Infosys (NYSE:INFY) held its fourth-quarter earnings conference call on Thursday. Below is the complete transcript from the call.

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Summary

Infosys Ltd reported a full-year revenue growth of 3.1% in constant currency terms, with Q4 showing a year-on-year growth of 4.1%.

The company secured $14.9 billion in large deals for the year, marking a 24% increase from the previous year, with $3.2 billion in Q4 alone.

Infosys Ltd highlighted its AI strategy, showcasing projects with companies like Ralph Lauren, Hertz, and BP, which have led to substantial business improvements.

The company formed strategic collaborations with AI and tech giants such as Anthropic, OpenAI, Google, Nvidia, and Microsoft to enhance its AI capabilities.

Guidance for FY27 projects a revenue growth of 1.5% to 3.5% and an operating margin of 20% to 22%, with expected growth in financial services and energy utilities.

FY26 revenues surpassed $20 billion, with communication and manufacturing verticals and the Europe region driving growth.

The company plans to onboard 20,000 freshers in FY27, with a strategic focus on AI-driven initiatives and cost optimization.

Infosys Ltd maintained a strong cash flow, with a free cash flow of $33.5 billion for FY26 and a dividend increase of 11.6% over the previous year.

The company signed 96 large deals in FY26, with a total contract value of $15 billion, of which 55% were net new.

Full Transcript

OPERATOR

Ladies and gentlemen, greetings and welcome to Infosys Ltd Q4 FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindra. Thank you. And over to Mr. Mahindra. Thanks everyone.

Sandeep Mahindra

Welcome to this earnings call to discuss Infosys Q4FY26 financial results. Joining us on this call is CEO and MD Mr. Sahil Parikh, CFO Mr. Jayar Sangra, along with other members of the leadership team. We'll start the call with some remarks on the performance of the company, subsequent to which we'll open up the call for questions. Please note that anything we say that refers to our future outlook is a forward looking statement that must be read in conjunction with the risk that the company faces. A complete statement explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I now like to pass on the call to Salal.

Salil Parikh

Thanks Sandeep. Good afternoon, good evening, good morning to everyone. Thank you for joining in. We delivered a strong performance in the financial year 2026. We had a growth of 3.1% for the full year. In constant currency terms, our Q4 revenue growth was 4.1% year on year. In constant currency terms, we had strong growth in financial services, in the communications industry and manufacturing industry and for the Europe geography For the full year last deals were strong. For the full year we had $14.9 billion of large deals. This is a growth of 24% over the prior year and for Q4 we were at $3.2 billion, a strong showing for the quarter. We shared our AI strategy during our AI Investor Day a few weeks ago. We see a large addressable market for AI services across six areas. AI strategy and engineering, Data process, Legacy modernization, physical AI and trust. With a Topaz fabric platform for AI, a COBOL platform for cloud, we have differentiated capabilities to serve our clients across the six areas of AI. Some examples of the work we are doing For a consumer products retail company, Ralph Lauren, we helped build a conversational and personalized AI tool that led to converting customer interest into a shopping experience. This resulted in an increase in their revenue by 12% and customer engagement by 50%. For a large transport company, Hertz, we helped with a legacy migration to bring 3 million lines of Cobol code to a modern microservices environment using AI foundation models. The cost was 60% lower, the timeline was 60% quicker than how they would have done it without AI for a large energy company. BP, we deployed 50 AI agent initiatives across trading, supply chain sustainability and core operations to transform the software development, knowledge automation, legacy modernization and digital decision support. This resulted in 95% payment accuracy, 50% faster contract validation and 18% improvement in it operations efficiency. We have strategic collaborations with emerging foundation model companies such as Anthropic and OpenAI which help us support our clients transformation for software development, legacy modernization and agent building. We also have established strategic AI collaborations with Google, Gemini, Nvidia, Microsoft AWS, Google Cloud, Google Cloud and Intel among others. We've deployed over 30,000 developers on GitHub Copilot as we look ahead to financial year 2027, we see large opportunities in AI services, continued competitive intensity and AI productivity impact. With a clear AI strategic roadmap and real world toolkit of Topaz fabric, we are well positioned to support our clients transformation technology and operations objectives Our revenue growth guidance of financial year 27 is 1.5% to 3.5% year on year in constant currency terms. We expect acceleration in growth in financial services and the energy utilities resources services vertical. From financial year 26 to 27 we expect H1 to be stronger than H2 consistent with our normal seasonality. Our operating margin guidance for financial year 27 is 20% to 22%. With that, let me hand it over to Jayesh for his update.

