Infosys Limited

Infosys said Q1 revenue was $502 million, up 1% sequentially and 2.4% year over year in constant currency. Operating margin was 21.1%, gross margins improved 60 basis points sequentially, free cash flow was $955 million, and EPS was INR 19.19, up about 15% YoY in rupee terms. AI services revenue was 8.2% of overall revenue, and large deal wins were $3.6 billion with 61% net new. For FY27, the company lowered constant-currency revenue growth guidance to 1.5% to 3% from the prior range and kept operating margin guidance at 20% to 22%; it also said the outlook includes about 1.7% contribution from acquisitions, more than 1% impact from large European manufacturing clients and about 0.75% to 1% impact from offshore shift.

Salil Parekh framed the quarter as proof that Infosys is building a durable AI-led business, pointing to 8.2% AI revenue, strong deal wins, and work across six AI value pools. He stressed that the company is seeing long-term relevance for its services as clients move toward modernization, AI, cloud, and productivity initiatives. His tone was constructive and confident, but he acknowledged the macro backdrop is uncertain and that pricing pressure has intensified.

Jayesh Sanghrajka said Q1 came in below expectations because of softer volumes, a one-off 50 basis point hit from a program termination, lower pricing than initially expected, higher offshoring, and weaker revenue from a European manufacturing client. He noted gross margins improved 60 basis points sequentially and operating margin rose 20 basis points sequentially to 21.1%, helped by 70 basis points of currency tailwind, 20 basis points from Project Maximus, and 20 basis points from intangible amortization benefits, partly offset by AI sales and marketing investment and the termination impact. He also highlighted a strong balance sheet with $3.9 billion in cash and investments, debt-free status, DSO of 76 days, utilization of 84.9% excluding trainees, and an effective tax rate expected at 29% to 30% for the year.

Analysts focused on why guidance was cut despite strong large-deal TCV, and management said Q1 softness should cascade into Q2 and the rest of the year, while the revised outlook now bakes in the client termination, softer volumes, pricing pressure, and higher offshoring. They also asked about pricing compression, and management said pricing is still increasing overall but not as much as expected because clients are asking for more productivity and competition is intensifying. On AI, management explained that externally reported AI revenue refers to the six strategic AI areas such as process AI, AI engineering, and data for AI, while AI-infused work is tracked internally but not included in that figure.