Infosys Q1 Results: From AI-Led Productivity Gains To Steady Deal Momentum, Here Are Five Key Takeaways

Infosys Ltd. delivered a mixed set of results for the first quarter of FY26, with revenue rising 3.3% year-on-year to Rs 42,279 crore, slightly ahead of estimates, but profitability coming under pressure. Net profit declined 2% year-on-year to Rs 6,941 crore, falling short of the estimated Rs 8,727 crore.

Despite margin headwinds from wage hikes and currency fluctuations, the company remains optimistic about near-term growth, citing strong traction in its AI offerings, productivity-led gains and continued deal wins driven by client focus on consolidation and efficiency.

Here are few key points from the tech giant's press conference:

Infosys continues to report strong traction in its AI-led initiatives, with productivity gains of 5–15% across client engagements. The company stated that these benefits are not only improving internal delivery but are also being shared with clients, reflecting growing adoption of AI solutions across key verticals.

The first quarter saw margin headwinds primarily due to wage hikes rolled out in April, contributing to a 100-basis-point impact. An additional 30 basis points came from adverse currency movements, with a further 20 basis points from other factors.

However, these pressures were partially offset by a 70-basis-point gain from pricing improvements, 40 basis points from acquisition impairment reversals, and 20 basis points from reduced third-party costs.

The company highlighted that Project Maximus, its internal cost-efficiency programme, continues to deliver on multiple fronts to support margin stability.

Infosys benefited from an ongoing trend among clients to focus on cost optimisation and vendor consolidation. This translated into strong deal wins during the quarter, including five deals in the manufacturing sector and four in financial services.

The company noted that large and consolidation-led deals have been instrumental in supporting overall growth. While the near-term outlook remains good, Infosys does not expect significant changes in the business environment for the second quarter.

Europe emerged as a bright spot, growing 12.3% year-on-year — over three times the company’s overall average — driven by prior strategic investments. The US continues to be the tech giant's largest market.

Sector-wise, the financial services segment remains a key growth engine, aided by AI integration and consolidation initiatives. The company also signed nine deals in the communications vertical. However, softness persisted in manufacturing, and the retail segment continued to face uncertainty.

The company reported peak utilisation levels at 85% and confirmed that hiring plans for fiscal 2026 remain on track. The phased wage hikes — first in January, followed by the second rollout in April — were cited as a key factor behind the 100-basis-point margin impact in the first quarter.