Infosys Cuts Revenue Growth Guidance to 1%-2% Despite 29% AI Growth
Key Facts
Infosys cut its revenue growth guidance for fiscal 2027 to 1%-2% in constant currency and maintained its target operating margin range at 20%-22%, according to its official results statement. The revision came as it reported second-quarter revenue of $5,145 million for the quarter ended September 30, 2026. Revenue grew 1.5% year over year and 1.2% sequentially in constant currency. The new growth range is below the guidance the company issued after its first-quarter results, when it forecast growth of 1.5%-3.0% for the same fiscal year. The operating margin target was unchanged between the two outlooks.
First-half results showed year-over-year revenue growth of 1.9% in constant currency, while operating margin was 21.0% for the period through September 30. The results put the first-half average within the annual margin target range, but came alongside narrower revenue growth guidance for the fiscal year. Before the results were announced, analysts had forecast sequential revenue growth of 1.5%-1.7% in constant currency. Some brokerages also expected the company to lower the upper end of its fiscal-year forecast, according to Business Standard's results preview published on October 22. The quarter's 1.2% sequential growth was below the range of analyst expectations cited in that preview.
Performance varied across the company's segments in the second quarter: revenue from life sciences rose 32.5% year over year in constant currency, while revenue from energy, utilities, resources and services grew 7.3%. By contrast, revenue from advanced technology fell 17.3%, and retail revenue declined 7.7%. A similar divergence appeared across regions, with revenue growing 10.9% in the rest of the world and 4.6% in Europe in constant currency. North America, meanwhile, recorded a year-over-year decline of 1.5%. The differing trends across segments and regions mean overall revenue growth coincided with strong gains in some businesses and markets and contraction in others.
In its artificial intelligence-related business, Infosys said revenue accounted for 10.5% of total revenue and grew 29% sequentially. Chief Executive Salil Parekh said growth in this business reflected the company's positioning and customer confidence as enterprises move toward adopting AI at scale. He added that the company is strengthening its position as a "trusted partner" for clients embarking on large, complex transformation programs. But sequential growth in AI revenue came alongside a cut to the company's fiscal-year revenue growth guidance to 1%-2%. The gap between growth in this business and the company's overall growth rate remains one of the quarter's most notable features.
Operating margin was 21.0% in the second quarter, the same level recorded for the first half, while the company maintained its annual range at 20%-22%. Chief Financial Officer Jayesh Sanghrajka said the company achieved the margin "amid elevated volatility." The statement linked this to a focus on cost control and operational efficiency while continuing necessary investments. Basic earnings per share were $0.20, down 0.3% year over year when measured in dollars. Earnings per share rose 8.7% year over year when measured in rupees, a different measure from the dollar-denominated earnings figure.
Free cash flow was $928 million in the second quarter, down 15.7% from the year-earlier period, while cash conversion reached 113.3% of net profit. The board declared an interim dividend of 26 rupees per share, up 13% from the previous year. Before the results were published on October 23, the stock closed at $12.75 on October 21 and then at $13.22 on October 22, according to EL7 data. These prices are pre-announcement closes and do not measure the stock's movement after the results were released. Infosys is scheduled to announce results for the quarter ended December 31, 2026, on January 13, 2027, according to its investor FAQ.