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    INFY
    Earnings call· Sep 2025(Q2 FY26)

    Infosys Ltd INFY

    Oct 16, 2025 Source

    Executive summary

    Infosys Q2 FY26 — Strong Performance and Tightened Full-Year Guidance

    Infosys delivered a strong Q2 FY26 performance, driven by large deal wins and growth in financial services and manufacturing. The company tightened its full-year revenue guidance, reflecting increased confidence despite an uncertain macro environment. Strategic investments in AI and localization continue to be key focus areas, while the company navigates H-1B visa complexities and rising subcontracting costs.

    Highlights

    5

    • Revenue grew 2.2% sequentially and 2.9% year-on-year in constant currency.

    • Operating margin was strong at 21% for the quarter.

    • Large deal wins totaled $3.1 billion, with 67% being new work.

    • Announced a mega deal worth $1.6 billion with UK NHS post-quarter close.

    • Net employee additions of 8,000 during the quarter.

    Concerns

    4

    • Retail vertical continues to see constraints.

    • Overall demand environment remains uncertain despite increased guidance.

    • Voluntary attrition, while marginally down QoQ, increased year-on-year.

    • Subcontracting costs have gone up, impacting margins.

    Guidance & targets

    3
    CategoryTargetConfidence
    Full-year FY26 revenue growth
    2% to 3% in constant currency
    high materiality
    High
    Full-year FY26 operating margin
    20% to 22%
    high materiality
    High
    Full-year FY26 fresher hiring
    15,000 to 20,000
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Company-wide
    Strong overall performance with sequential and year-on-year constant currency revenue growth.
    		—2.9% in constant currency2.2% sequentially21% operating margin
    Europe
    Has done extremely well due to investments and companies seeking transformation and cost efficiency. Continues to be a focus market for investment and acquisitions.
    		—outperforming——
    Financial Services
    Client base is doing very well, seeing extremely good growth and good traction in the pipeline.
    		—extremely good growth——
    Manufacturing
    Saw good growth this quarter and good traction in the pipeline.
    		—good growth——

    Operational metrics

    9
    Non-GAAP operating margin
    21%
    Q2 FY26

    Reported for the quarter.

    Net employee addition
    8,000
    Q2 FY26

    Employees added during the quarter.

    Fresher hiring
    12,000+
    H1 FY26

    Hired in the first half of the fiscal year, on track for full-year guidance of 15,000-20,000.

    Project Maximus margin contribution
    30 bpssequentially
    Q2 FY26

    Contribution to sequential margin expansion.

    Capital return policy
    85%
    5-year period

    Policy to return 85% of free cash flow to shareholders over a 5-year period.

    Share buyback program
    INR 18,000 crores
    announced

    Buyback announced, awaiting shareholder approval. Enabled by strong cash flow and tax refund from previous year.

    Acquisition revenue contribution
    20 bpsout of 2.2% sequential growth
    Q2 FY26

    Contribution to sequential revenue growth from acquisitions, with 2 months already baked in from the previous quarter.

    Subcontracting cost
    gone up
    Q2 FY26

    Keeps going up and down depending on demand and talent requirements, potentially including new age skills like AI.

    Voluntary attrition
    marginally dropped from previous quarter, increased from previous yearQoQ drop, YoY increase
    Q2 FY26

    Fact sheet indicates a marginal drop QoQ but an increase YoY.

    Industry KPIs

    3
    MetricValueDetails
    Headcount dso8,000employees
    Bookings tcv book to bill$3.1 billionUSD
    Genai ai book of business—

    Orderbook & backlog

    2
    Large deal wins$3.1 billionQ2 FY26 end

    67% of this was new or net new work.

    Mega deal$1.6 billionpost Q2 FY26 close

    Announced after the close of the quarter, with UK NHS for complete transformation, including AI elements.

    Deals & partnerships

    2
    Versent GroupFocused on digital, AI, and cloud capabilities.

    Acquisition is undergoing regulatory approval. Infosys is looking at other acquisitions to fill capability gaps in industry, skill areas, or geographies.

    UK NHSComplete transformation program, supporting with new technologies including AI.$1.6 billion

    Announced after the close of Q2 FY26. A huge program where Infosys is working with many partners to deliver effectively.

    Risks & headwinds

    6
    Uncertain macro environmentOngoing

    Still uncertain, with mixed signals (growth in some markets, inflation/constrained job creation in others, cost constraints in some industries).

