Infosys Limited, headquartered in Bengaluru, India, is a global leader in IT services and consulting. Founded in 1981, it specializes in digital transformation, AI, cloud, and cybersecurity solutions. With a workforce of over 323,000, Infosys serves clients across industries like financial services, manufacturing, and retail. In FY’25, it reported $4.2% growth, $21.1% operating margin, and $11.6 billion in large deals.
In this article we are going to discuss the summary of the management commentary that was delivered on Q4FY25 performance.
Financial Performance
- 4.2% YoY (constant currency) Revenue growth
- Operating margin: 21.1%, up 50 bps YoY
- Free cash flow: $4.1 bn (129% of net profit)
- Large deal wins: $11.6 bn TCV, with 56% net new.
AI Leadership
Clients are moving from a use case approach to an AI-led transformation approach.
The company has developed 200+ AI agents and is working on 400+ AI projects.
Using of AI results in –
- 30-40% productivity gains in customer service.
- 20-25% efficiency improvements in software development (e.g., Finacle).
Strategic Expansions & Acquisitions
The company continue with its strategic expansion and acquisition in the
- energy and consulting space in the U.S.;
- acquisition in cybersecurity space in Australia;
- a new strategic partner becoming part of company’s joint venture in Japan(Mitsubishi).
Sectoral Performance
Strong growth
- Financial Services (+12.6%),
- Manufacturing (+14%),
- Europe (+15%)
Weakness
- Retail (tariff impact),
- Automotive (Europe slowdown),
- Communications (soft demand).
Guidance for FY26
Company’s guidance for growth in financial year 2026 is 0% to 3% in constant currency terms.
Margin guidance: 20% to 22%, with efforts to improve through Project Maximus (lean automation, pricing optimization).
Hiring plans: 20,000+ freshers in FY26 (attrition at 14.1%).
Question and Answer Session Highlights
Can you provide commentary on the 0% to 3% growth guidance for FY26, given competitors like TCS mentioned delays in decision-making and Wipro noted a paused transformational deal? Are you seeing ramp-downs, delays, or cancellations in large deals?
We see uncertainty in the environment. Deals closed in recent quarters are progressing to their next phases without changes. We’re monitoring potential impacts from regulatory changes in certain industries. No ramp-downs or cancellations have been observed, but we’re cautious due to the uncertain environment.
Infosys hasn’t announced mega deals in the last 12 to 18 months. Are large deals drying up, and does this increase reliance on discretionary spending?
We had two mega deals in FY25 and maintain a pipeline of mega deals. In uncertain environments, clients often focus on cost takeout, automation, efficiency, and consolidation, which we’ve seen historically. We’re observing how this plays out, but our closed large deals are moving forward as planned.
Last quarter, you mentioned recovery in sectors like BFSI. Is this continuing, or do you expect a reversal due to the uncertain environment?
The environment is uncertain, and while we’re seeing some activity in BFSI, we haven’t addressed specific sector trends in this response. We’re monitoring potential impacts from economic changes, but no reversal has been confirmed yet.
Are the second-phase wage hikes planned for April on track? Are the hiring plans for 20,000 freshers in FY26 also on track?
Wage hikes are on track, with most rolled out in January and the balance effective from April 1. We’re also on track to hire over 20,000 freshers in FY26, as previously indicated.
There were reports of Infosys laying off fresh campus recruits, with your statement citing 337 due to weak performance, against media claims of over 700. Can you clarify what happened? Are you struggling to find the right talent? Is the number still 337, or is it larger?
We stand by our statement of 337 layoffs. Infosys has a rigorous training and assessment process for freshers, ongoing for 20 years. Each training batch gets three testing opportunities. Those who succeed stay; after three failed attempts, we offer alternative opportunities or external training support. The number remains as stated in our prior statements.
You’re confident in current deal wins, but do you see changes in client conversations going forward? Any visibility on potential ramp-downs or cancellations? What types of fresh deal wins are expected, particularly cost takeout? What’s your read on discretionary spending sentiment, and when might it recover? How long will this uncertainty last, given a competitor’s optimism for the second half?
The environment is uncertain, and our guidance reflects various scenarios. Recent deal wins are ramping as expected, with no ramp-downs or cancellations observed. Due to recent economic outlook changes, we anticipate client discussions focusing on consolidation and cost pressures, though no changes are evident yet. Historically, uncertain environments drive cost takeout and consolidation deals, which we’re prepared for. Discretionary spending sentiment may be cautious, but we haven’t seen significant shifts. The duration of uncertainty is unclear, as changes are recent, and we’ll monitor developments.
On margins, which stayed in a narrow band, what levers will you use going forward? How will the current environment impact margins, and how is it factored in?
In FY’25, we expanded margins by 50 basis points to 21.1%, despite headwinds like full-year compensation impacts, higher variable pay, large deal ramp-ups, and acquisition costs. This reflects our margin improvement efforts via Project Maximus. Opportunities to further improve margins include value-based selling, lean automation, productivity gains, and increasing nearshore presence. The uncertain environment is factored into our 20% to 22% margin guidance for FY’26.
Does the 0% to 3% guidance account for tariff impacts or GCCs? Have there been project delays or cancellations? Are you building verticals or niche platforms with outcome-based pricing? Is it time to abandon the 20% margin threshold? How will you win deals in this environment? Where is uncertainty greater, U.S. or Europe?
On platforms, AI is driving significant change with agent-based platforms, leveraged across telco, financial services, and services clients. We’re building small language models, like one for financial services using Finacle, and expanding these across industries. This broad-based platform activity positions us well. On winning deals, our portfolio balances growth (AI, cloud, digital) and efficiency (automation, consolidation), adapting to client needs in this uncertain environment. We haven’t specified U.S. vs. Europe uncertainty but are monitoring both.
The guidance is based on multiple models. At the lower end (0%), we assume heightened macro impacts, including tariffs and GCCs, though it’s hard to quantify their specific contributions. At the upper end (3%), we assume a steady to marginally improving environment. No significant project delays or cancellations have been noted. The guidance reflects increasing uncertainty at the lower end, ensuring we account for potential challenges.
We’ve heard Infosys set up an internal business unit focused on GCCs called Project Altius, with a new internal leader. Can you provide more details on this?
There is no new unit like Project Altius. For years, we’ve worked closely with GCCs, helping clients set up, scale, or adopt different GCC models. This is integrated across our go-to-market areas and service lines. Recently, we secured a significant GCC win with a services and airline business, and we’re confident in our approach.
Deploying AI is costly and has a long gestation cycle. Is it too early to assess its economic benefits at the developer and project levels? Can you elaborate?
AI investments are yielding benefits. For example, with Finacle, our uniform codebase has achieved 20% to 25% productivity gains using AI tools built on public models. Similar benefits are seen in user interface development for clients. Across 400 AI projects, we observe varying productivity impacts depending on client situations, but the opportunities are significant and already delivering value.
Customers are increasingly demanding productivity gains, which have a gestation cycle. Is this putting pressure on IT companies, especially with forward pricing for productivity? Are clients’ demands pressuring the run part of the business?
Clients seek significant productivity benefits, particularly in customer service, where we participate in joint tech and operations projects. We don’t have a large voice business but commit to delivering visible benefits. We communicate achievable productivity gains to clients, which may or may not align with their expectations. AI-driven productivity is integrated into our offerings, balancing client demands without specific pressure on the run business.