Infosys — Q2 FY26 earnings call

Call held 16 Oct 2025

Management summary

Infosys reported a strong Q2 FY26 performance, with sequential revenue growth of 2.2% and year-on-year growth of 2.9% in constant currency. The company expanded its operating margin to 21% and secured large deals totaling $3.1 billion, including a $1.6 billion mega deal post-quarter. Reflecting confidence, Infosys tightened its full-year FY26 revenue growth guidance to 2-3% in constant currency, while maintaining operating margin guidance at 20-22%. The company emphasized its leadership in enterprise AI and continued investments in localization and talent.

Highlights

  • Q2 FY26 revenues grew 2.2% sequentially and 2.9% year-on-year in constant currency terms.

  • Operating margin for Q2 FY26 was 21%, expanding by 20 basis points sequentially.

  • Large deal Total Contract Value (TCV) for Q2 FY26 was $3.1 billion, with 67% net new work.

  • A mega deal worth $1.6 billion was announced after the quarter close.

  • Infosys added 8,000 employees during Q2 FY26, bringing the total headcount to 332,000.

  • H1 FY26 revenues grew 3.3% in constant currency terms.

  • Free cash flow for Q2 FY26 stood at $1.1 billion, representing 131% of net profit.

  • Q2 FY26 EPS in rupee terms grew by 13% year-on-year to Rs. 17.6.

What they filed

Q1 FY27: revenue up 13.3%, net profit up 18.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue34,257 34,915 34,136 35,275 36,907 +8%37,996 +9%38,641 +13%39,957 +13%
EBITDA8,401 8,554 8,379 8,446 8,848 +5%9,170 +7%9,548 +14%9,961 +18%
Net profit6,813 6,358 6,628 6,114 7,759 +14%7,363 +16%7,975 +20%7,249 +19%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Revenue

  • Revenue growth in constant currency terms Revenue · FY26 · High confidence 2% to 3%

    Previously 1% to 3% → 2% to 3%

    The new guidance is growth between 2% and 3% in constant currency terms for the full year. And our operating margin guidance remains the same as in the past quarter at 20% to 22% for the full year. ... The previous guidance was 1% to 3%, and now it is 2% to 3%. So, in a sense, we have much more confidence with the lower end being increased in what we see into the outlook for the year.

    — Salil Parekh, Chief Executive Officer and Managing Director

  • Third-party item sales Revenue · H2 FY26 · High confidence lower than last year, similar trend to continue
    this year, we expect the third party to be lower than what we had last year, and we expect the similar trend to continue. So, we do not expect unusual growth or unusual elevation in third party in Q3.

    — Jayesh Sanghrajka, Chief Financial Officer

Margin

  • Operating margin Margin · FY26 · High confidence 20% to 22%

    From 20% to 22% today

    And our operating margin guidance remains the same as in the past quarter at 20% to 22% for the full year.

    — Salil Parekh, Chief Executive Officer and Managing Director

Headcount

  • Total freshers hired Headcount · FY26 · High confidence close to 20,000
    We had given a guidance in terms of the fresh hiring for the year, and we had said 20,000 is what we expect. We have hired in the first half, 12,000-plus freshers already. So we are well on our track to hire close to 20,000 this year.

    — Jayesh Sanghrajka, Chief Financial Officer

Capital Return

  • Free cash flow returned to shareholders Capital Return · over a 5-year period · High confidence 85%
    So the primary approach, we have a capital return policy and that guides all of our decision-making on that. So in that, we have a policy where we return 85% of our free cash flow over a 5-year period.

    — Salil Parekh, Chief Executive Officer and Managing Director

Buyback

  • Buyback amount and price Buyback · Q3 (expected completion) · High confidence INR 18,000 crores at INR 1,800 per share
    The amount is INR 18,000 crores at INR 1,800 which we will be executing. At this point in time, we are awaiting shareholder approval. The postal ballot is already out.

    — Jayesh Sanghrajka, Chief Financial Officer

Acquisition

  • Versent Joint Venture closure Acquisition · FY26 · Medium confidence this year
    We expect it to be closed in this year, but we do not know the exact timelines, and therefore, it is not baked in the guidance at this point in time.

    — Jayesh Sanghrajka, Chief Financial Officer

Operating Model

  • Subcontractor mix Operating Model · near term · Medium confidence not to increase significantly from current levels
    We don't expect at this point in time the subcons to increase significantly from the current levels.

    — Jayesh Sanghrajka, Chief Financial Officer

3 min read

Detailed narrative

Infosys reported a robust performance for the second quarter of fiscal year 2026 (July-September 2025), demonstrating resilience amidst an uncertain global economic environment. Revenues for the quarter grew by 2.2% sequentially and 2.9% year-on-year in constant currency terms, crossing the $5 billion mark for Q2 and $10 billion for the half year. This growth was broad-based, with four out of five large industry verticals and three out of four geographies growing year-on-year in constant currency. Notably, Financial Services and Manufacturing sectors each grew above 5% year-on-year, and Europe also saw growth exceeding 5%.

Profitability saw a positive trend, with the operating margin expanding by 20 basis points sequentially to 21% in Q2. H1 FY26 gross margin remained strong at 30.8%, flat year-on-year despite compensation headwinds, attributed to the ongoing success of Project Maximus. The company's cash flow generation was exceptional, with free cash flow reaching $1.1 billion, representing 131% of net profit, marking the sixth consecutive quarter above 100% conversion. Infosys also announced a buyback of INR 18,000 crores at INR 1,800 per share, pending shareholder approval, and approved an interim dividend of Rs. 23, a 9.5% increase over FY25.

Strategic initiatives, particularly in Artificial Intelligence (AI) and large deal acquisitions, were key drivers. Infosys secured large deals totaling $3.1 billion in Q2, with 67% being net new work. This was further bolstered by a mega deal worth $1.6 billion announced shortly after the quarter's close, specifically with U.K. NHS, focusing on complete transformation and AI integration. The company highlighted its leadership in enterprise AI, with over 2,500 Generative AI and AI projects underway and 90% of its employees being AI-aware. Investments in forward-deployed engineers and AI-driven solutions are accelerating client transformations, with examples like a multi-agent invoice automation solution unlocking $50 million in incremental cash flow.

Looking ahead, Infosys revised its full-year FY26 revenue growth guidance upwards, from 1-3% to 2-3% in constant currency terms, reflecting increased confidence in its performance. The operating margin guidance for FY26 was maintained at 20-22%. Management acknowledged that the second half of the fiscal year typically experiences seasonal softness due to fewer working days and furloughs. Despite this, the company remains optimistic about its strong deal pipeline, particularly in cost optimization, vendor consolidation, and AI-driven productivity. Infosys plans to hire close to 20,000 freshers this year, having already onboarded over 12,000 in the first half, indicating strong demand visibility.

However, the macro environment continues to present uncertainties, with some markets experiencing growth alongside inflation and constrained job creation, while others face cost constraints. The company is actively addressing the evolving H-1B visa landscape through its localization strategy, focusing on local hiring and expanding nearshore centers across geographies like the U.S., Canada, Mexico, and Europe. While management did not provide specific numbers on H-1B visa usage or AI revenue contribution, they emphasized their commitment to client delivery continuity and their disciplined approach to large deals to maintain margin profiles. The company also noted that the legal framework for liabilities in AI partnerships is still evolving, requiring careful navigation.

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