Detailed narrative
Infosys concluded its financial year 2025 with a solid performance, reporting a 4.2% constant currency revenue growth, reaching $19.3 billion. The company achieved an operating margin of 21.1% for the full year, marking a 50 basis point improvement over FY24, despite absorbing multiple headwinds including salary increases and acquisition-related amortization. Free cash flow for FY25 was a record $4.1 billion, representing 129% of net profit, demonstrating strong cash generation. The company also secured 96 large deals with a Total Contract Value (TCV) of $11.6 billion, with 56% being net new, indicating continued client trust and market traction.
For the fourth quarter of FY25, Infosys experienced a sequential revenue decline of 3.5% in constant currency, primarily attributed to a reduction in third-party costs (two-thirds of the decline) and seasonal weakness (one-third). However, on a year-on-year basis, Q4 revenue grew by 4.8% in constant currency, with the operating margin standing at 21%. Key segments like Financial Services and Manufacturing showed robust year-on-year growth at 12.6% and 14% respectively in constant currency, while Europe demonstrated strong performance with 15% constant currency growth, now contributing 30% to total revenues. Headcount at the end of FY25 stood at 323,578, an increase of approximately 6,000 year-on-year, with attrition contained at 14.1%.
Looking ahead to financial year 2026, Infosys provided a cautious growth guidance of 0% to 3% in constant currency terms, reflecting the uncertain macroeconomic environment. The operating margin guidance for FY26 is set at 20% to 22%. Management indicated that the lower end of the guidance factors in further environmental deterioration, while the upper end assumes a steady to marginally improving environment. The company plans to hire over 20,000 freshers in FY26 and expects free cash flow to remain above 100% of net profit. The effective tax rate for FY26 is projected to be in the range of 29% to 30%.
Strategic initiatives continue to focus on AI-led transformation, with Infosys leveraging its Topaz platform and over 200 developed AI agents to drive productivity and new revenue opportunities across various sectors, including telco and financial services. Management emphasized a pivot towards cost takeout, automation, and consolidation deals in response to client interest in efficiency gains amidst economic uncertainty. While acknowledging some slowness in sectors like automotive in Europe and caution in Hi-Tech and Retail due to tariffs and macroeconomic headwinds🌐, Infosys remains confident in its balanced portfolio and Project Maximus to drive margin improvements and navigate the evolving market landscape. The company also clarified that its FY26 guidance does not include the impact of recently announced acquisitions, which could add 40-50 basis points to revenue growth if closed in Q1.