    Mitigation: Diversified industry portfolio, focus on cost efficiency and automation for clients.

    Constraints in retail verticalComing quarters

    Retail sector continues to see constraints.

    Mitigation: Good pipeline in retail, monitoring how it plays out.

    H-1B visa restrictions and costsOngoing

    Stricter H-1B norms; company not sharing specific numbers on H-1B usage but states majority of US employees do not require Infosys immigration support.

    Mitigation: Localization strategy, building nearshore centers, local hiring in geographies (US, Canada, Mexico, Latin America, Europe), ensuring service continuity for clients.

    Rising subcontracting costsQ2 FY26

    Subcontracting cost has gone up.

    Mitigation: Costs fluctuate based on demand and talent requirements; potentially includes new age skills like AI.

    Voluntary attritionQ2 FY26

    Marginally dropped QoQ but increased YoY.

    Mitigation: Not explicitly stated, but implies ongoing management of talent.

    Legal liabilities in AI partnershipsOngoing

    Legal aspects of liabilities in AI are not fully clarified.

    Mitigation: Infosys takes responsibility for what it controls, careful in discussions with clients and partners.

    What to watch in Q3 FY26

    5

    Retail vertical recovery

    Coming quarters
    CurrentStill sees constraints
    TargetConversion of good pipeline into revenue

    Why it matters

    Retail is a significant vertical, and its recovery would signal broader demand improvement.

    We still see constraints in retail. We do see a good pipeline there, and we will see how that plays out in the coming quarters⏳.

    Q&A highlights

    5

    Why was guidance only tightened and not raised more significantly? What is the impact of H-1B changes? When will AI revenue be quantified? What is Versent's revenue contribution?

    Salil explained the guidance tightening reflects confidence despite uncertainty, with the second half typically being slower. He reiterated the company's localization strategy for H-1B. AI revenue is tracked internally but not yet externalized. Versent's contribution will be shared post-close, but prior year numbers are public.

    “The previous guidance was 1% to 3% and now it's 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.”

    asked by Ritu Singh · answered by Salil Parekh

    2 min read5 chapters

    Detailed Narrative

    01

    AI Strategy and Monetization

    Infosys is significantly scaling its AI capabilities, deploying forward-deployed engineers, and engaging in a broad range of enterprise AI projects. These initiatives aim to drive both growth, such as in sales and marketing functions, and cost efficiency through process optimization and code development. While the company tracks AI revenue internally and sees substantial opportunity, it is not yet quantifying its AI-specific revenue externally, choosing instead to share its strategic approach and partnerships with major tech companies.

    02

    H-1B Visa and Localization Strategy

    The company addressed concerns regarding H-1B visas, emphasizing that a minority of its U.S. workforce requires Infosys sponsorship for immigration. Infosys has proactively built numerous centers and hubs in the U.S. and other nearshore locations, focusing on local hiring and training. This localization strategy is designed to ensure uninterrupted service continuity for clients, especially in light of evolving and stricter H-1B visa norms.

    03

    Demand Environment and Pipeline Strength

    The overall demand environment remains characterized by uncertainty, with mixed signals across global geographies and industries. Despite this, Infosys reports a strong large deal pipeline, primarily driven by client demand for cost optimization, consolidation, automation, and the application of AI for efficiency. Financial services and manufacturing sectors show strong traction, while the retail vertical continues to face constraints, though a promising pipeline exists.

    04

    Project Maximus and Margin Expansion

    Project Maximus, the company's internal efficiency program, continues to be a key driver of margin expansion. It contributed 30 basis points to sequential margin improvement this quarter. Management anticipates further tailwinds in the second half of the fiscal year from ongoing Maximus initiatives, favorable pricing, lean operations, automation, and the positive impact of a optimized talent pyramid as newly onboarded freshers are deployed on projects. These factors are expected to offset seasonal headwinds like fewer working days and furloughs.

    05

    Capital Allocation and Share Buyback

    Infosys adheres to a consistent capital return policy, aiming to return 85% of its free cash flow to shareholders over a five-year period. Following a period of strong cash flow, including a significant tax refund in the previous year, the company announced a share buyback program of INR 18,000 crores at a price of INR 1,800 per share. This buyback, currently awaiting shareholder approval, is part of the company's broader strategy to return additional capital to shareholders.

    AI-generated summary of the company’s earnings call. Not investment advice.