Summary of Infosys Investor AI Day - February 17, 2026 Company Overview - **Company**: Infosys (NYSE: INFY) - **Event**: 2026 Investor AI Day - **Location**: Bengaluru campus Key Industry Insights AI Transition - The current AI transition is fundamentally different from previous technology shifts due to its speed and impact on business operations [4][6][7] - Historical context shows that previous transitions (e.g., PCs, cloud) took longer to reach mass adoption compared to AI, which is rapidly gaining users due to existing infrastructure [5][6] - The AI transition requires a complete overhaul of business operations, moving beyond mere technological upgrades to a fundamental change in how businesses operate [7][8] Legacy System Modernization - Companies can no longer defer the modernization of legacy systems; many are spending 60%-80% of their IT budgets on maintaining outdated systems [9][10] - The need for modernization is driven by financial inefficiencies and increasing security threats [10][11] - AI provides tools for rapid and cost-effective modernization, presenting a significant opportunity for firms like Infosys [11] Deployment Gap - There exists a "deployment gap" where the rapid advancement of AI technology outpaces the ability of enterprises to implement it effectively [17][18] - This gap highlights the need for organizational change, retraining, and a shift in data management practices [17][19] Core Business Strategies AI Services Opportunity - Infosys is actively engaged in AI projects with 90% of its large clients, indicating a robust demand for AI services [32][33] - The company has identified six key areas for growth in AI services: AI strategy and engineering, data for AI, process transformation, legacy modernization, physical AI, and AI trust [36][37] AI-First Value Framework - Infosys has developed an AI-first value framework to guide its service offerings, which includes a detailed breakdown of 30 offerings and 100 sub-offerings [37][38] - The framework emphasizes the integration of AI into existing business processes to drive efficiency and innovation [39] Talent Transformation - Infosys is focusing on reskilling its workforce to meet the demands of AI integration, having recruited 20,000 college graduates in the current year [44][45] - The company aims to build a workforce that is both technically skilled and capable of reimagining workflows [54] Financial Performance - AI services currently represent 5.5% of Infosys's revenue in Q3, with expectations for robust growth in this segment [37] Challenges and Considerations Complexity of AI Integration - Integrating AI into enterprises is complex and requires a deep understanding of existing systems and processes [48][49] - Successful AI implementation involves not just technology but also a cultural shift within organizations [50][51] Unique Client Context - Each enterprise has unique data, processes, and risks, which means AI solutions must be tailored to individual client contexts [52] - Infosys's approach focuses on leveraging its deep client relationships and industry knowledge to unlock value [52] Conclusion - The AI transition presents both challenges and significant opportunities for Infosys and its clients, necessitating a strategic approach to modernization, talent transformation, and AI integration [27][28]

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 - 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]

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]

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 reported at 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] - Operating margin guidance remains at 20%-22% [4] Business Line Data and Key Metrics Changes - Significant large deals totaled $4.8 billion, with 57% being net new [2] - Strong momentum in AI adoption, with 90% of the largest 200 clients engaged in AI projects [3] - Company is currently working on 4,600 AI projects and has generated over 28 million lines of code using AI [3] Market Data and Key Metrics Changes - Notable deal with the National Health Service in the U.K. valued at $1.6 billion [2] - Positive outlook in financial services and energy sectors, with good traction observed [18][38] - Manufacturing and Europe have shown significant growth, previously experiencing softness [42] Company Strategy and Development Direction - Company aims to capture market share across six AI-led value pools, positioning itself as a leading AI value creator for global enterprises [3] - Plans to share a comprehensive view of its approach at an Investor Day later this quarter [4] - M&A strategy includes looking for acquisitions in cyber, consulting, and energy services, with a strong pipeline of potential companies [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in market demand, reflected in headcount increases despite peers reducing jobs [6][9] - Positive outlook for the next financial year based on strong execution and large deal pipeline [9][18] - Management noted that while there are challenges, the overall demand environment remains strong, particularly in financial services and energy sectors [18][38] Other Important Information - Adjusted margins have expanded by 20 basis points sequentially, despite investments in sales and marketing [11][22] - Labor code impacts have been fully accrued in financial statements, with ongoing impacts expected to be around 15 basis points annually [29][69] - Company maintains a flexible work model and does not plan to change its approach to office requirements [65] 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 [6][9] Question: Impact of large deals on revenue guidance - Management stated that the revenue guidance upgrade is influenced by large deals and strong execution in the current quarter [9] Question: Sequential dip in margins despite currency tailwinds - Management explained that margins were impacted by various factors, including higher variable pay and lower utilization due to training new hires [11][22] Question: AI adoption and pricing models - Management noted that AI adoption is strong across client bases, with evolving pricing models being tested [18][19] Question: M&A strategy and market trends - Management confirmed ongoing discussions for potential acquisitions, focusing on areas like AI and consulting [28] Question: Labor code impact on margins and appraisals - Management clarified that the impact of labor codes has been accounted for, with no changes expected in appraisal approaches [29][69]