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    INFY
    Earnings call· Dec 2025(Q3 FY26)

    Infosys Ltd INFY

    Jan 14, 2026 Source

    Executive summary

    Infosys Q3 FY26 — Strong Deal Wins and Upward Revenue Guidance Revision

    Infosys delivered a strong Q3 FY26, marked by robust large deal wins, including a significant $1.6 billion contract with the NHS, and an upward revision of its full-year revenue guidance. While certain segments like North America and manufacturing faced headwinds, the company is observing increased discretionary spending in financial services and energy/utilities, coupled with growing traction in AI-led projects, positioning it favorably for the upcoming fiscal year. The company's focus on AI capabilities and strategic partnerships is driving new opportunities.

    Highlights

    5

    • Revenues grew 0.6% sequentially and 1.7% year-on-year in constant currency terms.

    • Large deals were robust at $4.8 billion, with 57% net new.

    • Adjusted operating margin stood at 21.2%.

    • Free cash flow generated was $915 million, with 113% conversion of adjusted net profit.

    • Full-year FY26 revenue growth guidance was revised upward to 3% to 3.5% in constant currency.

    Concerns

    5

    • Operating margins included an impact of change in labor codes in India, resulting in a reported 18.4% margin and a recurring 15 basis points impact.

    • North America revenue contracted by 1% year-on-year in constant currency.

    • Volumes continued to remain soft for the quarter and the year.

    • Manufacturing and Retail/CPG verticals experienced uncertainty and pressure on discretionary spend.

    • Utilization, excluding trainees, was down by 1% sequentially at 84.1%.

    Guidance & targets

    2
    CategoryTargetConfidence
    Full-year FY26 revenue growth
    3% to 3.5% growth
    high materiality
    High
    Full-year FY26 operating margin
    20% to 22%
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Financial Services
    Continued momentum led by large deal wins and an uptick in discretionary spends across banking, payments, mortgages, assets, and wealth management. Elevated interest in AI-led transformation, platform modernization, and vendor consolidation. Strong long-term strategic pipeline.
    9-month growth: approximately 5%Preferred AI partner for 15 of top 25 banking clients
    		—3.9%——
    Europe
    Continued to lead growth among geographies in constant currency terms.
    		—7.2%——
    North America
    Experienced a contraction in revenue year-on-year in constant currency, attributed to lower third-party costs and revenue as anticipated at the beginning of the fiscal year.
    		—-1%——
    EURS (Energy, Utilities, Resources, Services)
    Companies are allocating budgets towards AI infrastructure, data readiness, cloud, and software platforms. Increased discretionary demand in utilities and energy, with focus on decarbonization, low-carbon solutions, and cost optimization due to enterprise AI adoption. Expected to accelerate growth in FY27.
    Preferred AI partner for 15 of top 25 clients
    		————

    Operational metrics

    17
    Non-GAAP operating margin
    21.2%up 20 bps sequentially
    Q3 FY26

    Adjusted for the charge associated with change in labor codes in India.

    Operating margin (reported)
    18.4%
    Q3 FY26

    Includes the impact of change in labor codes in India.

    Free cash flow conversion
    113%
    Q3 FY26

    Of adjusted net profit.

    Free cash flow conversion
    118%
    9 months FY26

    Year-to-date.

    Cash and investments balance
    $3.9B
    Q3 FY26

    Consolidated, at the end of the quarter after returning $3 billion to shareholders.

    Yield on cash balance
    6.19%
    Q3 FY26

    Reported.

    ROE
    32.8%
    Q3 FY26

    Reported.

    Adjusted EPS (rupee terms)
    11.5%grew double digits
    9 months FY26

    Year-to-date growth.

    Recurring impact of labor code changes
    15 bps
    ongoing

    Expected recurring impact on operating margins.

    Revenue growth (constant currency)
    0.6%sequentially
    Q3 FY26

    Reported revenue growth.

    Revenue growth (constant currency)
    1.7%year-on-year
    Q3 FY26

    Reported revenue growth.

    Revenue growth (constant currency)
    2.8%
    9 months FY26

    Stood at the higher end of earlier guided range.

    Net headcount
    337,000increased by 5,000
    Q3 FY26

    Total employee count.

    Utilization (excluding trainees)
    84.1%down by 1% sequentially
    Q3 FY26

    As the company continues to create capacity for future growth.

    Utilization (including trainees)
    80%down by 2.2% sequentially
    Q3 FY26

    As the company continues to create capacity for future growth.

    Third-party as percentage of revenue
    7.3%reduced by approximately 1% compared to same period last year
    9 months FY26

    Year-to-date.

    Share buyback
    INR 18,000 crores
    Q3 FY26

    Largest ever buyback successfully completed, helping EPS accretion.

    Industry KPIs

    3
    MetricValueDetails
    Headcount dso337,000employees
    Bookings tcv book to bill$4.8BUSD
    Genai ai book of business4,600projects

    Orderbook & backlog

    4
    Large deal TCV$4.8BQ3 FY26

    Across 26 deals, including 2 mega deals.

