Infosys Ltd. lowered its FY27 revenue growth guidance to 1%-2% in constant currency terms from 1.5%-3%, despite securing $5.2 billion in large deals and reporting a 29% sequential increase in artificial intelligence (AI) revenue.
The revised outlook reflects softer business volumes, pricing pressure and weakness in select sectors, even as the IT services major maintained its operating margin guidance at 20%-22%.
Large deal total contract value (TCV) rose to $5.2 billion in Q2 FY27 from $3.6 billion in the previous quarter. Net-new business accounted for 62% of the latest deal value. AI-related revenue contributed 10.5% of total revenue, marking a 29% quarter-on-quarter increase.
Infosys Q2 Deal Wins Include Two Mega Deals
Chief Executive Officer and Managing Director Salil Parekh identified AI revenue and large deal wins as the quarter's key positives. Infosys signed two mega deals, one a renewal and the other a net-new contract.
The company expects the net-new deal to begin ramping up towards the later part of Q4, with its contribution remaining limited in FY27. Management expects it to contribute more than 1% to revenue from the following financial year.
Parekh said Infosys continues to work with AI companies and gain market share as enterprises expand AI adoption. He described AI revenue as a standout, reflecting growing opportunities in AI-led services.
Also Read | Infosys Q2 Attrition Falls To 12.7%: Headcount Rises To 3.33 Lakh On 8,000 New Fresher Hires
Softer Volumes, Pricing Pressure Weigh On Guidance
Chief Financial Officer Jayesh Sanghrajka said Q2 was softer, with lower volumes, pricing pressure across client profiles and weakness in some sectors. Retail and high-tech faced client-specific slowdowns and discretionary project ramp-downs.
Manufacturing, energy and financial services, however, continued to deliver strong growth. Management said geographical trends remained broadly similar.
Sanghrajka also flagged an uncertain macroeconomic environment and the impact of higher offshoring on the company's outlook. Infosys had previously indicated that offshoring would have an impact of around 1% on revenue growth.
AI is creating fresh business opportunities, but it is also intensifying pricing pressure. As clients seek productivity gains from automation, service providers face pressure to deliver more work at lower costs. Sanghrajka said several AI projects were progressing well, although the technology was contributing to both growth and compression in traditional services.
Infosys Maintains Margin Guidance At 20%-22%
Infosys retained its FY27 operating margin guidance at 20%-22% and reported a Q2 operating margin of 21%. Sanghrajka said cost controls and efficiency measures helped keep margins stable.
Currency movements provided a 40-basis-point benefit, while higher calendar days and Project Maximus contributed 20 basis points each. These tailwinds helped offset a 20-basis-point impact from an acquisition. Management also referred to a reversal related to post-sales customer support costs that had affected the previous quarter.
The company expects compensation increases to create a margin headwind in the second half of FY27, while pricing pressure is likely to remain intense.
Infosys' quarter highlights the gap between a strong deal pipeline and near-term revenue visibility.
The challenge now is to convert large contracts and AI demand into sustained growth while protecting margins in a competitive and uncertain market.
Also Read | Infosys Q2 Results: Net Profit Flat At Rs 7,823 Crore, Revenue Up 2% YoY; Dividend Declared
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.