, citing strong year-to-date performance and robust deal wins [22] - The company anticipates a shift from compliance to business growth in Financial Services, with elevated interest in AI-led transformation [18][21] - There is a cautious optimism regarding discretionary spending in various sectors, with expectations for growth in FY 2027 [9][22] Other Important Information - The company completed its largest-ever buyback, returning INR 18,000 crores to shareholders, which is expected to aid in EPS accretion [16] - Adjusted EPS in Rupee terms grew by 11.5% year-on-year for the nine-month period [16] - The impact of new labor laws is expected to result in a recurring margin impact of approximately 15 basis points [60] Q&A Session Summary Question: Why is the implied outlook for Q4 not stronger despite strong signings? - Management noted that while there is strong momentum, the lower working day calendar in Q4 presents a headwind [26][29] Question: Are there signs of discretionary spending expanding beyond Financial Services and energy? - Management confirmed that growth is expected in Financial Services and energy, but other sectors are still emerging [26][27] Question: Is AI a headwind or tailwind for margins? - Management indicated that AI projects are not negatively impacting pricing and are seen as accretive [30][32] Question: What is the outlook for North America? - Management expects a contraction in North America due to lower third-party costs across segments [35][36] Question: How are clients approaching their 2026 budgets? - There is increased activity in AI and discretionary spending in Financial Services, with expectations for growth [36][37] Question: What is the impact of the NHS deal on healthcare growth? - The NHS deal contributed significantly to healthcare growth, with expectations for residual contributions [40][41] Question: What is the recurring impact of new labor laws on margins? - The recurring impact is expected to be approximately 15 basis points going forward [60]

Financial Data and Key Metrics Changes - Revenues grew 0.6% sequentially and 1.7% year-on-year in constant currency terms, reaching $5.1 billion [3][8] - Adjusted operating margin was 21.2%, while the reported operating margin, impacted by labor code changes, was 18.4% [8][9] - Free cash flow generated was $915 million, with an adjusted free cash flow conversion for nine months standing at 118% [8][12] - The company revised its revenue growth guidance for FY26 to 3%-3.5% in constant currency [6][18] Business Line Data and Key Metrics Changes - Large deals totaled $4.8 billion in Q3, with 57% being net new deals, across 26 deals [3][11] - Financial services saw a year-on-year growth of 3.9% in constant currency terms, with strong momentum in large deals and discretionary projects [9][14] - The healthcare sector benefited from a significant $1.6 billion deal with the National Health Service in the UK, contributing to incremental revenue growth [3][35] Market Data and Key Metrics Changes - Europe led growth with a 7.2% year-on-year increase in constant currency terms [9] - The Americas saw a contraction of approximately 1% year-on-year, attributed to lower third-party costs across segments [30][31] - The company is witnessing increased demand for AI-led transformation and modernization across various sectors, particularly in financial services and energy utilities [16][18] Company Strategy and Development Direction - The company is focusing on expanding its AI capabilities, with 90% of its 200 largest clients engaged in AI projects [4][6] - Six AI-led value pools have been identified as significant growth opportunities, including AI engineering services and legacy modernization [5][6] - Strategic partnerships with AI companies, such as Cognition, are being pursued to enhance service offerings [4][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model and the relevance of offerings despite seasonal weaknesses [8] - There is an expectation of growth acceleration in FY27, particularly in financial services and energy utilities, driven by strong deal wins [6][18] - The company anticipates a shift from compliance to business growth in financial services, with increased discretionary spending expected [15][18] Other Important Information - The company completed its largest-ever buyback, returning INR 18,000 crores to shareholders, which is expected to aid in EPS accretion [12] - Labor code changes had a notable impact on operating profit, net profit, EPS, and free cash flow for the quarter [8][9] - The company is investing in talent, with a net headcount increase of 5,000 to 337,000 employees [10] Q&A Session Summary Question: Why is the implied outlook for Q4 not stronger despite strong signings? - Management noted that while there is strong momentum, lower working days in the quarter are a headwind for guidance [22][25] Question: Are margins under pressure due to pricing? - Management indicated that pricing has been accretive, with no significant headwinds from AI projects affecting margins [26][27] Question: What is the outlook for North America? - Management expects a contraction in North America due to lower third-party costs across segments [30][31] Question: Is there a shift in AI strategy across verticals? - Management confirmed increased interest in AI across various industries, with financial services showing significant momentum [41][82] Question: What is the impact of new labor laws on margins? - The recurring impact of new labor laws is expected to be approximately 15 basis points on an ongoing basis [55]