Jayesh Sangra

Thank you Sandeep Good morning, Good evening everyone and thank you for joining the call today. Financial year 26 performance demonstrates our ability to maintain financial discipline and operational excellence in a challenging and evolving business environment. Client spending is guided with greater focus on cost optimization engagement as against growth led transformation programs. We are seeing increasing momentum in AI driven initiatives particularly around productivity, automation and platform led modernization initiatives. Let me start with the key highlights for the year and the quarter. FY26 revenues crossed 20 billion and grew 3.1% in constant currency terms within the upgraded guidance band given in January. This was after lower third party cost which was down by 1% as percentage of revenue and 0.7% reduction in on site mix. Acquisitions contributed about 70 bids on full year growth for FY26. Communication, manufacturing vertical and Europe geography grew more than double the company average led by ramp up of the large deal wins. Additionally, FS and EURs grew above the company average in constant currency terms. Volumes for the year were flattish. Growth was led by increase in realization thanks to Project Maximus. Adjusted operating margin was stable at 21%. Gains from currency and maximus were reinvested in talent, AI investment and sales and marketing. Q4 revenues grew by 4.1% year on year. Sequentially revenues declined 1.3% in constant currency due to seasonality and slower decision making. In the month of March growth in Q4 was broad based across major geographies. Communication, EURs and LS verticals grew well above the company average on a year on year basis. In Constant currency terms Q4 operating margin stood at 20.9% down 0.3% sequentially adjusted for the labor code impact in Q3. On site mix further reduced to 22.8% from 23.1% in Q3. Utilization excluding trainings was 83% in Q4 and 84.4% in FY26. Utilization including trainees was at 81.1% for FY26 reflecting the investment made towards creating future capacity. Strong focus on collections aided by technology interventions helped us reduce DSO including an unbilled net of unearned to 78 which is the slowest in seven years which is the lowest in seven years. Reported EPS in INR terms grew 23.8% YoY in Q4 and 11% in FY26. EPS adjusted for income tax orders and the labor code grew double digit for the year at 13.9% in Q4 and 12.1% for the full year in INR terms. Free cash flow adjusted for the labor codes and income tax refund stood at $33.5 billion for FY and 882 million for Q4 adjusted. Free cash as a percentage of net profit continue to be well above 100% at 106 for FY26 and 111 for Q4. We had a strong large deal wins in financial year with a TCV of $15 billion with 55% net new large deal pipeline continues to remain strong. Our 50 million plus dollar plus client increased by 3 and 100 million plus clients also increased by 3,400 million by 2 in financial year last year Headcount at the end of the year was over 328,000. Voluntary attrition reduced by 1.5% to 12.6% for the year reflecting continuous softness and interventions toward talent retention. We onboarded more than 20,000 freshers in FY26 and expect to hire a similar number in FY27. We will continue to calibrate the overall requirement depending on growth expectations and attrition trends, operating margins for Q4 declined by 0.3% to 20.9% sequentially. Major components of the changes are as below headwinds of 50 basis points impact from past acquisition on account of Additional amortization of intangibles 30 basis points for normalization of last quarter's one off gain 20 basis points from compensation related costs offset by lower variable pay. This is partially offset by tailwinds of 40 basis points for currency and 30 basis points for maximus comprising of value based selling, lean and automation and critical portfolio. Q4 yield on cash and investments balance was at 6.2% and 6.7% for the year. ROE stood at 31.6%. Consolidated cash and investments were at 4.5 billion after returning over 4 billion to shareholders in FY26 Reflecting our strong cash generation, we signed 19 large deals during the quarter with TCV of 3.2 billion. This includes 5 age in financial services and manufacturing, 4 in retail, 2 in 2 each in life science and communication and 1 in EURs. Region wise we signed 11 deals in Europe, 5 in America and 3 in the rest of the world. In FY26 we signed 96 large deals with TCV of 15 billion 55% Net new this includes 3 mega deals for the