Infosys Reports Fifth Straight Quarter of 100% Free Cash Flow Conversion

Infosys Ltd. reported a steady start to fiscal 2026, with revenue rising 3.3% quarter-on-quarter to Rs 42,279 crore, ahead of estimates. While net profit declined 1.6% to Rs 6,921 crore, the company delivered a strong operational performance and continued its focus on disciplined cash management.

For the fifth consecutive quarter, Infosys reported over 100% free cash flow to net profit conversion, generating $884 million in FCF, equivalent to 109% of net profit. The company reiterated its confidence in sustaining this trend, guiding that FCF will remain above 100% of net profit through this fiscal.

Additionally, it reaffirmed plans to return 85% of cumulative FCF via dividends and share buybacks between financial years 2025 and 2029.

Earnings per share grew 5.8% year-on-year in dollar terms, reflecting steady underlying growth. EBIT for the quarter stood at Rs 8,803 crore, up 2.7%, while EBIT margin contracted slightly to 20.8%, broadly in line with expectations. The margin was impacted by a 100-basis-point hit from wage hikes, along with currency-related headwinds. However, this was partially offset by pricing gains, lower third-party costs, and acquisition benefits.

The company raised the lower end of its revenue growth guidance for fiscal 2026 to 1–3%, up from 0–3%, citing robust deal momentum and improving business traction. Deal wins surged 46% quarter-on-quarter to $3.8 billion, supported by strong demand in financial services and manufacturing. Notably, Infosys closed five deals in manufacturing and four in financial services, with consolidation-led wins playing a key role.

The business environment remained mixed. Europe led regional growth with a 12.3% year-on-year increase, driven by prior investments, while the US continued to be Infosys’s largest market. Sectorally, financial services remained resilient, boosted by AI adoption and client consolidation. The communications segment also performed well, with nine new deals signed. However, retail showed continued uncertainty, and manufacturing remained soft.

Infosys highlighted ongoing traction in its AI offerings, which are delivering productivity improvements of 5–15%. These gains are being shared with clients, underscoring the company’s focus on delivering measurable value.

Utilisation peaked at 85%, with hiring plans for FY26 on track. Wage hikes, implemented in two phases in January and April, were a key contributor to the margin decline in Q1. Despite these cost pressures, Infosys remains confident in its operational execution and cash generation in the coming quarters.