Infosys Cuts FY27 Revenue Growth Guidance to 1-2% Amid Soft Demand

IT major Infosys has revised its FY27 revenue growth guidance downward to 1-2 per cent in constant currency terms, compared to its previous forecast of 1.5-3 per cent. The adjustment follows a softer-than-expected performance in the second quarter and ongoing macroeconomic uncertainty.

For the September quarter, Infosys reported revenue of ₹49,244 crore, marking a 1.5 per cent increase year-on-year and a 1.2 per cent sequential growth in constant currency terms. The company’s net profit for the quarter stood at ₹7,823 crore, showing a 6.2 per cent rise year-on-year and a 0.7 per cent increase quarter-on-quarter.

CFO Jayesh Sanghrajka explained that the lower guidance reflects broader market conditions. "We called out 1.5 per cent in our previous guidance, and we expect more uncertainty. Q2 has been softer, and our volume continues to remain soft," Sanghrajka said. He pointed to pricing pressure driven by competitive intensity, higher demands on productivity, and lower-than-expected discretionary spending in specific sectors such as software, retail, and hi-tech.

The company reported that its operating margin remained flat at 21 per cent during the quarter. Margin performance was impacted by a 70-basis-point effect from wholesale customer support costs and a 20-basis-point impact from acquisitions. These pressures were offset by currency benefits (40 bps), additional working days (20 bps), and Project Maximus (20 bps). Infosys also noted that higher compensation costs and sustained pricing pressure are likely to serve as margin headwinds in the second half of the financial year.

Despite the broader demand slowdown, Infosys highlighted significant traction in artificial intelligence. AI-related revenue now accounts for 10.5 per cent of the company's total revenue, recording a 29 per cent quarter-on-quarter growth rate.

CEO and MD Salil Parekh emphasized the importance of this segment, stating, "The more critical element is AI growth. It is a secular trend, and we are seeing it grow quickly. Despite some volatility, we expect this strong pace of growth to continue over the next several quarters."

Gaurav Vasu, CEO and Founder of UnearthInsight, observed that the modest Q2 results reflect slow revenue growth and flat margins. Vasu noted that the guidance revision indicates a lack of demand pickup in North America as tech spending shifts toward AI players. He added that while the share of AI revenue has reached 10 per cent, it has not yet translated into broader revenue growth, higher margins, or increased revenue per employee.

"The downward revision of FY27 guidance by Infosys highlights a broader transitional phase in the technology sector. While emerging segments like artificial intelligence are scaling rapidly, traditional discretionary spending remains subdued due to macroeconomic pressures and competitive pricing dynamics. For businesses and service providers alike, this underscores the challenge of balancing long-term technological investments with near-term revenue realization in a cautious market environment." — Dr. Shishir Gupta, Founder & CEO, StartupLanes