Infosys Cuts 2027 Revenue Growth Forecast to 1%-2% Despite $5.2 Billion in Contracts
Key Facts
Infosys cut its revenue growth forecast for fiscal 2027 to 1%-2% in constant currency, from a previous range of 1.5%-3%, while maintaining its operating margin forecast at 20%-22%, according to a company disclosure on October 23. The guidance revision followed the announcement of second-quarter revenue of $5.145 billion, with year-on-year growth of 1.5% and quarter-on-quarter growth of 1.2% in constant currency. The operating margin was 21.0% for the quarter. Meanwhile, the value of large new contracts won during the quarter was $5.2 billion, 62% of which was new business. The annual forecast cut despite the contract wins reflects pricing pressure and slowing demand, according to media coverage citing the company.
The year-on-year comparison shows slower revenue growth in constant currency: Infosys recorded revenue of $5.076 billion in the second quarter of fiscal 2026, with year-on-year growth of 2.9% and an operating margin of 21.0%. In the corresponding quarter of fiscal 2027, revenue rose to $5.145 billion, but year-on-year growth slowed to 1.5%, while the margin remained at 21.0%. On a quarter-on-quarter basis, growth in the latest quarter was 1.2% in constant currency, compared with 2.2% in the second quarter of the previous fiscal year. The company maintained its fiscal-year target operating margin range at 20%-22%, despite cutting its revenue growth range. In the same quarter, AI revenue accounted for 10.5% of total revenue and grew 29% from the previous quarter.
On the sales front, the large contracts, worth a total of $5.2 billion, included a mega deal worth more than $2 billion with a large international company. The chief executive said the contract runs for seven years and is “pure new business,” adding that its expected contribution exceeds one percentage point of revenue growth in the following fiscal year. This places the deal’s expected impact in the following year, rather than in the fiscal 2027 revenue growth guidance base, which was cut to 1%-2%. Also, 62% of the value of large contract wins in the quarter was new business, according to the company. The scale of these contracts coincides with growth in AI revenue, which accounted for 10.5% of revenue and rose 29% quarter on quarter.
Media coverage citing Chief Financial Officer Jayesh Sanghrajanka attributed the pressure to intensifying competition and service pricing, along with clients seeking a larger share of productivity gains from AI use. Sanghrajanka said the company “will see pricing pressure remain intense,” adding that it would be a headwind in the second half of the fiscal year. This pricing pressure puts revenue growth up against demand for lower service costs, even as AI-related business expands. In a market reaction, the company’s American depositary receipts fell 7.8% in premarket trading on October 23, following the forecast cut. Infosys shares had closed at $13.22 on October 22, according to EL7 data.
The company also announced an interim dividend of 26 rupees per share in October 2026, up 13% from the previous year. The third quarter of fiscal 2027 is due to end on December 31, 2026, with Infosys scheduled to report results on January 13, 2027. The next quarterly results will be the next milestone for tracking revenue and margins after the annual guidance revision. The date follows a quarter in which the company recorded revenue of $5.145 billion and an operating margin of 21.0%. The company expects the impact of the seven-year deal to show in revenue growth in the following fiscal year.