Infosys cuts yearly growth outlook despite strong deal wins

Infosys has lowered its full-year constant-currency revenue growth guidance for fiscal year 2027 to 1% to 2%. This is down from an earlier range of 1.5% to 3% and an initial estimate of 1.5% to 3.5%. The company announced this cut alongside its September quarter results, explaining that a shift toward offshore delivery and a deal exit could reduce growth by up to 2%.

Performance And Margins

During the second quarter, sequential constant-currency revenue grew 1.2%, which slightly missed market expectations. About 40 basis points of this growth came from recent acquisitions. Soft client volumes, muted pricing due to strong market competition, AI-led productivity changes, and cautious client spending weighed down the performance. The retail and hi-tech sectors faced the hardest hits from lower third-party revenues, while financial services, energy, and manufacturing performed better. Meanwhile, AI revenue expanded to 10.5% of overall revenue, up from 8.2% in the first quarter. Earnings before interest and tax margin fell by 10 basis points sequentially to 21%, hurt by higher customer support and acquisition costs.

Deal Wins And Market Reaction

Despite the lowered outlook, Infosys secured 19 large deals in the second quarter, pushing its total contract value to $5.2 billion. This represents a 44% increase sequentially and a 68% jump from the previous year, with 62% of it coming from net-new business. However, analysts note that these mega-deals will not convert into revenue quickly, as the third and fourth quarters are typically slow due to client furloughs. The stock has fallen 28% so far in 2026, trading at a price-to-earnings multiple of 14.5, which puts it at a discount compared to rivals like TCS, HCL, and Tech Mahindra.

Context

Guidance cuts by major IT firms often signal broader caution among global clients regarding their discretionary technology budgets. Even when companies secure massive multi-year deal values, the actual revenue flows in gradually over several quarters as projects transition and scale up.