Infosys(INFY) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Company reported a revenue growth of 2.2% sequentially and 2.9% year-on-year in constant currency terms for Q2 FY 2026 [4][8] - Operating margins expanded by 20 basis points sequentially, reaching 21% [10][11] - Free cash flow stood at $1.1 billion, representing 131% of net profit, marking the sixth consecutive quarter above 100% [10][11] - Earnings per share (EPS) in rupee terms grew by 13% year-on-year to INR 17.6 [10] Business Line Data and Key Metrics Changes - Financial services and manufacturing verticals grew above 5% year-on-year in constant currency for both Q2 and H1 [9][13] - The company signed 23 large deals during the quarter, with significant contributions from financial services and manufacturing [12] Market Data and Key Metrics Changes - Europe experienced growth greater than 5% year-on-year in constant currency terms [9] - The company added 8,000 employees during the quarter, bringing total headcount to 332,000 [10] Company Strategy and Development Direction - The company announced a revenue growth guidance of 2%-3% for the financial year, with operating margin guidance remaining at 20%-22% [7][17] - Strategic focus on AI capabilities has positioned the company as a leading enterprise AI services provider, with over 2,500 generative AI projects [18][20] - The company is pursuing a joint venture with Versant in Australia, which is expected to close later this year [7][78] Management's Comments on Operating Environment and Future Outlook - Management noted strong client focus on deploying AI for growth and cost-efficiency programs [4][5] - The company anticipates seasonal factors impacting growth in H2, with lower working days and higher furloughs expected [88] - Management expressed confidence in navigating the changing visa landscape through localization and nearshoring strategies [52][54] Other Important Information - The company announced an INR 18,000 crore buyback through a tender route at INR 1,800 per share, expected to be completed in Q3 [12] - The board approved an interim dividend of INR 23, which is 9.5% higher than the previous year's interim dividend [12] Q&A Session Summary Question: Partnerships with companies building AI capabilities - Management confirmed ongoing partnerships with companies building AI capabilities, focusing on modernization as a significant growth opportunity [30][34] Question: Large deal margins and comfort level - Management stated that while they do not disclose margins separately, they maintain a disciplined approach to large deals to ensure margin profiles are preserved [36] Question: Changes in smaller deal activity - Management indicated no significant changes in smaller deal activity, with a consistent pipeline [39] Question: Impact of H1B visa changes on business model - Management noted that while there is no immediate change, the long-term model will adapt with increased localization and nearshoring [52][54] Question: AI's impact on revenue growth profile - Management highlighted that AI presents both growth opportunities and efficiency improvements, but the current focus is on cost reduction due to economic conditions [69][70]