Core Insights - Infosys reported Q3 revenues of $5,099 million, reflecting a year-on-year growth of 1.7% and a sequential growth of 0.6% in constant currency [1][7] - The reported IFRS operating margin was 18.4%, while the adjusted operating margin increased to 21.2% [1][7] - Free cash flow generation was strong at $915 million, with adjusted free cash flow at $965 million, representing 112.8% of adjusted net profit [1][7] Financial Performance - Year-to-date revenues for December 2025 grew by 2.8% year-on-year in constant currency, with reported IFRS revenues at $15,117 million, a growth of 3.9% year-on-year [2][7] - The reported IFRS operating margin for the year-to-date period was 20.0%, and the adjusted operating margin was 21.0% [2][7] - Basic EPS for Q3 was reported at $0.18, while adjusted basic EPS was $0.21 [7][23] Strategic Initiatives - Infosys emphasized its differentiated value propositions in enterprise AI through Infosys Topaz, which has helped increase market share and client partnerships [3][8] - The company is committed to reskilling and empowering its workforce to succeed in an AI-augmented environment [3][8] Client Collaborations - Infosys extended its collaboration with Metro Bank to enhance finance operations using Workday solutions [9] - The company launched an AI-first Global Capability Center model to support digital transformation for clients like Lufthansa Systems [9] - Collaborations with NHS Business Services Authority and Telenor Shared Services aim to modernize workforce management and HR operations, respectively [9][10] Awards and Recognitions - Infosys received multiple recognitions, including being named a leader in various IDC MarketScape assessments and recognized for its commitment to inclusion and diversity [14][19]

Core Insights - The company revised its revenue guidance for the fiscal year, raising the constant-currency growth outlook to 3% to 3.5% while maintaining operating margin guidance at 20% to 22% [1][6] - The company reported a sequential revenue growth of 0.6% and a year-over-year growth of 1.7% in constant currency terms, with $4.8 billion in large deals signed during the quarter [2][6] - The company is accelerating AI adoption, working with 90% of its top 200 clients on AI initiatives and executing approximately 4,600 AI projects [5][14] Revenue and Financial Performance - Revenue grew 0.6% sequentially and 1.7% year-over-year in constant currency terms [2][6] - The company signed $4.8 billion in large deals during the quarter, with 57% being net new [2][6] - Adjusted operating margin was reported at 21.2%, with free cash flow totaling $915 million [2][6] AI Strategy and Adoption - The company is focusing on AI through its Topaz Fabric agent services, which aims to help clients manage and implement AI agents [5][11] - The company has generated over 28 million lines of AI-assisted code and built over 500 AI agents [5][14] - Six AI-led value pools have been identified to unlock incremental opportunities [11] Margin and Cost Management - Adjusted operating margin expanded by 20 basis points sequentially in Q3, with a nine-month margin standing at 21% [7][10] - Margin benefits were attributed to currency fluctuations and the Project Maximus efficiency program, offset by higher sales and headcount investments [4][8] - The company has onboarded approximately 18,000 of the planned 20,000 freshers, contributing to lower utilization rates [9] Vertical Trends and Client Engagement - The company is seeing improved trends in financial services and energy sectors, with AI adoption increasing among large financial services clients [6][13] - Positive signs were noted in retail, although some client-specific cost containment measures are in place [15] - The company works with 90% of its largest 200 clients on AI initiatives, indicating strong client engagement [14] Future Outlook and Strategic Initiatives - The company plans to provide a comprehensive view at an upcoming Investor Day [12] - Management is exploring acquisitions in areas such as cyber, consulting, and energy services, while remaining open to AI-focused acquisitions as the market evolves [18] - The company does not plan to change its flexible work arrangements and will provide next-year outlook details in April [19]

Core Insights - Infosys Ltd., India's second-largest IT services company, reported a mixed performance for the third quarter, characterized by a decline in profit but steady revenue growth and an improved outlook for the company [1] Financial Performance - The company experienced a decline in profit during the third quarter, indicating potential challenges in cost management or market conditions [1] - Despite the profit decline, Infosys reported steady revenue growth, suggesting resilience in its core business operations [1] - The outlook for the company has improved, which may indicate positive expectations for future performance and strategic initiatives [1]

