Infosys fares better than expected, steers clear from big-bang AI announcements

Infosys, India’s second largest IT services company, finished the September quarter with revenue of $5.08 billion, up 2.66% from the June quarter and 3.77% from the previous year. More than half of the earnings came from banks and financial institutions, the company’s largest customer base.

The second quarter performance of Wipro, India’s fourth largest IT firm, was relatively subdued. Its revenue was $2.6 billion, up 0.65% sequentially and down 2.1% year over year. While much of its business, such as Infosys, has been shut down by banks, revenues from most other sectors have declined. Banks account for just over a third of Wipro’s business.

This summarizes the earnings of India’s five largest IT companies; The largest, Tata Consultancy Services, reports the weakest performance and the third-largest, HCL Technologies Ltd, is an outlier.

TCS, HCL Tech and Tech Mahindra Ltd ended the second quarter with revenues of $7.47 billion, $3.64 billion and $1.59 billion, up 0.61%, 2.79% and 1.41%, respectively.

First half fee

Three of the Big Five increased revenue in the first half of the fiscal year; The rest did not.

While Infosys, HCL Tech and Tech Mahindra’s revenues rose 4.3%, 5.6% and 0.1% in the first half to $10 billion, $7.19 billion and $3.15 billion, respectively, TCS and Wipro saw a decline in their revenues; For TCS, it fell 1.9% to $14.89 billion and for Wipro, it fell 1.8% to $5.19 billion.

This raises a warning sign for both companies; because the first half is traditionally stronger for local IT services companies due to more billing days and fewer holidays.

For now, there was a cautious atmosphere at Infosys’ Electronic City campus.

CEO Salil Parekh said in the post-earnings press conference that the environment remains “unclear.” “We’re seeing some changes today where the global environment and macro are looking. We’re still seeing growth in some of our major markets, but we’re also seeing some inflation and limited job creation. There are cost constraints in some other markets. Some industries are seeing that. So it’s a mix,” Parekh said.

Parekh’s views were similar to those expressed earlier by TCS chief executive officer (CEO) K. Krithivasan, who cited “prolonged uncertainty” in the broader economic environment.

CEO Srini Pallia said Wipro does not expect a “significant increase” in discretionary spending by large customers. “But discretionary spending is increasingly shifting to AI and AI-related projects,” Pallia said at the company’s post-earnings press conference, adding that it’s important for clients to reduce costs when creating their budgets, including on IT-related work.

This is in line with HCLTech, whose management says the macro environment is more or less unchanged. However, fifth largest Tech Mahindra Ltd said that although the environment has stabilized and partially improved, it remains fragile.

Claim the sadness

The Indian IT sector continues to navigate an uncertain demand environment, largely due to macroeconomic challenges caused by US President Donald Trump’s regulatory uncertainties and trade disputes between the world’s largest economies.

The lack of clarity on demand is also reflected in companies’ guidance. Infosys raised the lower end of its forecast for the full year, expecting revenue growth of 2-3% in constant currency terms. But it did not raise the upper end of its guidance despite signing a $1.6 billion contract with England’s NHS two days ago.

This is similar to HCLTech, which maintained its 3-5% target for the full year in constant currency terms. Fixed currency does not take into account currency fluctuations.

However, Wipro expects revenue of $2.59-2.64 billion in constant currency terms for the third quarter, down 0.5% and up 1.5% respectively. Pallia said Wipro’s focus is to convert backlog orders into active income and grow profitably. Wipro does not publish annual guidance.

Of course, TCS and Tech Mahindra do not offer quarterly or annual guidance, but each expects the second half to be better for services revenues.

While four of the Big Five have big plans for AI, Infosys is being more cautious.

“We do a lot of projects with our customers on enterprise AI that focuses on growth, like the sales function or the marketing function, or focuses on a lot of their processes, focusing on cost optimizing them on customer service and core development,” Parekh said.

Earlier, TCS announced plans to invest over $6 billion over a period of five to seven years to build and operate a 1GW data center.

But according to Parekh, Infosys is “happy with the (AI) strategy we have together.”

A few kilometers east, Pallia was “thrilled” as Wipro announced Wipro Intelligence, a suite of artificial intelligence platforms and solutions, and also released a short video before embarking on a Q&A session with journalists.

Noida-based HCLTech became the first company among the Big Five to post revenue from AI, reporting $100 million last quarter. The company is doubling down on IP-based software products and platforms. Tech Mahindra, on the other hand, creates a large language model with 1 trillion parameters.

Margins, number of employees

Infosys’ operating margin increased by 20 basis points to 21%, driven by more work being transferred to contractors and margin improvement plan. Wipro, on the other hand, decreased by 60 basis points to 16.7%, respectively. However, this was reduced primarily by a one-off expense resulting from the client’s bankruptcy. Apart from this, margins fell 10 basis points to 17.2%.

Another major issue that arose before earnings season began was headcount. In particular, TCS was the only company among the top five companies that reduced the number of employees last quarter, in line with the layoffs it announced in July.

Infosys hired 8,203 employees at the end of September, up from 331,991 employees, while Wipro hired 2,260 employees at 235,492 employees. This means TCS is the only Big Five company to end up with fewer staff; This is mainly due to layoffs announced in the quarter, which will reduce the workforce by 2%.

For now, analysts are divided on their approach to the two companies.

“On the AI ​​side, the fear of AI being deflationary for Infosys does not exist as of now. It is actually creating newer opportunities. I think this is a good outcome in a challenging environment. The pipeline is improving and the benefits of deal wins and capacity building will be visible in Q4 or Q1,” said Amit Chandra, vice president at HDFC Securities.

However, a second analyst expects more clarity from Wipro.

“Even though Wipro’s major deal wins in FY26FY26 have exceeded FY25 bookings, we expect further clarity on the increments of recently won deals,” said Manik Taneja, managing director, IT services, Axis Capital.