India’s second-largest information technology services company, Infosys Limited, delivered impressive first-quarter results for fiscal year 2026, demonstrating resilience in a challenging global economic environment. The Bengaluru-based IT giant reported substantial growth across key financial metrics while raising its revenue guidance for the full year.
Executive Summary: Key Financial Highlights
Infosys showcased robust financial performance in Q1 FY26, with consolidated net profit rising 8.7% year-over-year to ₹6,921 crore, surpassing analyst expectations of ₹6,778 crore. The company’s revenue grew 7.5% annually to ₹42,279 crore, exceeding the estimated ₹41,724 crore.
In constant currency terms, revenue increased 3.8% year-over-year and 2.6% quarter-over-quarter to $4,941 million, reflecting the company’s ability to navigate currency volatility through strategic hedging mechanisms.
Profitability and Margin Analysis
The operating profit segment demonstrated steady growth, rising 6.2% year-over-year and 2.7% quarter-over-quarter to ₹8,803 crore. However, operating margins experienced a slight compression, declining to 20.8% from 21.1% in the previous year, though still within the company’s guided range.
Earnings per share (EPS) showed healthy improvement, increasing 8.6% year-over-year to ₹16.70, indicating strong value creation for shareholders. The company maintained exceptional cash flow conversion above 100% for the fifth consecutive quarter, with free cash flow reaching ₹7,533 crore, representing 108.8% of net profit.
Sector-Wise Performance: Manufacturing Leads Growth
Infosys demonstrated diversified growth across multiple industry verticals, with manufacturing emerging as the strongest performer. The manufacturing segment recorded impressive constant currency growth of 14.8% year-over-year, reflecting increased digitization initiatives across manufacturing enterprises globally.
The energy, utilities, resources, and services segment followed with 7.2% year-over-year growth, while financial services, traditionally Infosys’s largest revenue contributor, grew 6.3% annually. The communication segment posted decent 4% growth, and the hi-tech segment expanded 1.7% year-over-year.
However, the life sciences segment faced challenges, declining 6.6% year-over-year, potentially reflecting reduced healthcare IT spending post-pandemic normalization.
Geographic Revenue Distribution and Trends
North America, Infosys’s largest market, remained relatively flat with minimal 0.5% year-over-year growth in constant currency terms, indicating market saturation and increased competition in the region. This performance underscores the importance of geographic diversification for sustained growth.
Europe emerged as a bright spot, delivering robust 16.2% year-over-year growth in constant currency, demonstrating strong demand for digital transformation services across European enterprises. This growth likely reflects increased technology adoption and digital modernization initiatives across European markets.
The Indian domestic market experienced a slight decline of 1% year-over-year in constant currency, suggesting competitive pressures in the home market.
Large Deal Momentum and Client Relationships
Infosys secured significant large deals worth $3.8 billion during the quarter, with 55% representing net new business relationships. This substantial deal pipeline reflects the company’s competitive positioning in enterprise digital transformation projects and artificial intelligence implementations.
Notable strategic collaborations included extensions with Select Portfolio Servicing and AIB, along with new partnerships with E.ON for AI-powered digital workplace transformation across Europe, DNB Bank for digital transformation acceleration, and Yorkshire Building Society for comprehensive digital modernization.
The total number of active clients slightly decreased to 1,861 from 1,867 year-over-year, indicating a focus on deeper engagement with existing clients rather than aggressive client base expansion.
Workforce Dynamics and Talent Management
Infosys’s workforce expanded to 323,788 employees, an increase from 315,332 year-over-year, demonstrating continued investment in talent acquisition despite industry-wide cost optimization trends. The company added 8,456 employees during the quarter, indicating confidence in future growth prospects.
However, the last twelve months (LTM) IT services voluntary attrition rate increased to 14.4% from 12.7% year-over-year, reflecting ongoing talent retention challenges across the IT services industry. This increase in attrition could potentially impact project delivery and increase recruitment costs.
Revised Guidance Reflects Optimism
Management demonstrated confidence in the company’s growth trajectory by revising revenue guidance upward. The company now expects revenue growth of 1-3% in constant currency for FY26, compared to the previous guidance of 0-3%. This revision reflects strengthening demand patterns and successful client engagement strategies.
The operating margin guidance remained unchanged at 20-22%, indicating management’s focus on maintaining profitability while investing in growth initiatives and strategic capabilities.
Strategic Focus Areas and Future Outlook
CEO Salil Parekh emphasized the company’s strength in enterprise artificial intelligence capabilities and successful client consolidation strategies. The organization’s Project Maximus initiative continues driving investments in strategic priorities to enhance profitable growth and shareholder value creation.
CFO Jayesh Sanghrajka highlighted the company’s proactive hedging strategy effectiveness in managing currency volatility, which remains crucial given the company’s global revenue exposure.
Investment Implications and Market Position
Infosys’s Q1 FY26 results demonstrate the company’s resilience and strategic positioning in the evolving IT services landscape. The upward revision of revenue guidance, strong deal pipeline, and diversified growth across industry verticals position the company favorably for sustained performance.
The company’s focus on artificial intelligence capabilities, digital transformation services, and strategic client partnerships aligns with global technology adoption trends. However, investors should monitor attrition rates, margin pressures, and North American market performance for comprehensive risk assessment.
With cash and investments totaling ₹45,204 crore at quarter-end, Infosys maintains a strong balance sheet position for strategic investments and potential market opportunities.