year. Tax rate for the quarter is lower due to reversal of prior year tax provisions as a result of favorable tax orders. We expect effective tax rates for the financial year 27 to be in the range of 29 to 30% in line with our Capital Allocation Policy, Board has proposed a final dividend of rupees 25 per share which will result in a total dividend of 48 per share, an increase of 11.6% over last year once the final dividend is approved by the shareholders. Coming to verticals financial services for FY26 grew above company average at 4.4% led by ramp ups of large deal wins and continued momentum in AI led transformation, legacy modernization and vendor consolidation. Overall market sentiment remains positive resulting in continued consumer spending across US banking, capital markets and Europe. CY26 budgets are expected to grow in US we signed a large GCC deal for a regional bank in the US an industry first and a large AI first GCCD. We have strategic AI partner for 18 out of the top 20 clients in this vertical. Significant large deal closures and a new account opening in FY26 along with a strong large deal pipeline will drive growth acceleration in FY27. Clients in manufacturing remain cautious amid softer demand, particularly in automotive and parts of Europe. There is continued uncertainty on account of tariffs and ongoing Middle east conflict which is resulting into delayed decision making in pockets. Discretionary spending remains constrained while clients prioritizing cost optimization and operational resilience. Large deal pipeline comprises of infra outsourcing AMS as for HANA rollouts etc. Near term and FY27 growth will be impacted due to low revenue from one large client. Across EURS segments, demand environment remains constructive supported by a strong large deal pipeline. Clients continue to prioritize cost reduction and operational efficiency which is a driving vendor consolidation. In energy we see increased outsourcing leading to healthy deal momentum. Utilities demand is structurally higher driven by grid constraints, renewable integrations and acceleration electricity needs for data centers. 80% of the large DCV of FY26 was net new which will help growth and acceleration in FY27 in retail segments, clients are operating in continued uncertainty from supply chain disruptions, geopolitical conflict and shifting trade policy. Consumer demand remains muted across the sector and budgets are tightly controlled with discretionary spends. Under pressure, clients expect savings from AI led productivity to do more. With the similar budgets we will see higher demand for AI assisted legacy modernization. SoPass fabric and AI Next platforms are helping clients in ideation from concept to deployable stage with the right guardrails for privacy, ethics and control. In communication sectors, growth for FY26 was led by large deal ramp ups. Overall environment remains cautious amid macro uncertainty and margin pressures for clients. Budgets are flat to negative which is impacting discretionary spend. Non discretionary spends are selective and increasingly AI led. There is a shift from generative to agentic AI with clients consolidating IT and BPM cuts. We see a strong uptick in AI deals in areas like IT operations, software replacement and mainframe migration. As we enter FY 2010, we continue to see a measured and selective approach to enterprise budgets amid macro and geopolitical uncertainty, higher interest rates, rapid technology shifts and high competitive intensity. We expect FY27 growth to be 1.5% to 3.5% in concept to currency terms. The FY27 guidance includes contribution from Status which we closed earlier this week but excludes worsened JV and optimum healthcare acquisitions that are yet to be closed. Reduction of 0.75 to 1% due to a lower revenue from one of our large European manufacturing clients. This was due to reduced client spend on account of challenging macro environment along with our conscious decision to not pursue a certain deal that were not aligned to our return expectations. Further Reduction in onset mix by 0.75 to 1%. We expect third party costs for FY27 to remain at similar levels as FY26. Our operating margins guidance for the year is 20 to 22%. This assumes headwinds from wage hikes, productivity pass throughs and AI investments offset by initiatives under Project Maximus. The impact of optimum healthcare strategies and worsened on operating margin will be approximately 0.7 on a full year annualized basis post closure. With that we can open up for the questions.