Financial Data and Key Metrics Changes - Revenue grew 0.6% sequentially and 1.7% year-on-year in constant currency terms [2] - Adjusted operating margin was 21.2% [2] - Free cash flow generated was $915 million [2] - Revenue growth guidance for the financial year revised to 3%-3.5% in constant currency [4] Business Line Data and Key Metrics Changes - Large deals amounted to $4.8 billion, with 57% being net new across 26 deals [2] - Significant large deal with the National Health Service in the U.K. valued at $1.6 billion [2] - Strong momentum in AI adoption, with 90% of the largest 200 clients engaged in AI projects [3] Market Data and Key Metrics Changes - Positive outlook in financial services and energy sectors, with good demand observed [8][18] - Manufacturing and Europe showed significant growth, previously experiencing softness [53] Company Strategy and Development Direction - Focus on AI capabilities, with six emerging AI-led value pools identified [3] - Plans to share a comprehensive view of the company's approach at an upcoming Investor Day [4] - Continued investment in sales and marketing, with a focus on building capacity for future growth [10][11] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in market demand, leading to headcount increases [8] - Positive outlook for the next financial year based on strong execution and large deal pipeline [8][18] - Management noted that while some sectors are showing improvement, others remain under pressure [18] Other Important Information - Adjusted margins expanded by 20 basis points sequentially, despite challenges from labor codes [24] - Ongoing impact of labor codes expected to be approximately 15 basis points annually [80] Q&A Session Summary Question: Headcount increase amidst job cuts in peers - Management indicated that the headcount increase reflects confidence in market demand and is part of their strategy to build future capacity [8][10] Question: Guidance upgrade factors - The guidance upgrade is influenced by large deals and strong execution, particularly in financial services and energy sectors [8][18] Question: Sequential margin dip despite currency tailwinds - Management explained that margins were impacted by various factors, including higher variable pay and lower utilization due to training new hires [10][11] Question: AI adoption and pricing models - Management noted that AI adoption is strong across client bases, with evolving pricing models being tested [19][20] Question: M&A strategy and market trends - Management confirmed ongoing discussions for potential acquisitions, focusing on areas like cyber, consulting, and energy services [31] Question: Labor code impact on margins and appraisals - Management clarified that the impact of labor codes has been accounted for, with no immediate changes to appraisal processes [80]

Financial Data and Key Metrics Changes - Revenue grew 0.6% sequentially and 1.7% year-on-year in constant currency terms [2] - Adjusted operating margin was 21.2% [2] - Free cash flow generated was $915 million [2] - Revenue growth guidance for the financial year revised to 3%-3.5% in constant currency [4] Business Line Data and Key Metrics Changes - Large deals amounted to $4.8 billion, with 57% being net new, across 26 deals [2] - Significant large deal with the National Health Service in the U.K. valued at $1.6 billion [2] - Strong momentum in AI adoption, with 90% of the largest 200 clients engaged in AI projects [3] Market Data and Key Metrics Changes - Positive outlook in financial services and energy sectors, with good demand observed [8][18] - Manufacturing and Europe showed significant growth, previously experiencing softness [52] Company Strategy and Development Direction - Focus on AI capabilities with the introduction of Topaz Fabric, enhancing AI agent management [2][3] - Plans to capture market share across six AI-led value pools identified [3][4] - Continued investment in sales and marketing, with a focus on building capacity for future growth [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in market demand, leading to headcount increases despite industry layoffs [6][8] - Positive outlook for the next financial year based on strong execution and large deal pipeline [8][18] - Management noted that AI adoption is expected to drive future growth and operational efficiencies [3][15] Other Important Information - Adjusted margins expanded by 20 basis points sequentially, despite challenges from labor codes [24] - Ongoing impact of labor codes expected to affect margins by approximately 15 basis points annually [80] Q&A Session Summary Question: Headcount increase amidst industry layoffs - Management indicated that the headcount increase reflects confidence in market demand and future growth [6][8] Question: Impact of large deals on revenue guidance - Management confirmed that large deals, including the NHS contract, contributed to the revised revenue guidance [6][8] Question: Sequential decline in margins - Management explained that adjusted margins expanded despite reported margin declines due to labor code impacts [24] Question: AI adoption and its impact on hiring - Management stated that AI software engineers will be utilized across various industries, leading to continued hiring [65] Question: M&A strategy and market trends - Management confirmed ongoing evaluation of potential acquisitions in AI and related sectors [31] Question: Future of office requirements - Management affirmed that the current flexible work model will continue without mandatory office hours [77]