Infosys has its best growth in 3 years, but Big Five have another uncertain year ahead

Infosys Ltd beat analysts’ expectations by growing at its fastest pace in three years in the last financial year, even as it cited the potential impact of artificial intelligence technologies. India’s second-largest information technology (IT) services company, like its peers noting customer-specific challenges and the rise of automation tools, said the advancement of artificial intelligence (AI) could constrain revenue in the current financial year.

The Bengaluru-based company reported revenue of $20.16 billion, up 4.57% from the previous year. A third of its increased revenue came from manufacturing, a sector that provides a fifth of its business.

For the company, macroeconomic conditions remained largely unchanged in the March quarter. “We don’t see anything unusually changing from last quarter to this quarter,” Infosys CEO Salil Parekh said at the company’s post-earnings press conference on Thursday. He added that the company expects more business from financial institutions and energy and utility companies.

Financial institutions account for nearly a third of the company’s revenues, while energy and utility firms provide just over a tenth. Net profit increased by 4.9% to $3.31 billion.

Infosys beat Bloomberg The analyst survey’s revenue expectation is $19.15 billion. However, the company’s shares traded 6.7% lower on the New York Stock Exchange, indicating investors were disappointed.

On the earnings call, Parekh flagged the threat posed by automation tools.

“So compression is coming in some services, growth is coming in other services, and compression is generally in areas where the AI ​​base models and some of the tools are very efficient,” he said.

Like Infosys, its Big Five partners Tata Consultancy Services, Wipro, HCL Technologies and Tech Mahindra have also expressed concerns over the problematic demand environment as geopolitical and trade uncertainties force major customers to postpone technology spending. Automation tools and increasing insourcing by large companies are further eroding the business of IT services companies.

TCS and Wipro ended FY26 with lower revenues; This marks the first time that two of the nation’s four largest technology outsourcers ended the full year with revenue declines. TCS and Wipro posted revenues of $30.08 billion and $10.48 billion, down 0.54% and 0.32% respectively. Executives from both companies highlighted concerns about uncertain demand and customer-specific issues.

One bright spot was fifth-largest Tech Mahindra Ltd, which finished last year with revenues of $6.39 billion, up 1.9% on the previous year. It reported growth after two years of revenue decline but remains cautious about demand. Third largest HCL Technologies Ltd posted industry-best revenue growth of 5.95% to $14.66 billion. However, growth is slower in the current financial year as four customers paused and withdrawn technology commitments, it said. It targeted 1-4% growth for the full year in constant currency terms.

Infosys’ earnings were weaker than expected, according to Sushovon Nayak, chief IT analyst at Anand Rathi Institutional Equities. “Street’s expectation was 2-5%, which would have toned down after the HCL push. At the midpoint, organic cc growth in FY27 would be 2.25% (compared to 2.4% cc in FY26). This loss can be attributed to lower revenue from large European manufacturing customer and decision not to do a return-cutting deal (75-100 basis points in total). AI-related revenue deflation will also weigh on growth,” Nayak said. He said it might have created pressure.

Infosys expects revenue growth of 1.5-3.5% on a constant currency basis in FY27, above the 0-3% forecast in April 2025. This represents slower growth than HCLTech, which expects growth of up to 4% at the upper end of its own guidance. The guidance does not take into account growth of around 200 basis points from two acquisitions that Infosys completed in the previous financial year.

The company declined to comment on succession planning regarding the CEO’s role.

“As we look to fiscal 2027, we see huge opportunities in AI services. We also see continued competitive intensity and an impact on AI productivity,” Parekh said.

The company, which reported that it earned approximately $280 million in revenue from artificial intelligence services in the December quarter, did not share the same for the March quarter.

While Infosys’s profitability fell by 80 basis points to 20.3%, TCS, Wipro and Tech Mahindra’s margins increased by 10-290 basis points. In contrast, HCLTech’s margin fell 110 basis points to 17.2%.

Much of the decline in Infosys’ margins was due to up-front costs related to acquisitions it announced in the last financial year. Infosys spent more than $800 million on acquisitions last year; this was the highest figure since its listing.

The decline in margins is also accompanied by an increase in headcount, with Infosys adding 5,016 people in FY26 to reach 328,594 employees. This suggests that the country’s top five present a mixed picture in terms of headcount. TCS has laid off more than 23,000 people, mainly due to layoffs it announced last year, while Tech Mahindra has reduced its headcount by more than 1,100.