OPERATOR

Thank you very much. We now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on their Touchton telephone. If you wish to remove yourself from the question queue you may press Star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles participants, you may press Star and one to ask the question. First question is from line of Yogesh Agarwal from HSBC Securities. Please go ahead.

Yogesh Agarwal (Equity Analyst)

Yeah, hi, there's couple of questions. Firstly Salil, can you talk about the push pulls for the guidance like at the lower end, at the upper end, what are you assuming? And secondly, you guys had a very successful Project Maximus. The quality of business, the revenues has also improved. But the entire Indian Rupee depreciation which is very significant has not impacted the margin outlook. So I was just curious which are the areas where all the Indian Rupee depreciation has been invested and if you can talk a little bit about that. Thank you.

Jayesh Sangra

Yogesh, this is Jayesh here. At the lower end of the guidance we have assumed higher deterioration in the environment and at the upper end we have assumed improved environment like similar to what we've done in the last year as well. In terms of margin work I did give you a broad margin work but largely we have invested all the benefit that we got from Indian Rupee as well as from Maximus, back into the business. Whether it is sales and marketing cost which has gone up by 40 basis points on a full year basis, the AI talent and the AI partnership, et cetera that we have. So I think all of that has been absorbed in the margin in the financial year.

Yogesh Agarwal (Equity Analyst)

And just a quick follow up, you mentioned productivity pass through impacted margins. I was just wondering why should that be the case if there was productivity improvement?

Jayesh Sangra

Yogesh, market is competitive, right? As I said, the competitive intensity in the market has gone up and the productivity will get passed back to the client largely.

OPERATOR

Thank you. Thank you. Next question is from the line of Ankurudra from JP Morgan. Please go ahead.

Ankurudra (Equity Analyst)

Thank you. I noticed you've chosen to guide in a 200-basis-point band versus a slightly wider band in the last couple of years. Is your visibility better this year versus the last few years? And furthermore, if you can dig slightly better, a bit more into the guidance, as a follow up to the previous question, you're guiding for a 2.25% organic at the midpoint approximately which appears to be a bit of a slowdown versus the 2.5% or 2.4% organic in fiscal 26. Can you maybe talk about what are the puts and takes of the outlook and you know, if you can especially elaborate on if the slowdown is because of a demand environment, the structural deflation or see the impact from that one large account which is ramping down this year. Thank you.

Salil Parikh

Yeah. So Yogesh, if you. Sorry uncle, if you look at the guidance last year we gave a three point guidance because the whole environment changed pretty much very close to the time when we were giving guidance and we had very little clarity in terms of how that environment changed. On the back of tariff, tariff changes is going to impact the client behavior, et cetera. Where we stand today, I think there is a better clarity in terms of what's happened. The environment has been like this for last last few quarters and we know how clients are behaving at this point, at least at this point in time. Of course if things change, the client behavior will change. That's given always. But at this point in time from a competitive perspective we have a better clarity and better handle versus the last year. Like the construction of the guidance. What we are seeing positive where the changes are. Jayesh mentioned many of those points. I'll elaborate. We are seeing the growth on AI services. We are seeing very good traction on that. We are seeing we've started a program where we are working with large companies with a smaller footprint that Infosys has. We're expanding that quite nicely. Then we saw the last deal, the NET New was 55% so that will contribute for the next, for this financial year in a significant way. And then on the other hand there is the productivity benefits that are coming through which the clients are looking for with AI on the existing portfolios. Then Jay shared a couple of situations with Manufacturing Europe with on site mix, sort of some technical factors. So those if I sort of add and subtract is where we came on that guidance. The environment I find is good. Our large deals pipeline is good. The way we had done it on that Investor day we had sort of said look, there's a growth side with what will be the AI services. We have a couple of other growth drivers and then there's a compression side and that's the balance that we are seeing in the past year with 3.1% and if you adjust for the one timers the one time from the prior year growth rate which was more than the compression we were seeing and this coming year the guidance that we have started with also sees that and then we'll see as Jason on the environment, how it changes, improving or not improving and then see how the year goes after that.

Ankurudra (Equity Analyst)

Thank you for the elaboration. Saril, if I could, you know, just a quick follow up. What would need to happen for you to see an acceleration at the midpoint on an organic basis.

Salil Parikh

Thank you. These are things which are always sort of more difficult to estimate as you know well Ankur on However, the view emerging is that the situation in the Middle East may find some sort of a good out resolution. Then the underlying economic strengths are pretty good in the markets where we are large. So that could give sort of rise to a more stable macro environment. Our traction and partnerships are good. So if those things, the first and the second accelerate, then we will see some good outcomes. But it's more of going in. We see the environment today. It's not we've not seen some big change to give us a view that we have to do a three point range and so on at this stage. And overall we see growth which is more than compression.

