Infosys Ltd. Q1 FY2026 earnings call

• Strong start to FY '26 with revenues growing 3.8% Y-o-Y in constant currency. - Growth driven by enterprise AI leadership and client consolidations. - Built 300 AI agents across business operations and IT areas. - Operating margin 20.8%, free cash flow $884 million. - Large deal wins: 28 deals with $3.8 billion TCV, 55% net new. - Headcount at 323,788, attrition 14.4%. - Margin components: headwinds from compensation, variable pay; tailwinds from realization, seasonality, lower amortization, etc.

Infosys had a strong start to FY '26. Revenues grew 2.6% sequentially and 3.8% year-on-year in constant currency. Operating margin was 20.8%, free cash flow was $884 million. Growth was broad-based across large industry groups and geographies. Vertical-wise, Financial Services saw momentum in U.S. with capital markets, etc.; Manufacturing faced challenges in automotive, etc.; EURS had mixed outlook; Communications faced growth challenges. Large deals were $3.8 billion, with 28 deals totaling $3.8 billion TCV, 55% net new.

• Revised FY '26 revenue guidance from 0%-3% to 1%-3% in constant currency. - Operating margin guidance remains 20%-22%. - Expect FY '26 free cash flows to be above 100% of net profit.

• Uncertainty due to lack of resolution on tariffs and geopolitical situation. - Clients cautious in discretionary spending, leading to delayed decision-making.

Q: On organic growth momentum, why guide for 2% midpoint despite strong Q1?

A: Environment underlying hasn't changed, tariffs and geopolitical situation remain, client decision cycles elongated.

Q: Any margin or pricing trade-offs with AI in renewals?

A: Enterprise AI has productivity gains shared between clients and Infosys; new opportunities for revenue exist.

Q: Concern on vendor replaceability due to AI?

A: Infosys benefits from strength in delivery, AI work, and multiservice capability, not making it easier/difficult overall.

Q: Europe performance and sustainability?

A: Growth in Europe due to investments, large deals, and outsourcing opportunities; opportunities remain but no guide on outperformance beyond company growth.

Q: Seasonality view on H2 being weaker?

A: H1 strong, usual seasonality implies H2 weaker, but Q1 strong performance supports this.