ET Intelligence Group: Infosys reported strong traction in large order wins for the December quarter notwithstanding the seasonal weakness due to holidays. It was also able to beat analyst estimates on the revenue front while a one-time hit of the Indian labour code changes effective from November 2025 affected the profit and profitability. It also raised the constant currency revenue guidance for FY26 to 3-3.5% growth from the 2-3% target issued three months ago. Given the company's relatively modest guidance of 0-3% growth set at the beginning of the current fiscal year, there has been a gradual improvement in the outlook since then.
Earlier, on Monday, peers including Tata Consultancy Services (TCS) and HCL Tech, also reported sustained order bookings and financial numbers that exceeded expectations. Overall, these companies have shown improving adoption of the new technology platform in AI by clients.
While this should ideally accelerate the project execution, the actual impact on deal ramp-ups will be a key factor to monitor in coming quarters. The IT stocks may tend to remain under pressure in the short term given uncertainties over the US stance on tariff and visa issues though a weaker rupee against the major currencies may offer support to realisations.
For Infosys, total contract value (TCV) of large deal wins was at a nine-quarter high of $4.8 billion in the December quarter after staying between $2.4 billion and $2.8 billion over the past five quarters. And like in the previous quarter, the momentum was driven by the new deals, which formed 57% of the TCV.
On the financial front, while revenue at $5,099 million rose by 0.5% sequentially, a tad higher than the analysts' average estimate of 0.1% growth, it was the slowest in three quarters, affected by seasonal weakness. In addition, the reported operating margin (EBIT margin) fell by 270 basis points sequentially to 18.4% due to an impact of ₹1,289 crore due to the change in labour code. Excluding this, the margin expanded by 20 basis points from 21% in the previous quarter. According to the management, the labour code-related expenses are likely to affect the margin by around 15 basis points annually. It will be important to monitor for a possibility of offsetting this through operational efficiencies.
Among the three top-tier IT companies that have declared the December quarter results so far, barring TCS, the other two reported higher headcount, sequentially as well as year-on-year, amid softening attrition rate. For Infosys, headcount increased by 13,656 year-on-year to nearly 340,000 while attrition fell to 12.3% from 13.75% a year ago.
Curated by David Kim