OPERATOR

Appreciate it. Thank you. Thank you. Next question is from the line of Brian Bergen from TD Kovan. Please go ahead.

Brian Bergen (Equity Analyst)

Hi, thank you. I wanted to ask on the AI productivity that you're seeing here. So with the AI model advances happening as fast as they are, as the amount of productivity during compression that you're seeing changed in the current contracts relative to what you may have been seeing say one or two quarters ago. And can you dimension maybe the mix of the business that is directly exposed to the productivity pass throughs versus maybe the mix of the business that is more insulated

Salil Parikh

on the first one we have not with the models and the technology is moving with great innovation. We have not seen in one or two quarters the change that you referenced. So what we are seeing is the competitive intensity is pretty high. So every now and then we see a competitor doing something which looks outside the range of what we think the models can do today. So that sort of thing we do see but not just the tech in the last two quarters Meaning over the last two years of course there have been changes in the terms of expos. I think we have not like shared that data but I think we've shared very clearly what our service line data is. And you can make some estimates with that, I think.

Brian Bergen (Equity Analyst)

Okay. And then my follow ups on kind of how you're thinking about the overall business and headcount hiring intentions for fiscal 27. I think I heard you say roughly targeting the fresher target of around 20,000 again. But do you envision a scenario where I guess the total headcount could ultimately be down in total when the year is over and also if you can help talk about the subcontractor intensity that you're anticipating in the year ahead.

Salil Parikh

So on the overall headcount, first, as you pointed out, we will recruit 20,000 college graduates. That's our plan. Today we have a model which does some of it at one particular time and the rest of it throughout the year. So we have like a variability built in if we see some changes. But what we see Today we think 20,000 looks like a good place to start. We still have now by look out for this quarter, next quarter, very good demand for people which are coming at higher levels, lateral recruitment. So I think that will continue. I don't see that our headcount is going to be like we don't have a plan that the headcount will be less at the end of the year. Now we'll see how the demand environment plays out. But it's not the going in sort of a view that we have. Of course we have. You know, we Basically look at Q1, Q2 and the rest we build out on the models we have.

Jayesh Sangra

Yeah. And then the subcon brand, if you look at last few years, you know, subcon as a percentage of revenue has come down. Obviously it's also a factor of the growth. So typically, you know, we use subcons to meet the demand which is, which comes in immediately. We don't have the requirements skill set and then we backfill that through the employees and that's a cycle that goes on. So we don't really expect subcon to significantly change from this number over a medium term period. We expect it to maybe go towards the lower end, I mean slightly go down from the current level but at this point in time not significantly change.

OPERATOR

Okay, that's helpful. Thank you very much. Thank you. Next question is from the land of Gauravara from Morgan Stanley. Please go ahead.

Gauravara (Equity Analyst)

Hi, thank you for taking my question. My first question is on the construct of growth. When I look at that, there are broadly three factors that comes to my mind. The first is the macro. Compared to last year, it appears that the headwinds related to tariff etc are not there. So there is slight improvement which is reflected in 40 percent of your portfolio that you talked about. The second factor is AI services services, which probably has become larger than the last year and growing faster, which again is a tailwind. And the last factor could be the deflationary impact on existing business on account of productivity savings. So the fundamental question is that the first two tailwinds look better than last year and the growth rates in organic terms does not look better at the midpoint of guide. Is it that the deflationary impact assumed in your guidance at the midpoint is slightly higher than what you have seen in the last year?

Salil Parikh

Hi Gaurav, this is Salil. I think what you described is the way it starts off, which is we see very strong activity on AI services on the macro. You know, as the year progressed last year, the situation of the tariff got better and better understood, as you know. Then when the war started that again had a little bit of a constraining effect on the macro. There's a general view that there's coming to a resolution, but it has not happened. So while some of the economic indicators are forecasted in a better way, it's not yet into the system in that sense. So we'll see when it actually comes in. Then if you look at the couple of things that Jayesh shared on the specific on the manufacturing Europe, on the specific on the on site mix, when you put all that together,

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