    Net new large deal TCV57%Q3 FY26

    Percentage of total large deal TCV.

    Total large deal TCV$11.7B9 months FY26

    exceeded total large deal TCV of full year FY25

    Year-to-date total.

    Net new deal TCVup 40%9 months FY26

    compared to the same period last year

    Year-to-date growth.

    Product announcements

    1
    ProductTypeDetails
    Topaz Fabriclaunch

    Deals & partnerships

    2
    National Health Service (U.K.)Deal to help NHS leverage AI to streamline operations and improve patient care.$1.6B

    One of the most significant large deals won in Q3.

    CognitionStrategic partnership to combine Cognition's Devon software agent with Infosys' knowledge of client landscape and industry expertise.

    Already working with them across clients. Focus on areas like legacy modernization.

    Risks & headwinds

    6
    Impact of change in labor codes in Indiaongoing

    15 basis points recurring impact on operating margin

    Mitigation: The one-off charge has been taken in Q3 FY26; no further one-off impact expected unless regulations change.

    Soft volumesQ3 FY26 and year-to-date

    Volumes continue to remain soft for the quarter and the year

    Mitigation: Focus on value-based selling and productivity increases (RPP increased on a 9-month basis).

    North America revenue contractionQ3 FY26

    -1% year-on-year in constant currency

    Mitigation: Anticipated at the beginning of the year due to lower third-party costs and revenue; impact is across segments.

    Manufacturing vertical challengescurrent

    Discretionary spend under pressure, slow decision-making, auto sector challenged

    Mitigation: Supporting clients through digital rationalizations and AI-led productivity initiatives; focusing on expanding base and benefiting from AI/data center build-out suppliers.

    Retail and CPG sector uncertaintycurrent

    Discretionary spend remains soft apart from SAP, DNA testing and AI augmented services

    Mitigation: Clients prioritizing cost takeouts and AI-led productivity deals; leveraging Topaz and AI Next platform.

    Traditional IT pressure in Telcoscurrent

    Traditionally IT remains under pressure

    Mitigation: Telcos prioritizing AI automation and transformation for productivity increases; seeking partnerships for scaling and innovation with outcome-based engagement models.

    What to watch in Q4 FY26

    5

    Financial Services discretionary spend

    FY27
    CurrentUptick in Q3 FY26
    TargetContinued expansion and contribution to growth

    Why it matters

    Sustained discretionary spending in this key vertical is a strong indicator of broader market recovery and client confidence.

    Uptick in discretionary spend in aforementioned subverticals and deal wins in recent quarters positions us favorably for better growth in FY '27.

    Q&A highlights

    7

    Why isn't the implied Q4 outlook stronger, given strong momentum? Is the FY27 growth acceleration comment for the overall business or specific segments? Are short-cycle projects expanding beyond FS and Energy?

    The Q4 outlook reflects overall momentum and deal wins, but also accounts for seasonal weakness and lower working days. FY27 growth acceleration is specifically for Financial Services and Energy/Utilities/Resources/Services, driven by large deals and AI partnerships. Discretionary work is more prevalent in FS, and AI activity is increasing across industries.

    “On the numbers for next year, so what we have shared today is in the 2 verticals, energy, utilities, resources and services, and in financial services, we see that the growth on financial year '27 to '26 will be good, and that is because of the deals we have won large and other deals and the AI where we have partners with 15 of our large -- of our large 25 clients.”

    asked by Ankur Rudra · answered by Salil Parekh

    2 min read5 chapters

    Detailed Narrative

    01

    AI Strategy and Topaz Fabric

    Infosys is deepening its Topaz AI capability with the launch of Topaz Fabric, an agent services suite designed to help clients manage and implement AI agents across their enterprise. The company is actively working on 4,600 AI projects, has generated over 28 million lines of code using AI, and built over 500 agents. Management identifies 6 emerging AI-led value pools, including AI engineering services, data for AI, and agents for operations, which are expected to unlock significant incremental opportunities.

    02

    Large Deal Momentum and Market Share Gains

    The company reported robust large deal TCV of $4.8 billion in Q3, with 57% net new deals, including a significant $1.6 billion contract with the National Health Service in the U.K. Total large deal TCV for the first 9 months of FY26 reached $11.7 billion, surpassing the full-year FY25 total. This strong deal momentum, coupled with consolidation trends, suggests market share gains for Infosys.

    03

    Vertical Performance and Discretionary Spend

    Financial Services continued its momentum with 3.9% YoY CC growth in Q3 and approximately 5% growth over 9 months, driven by large deal wins and an uptick in discretionary spending. Energy, Utilities, Resources, and Services (EURS) also showed strong potential, with both verticals expected to accelerate growth in FY27. However, North America revenue contracted by 1% YoY CC, and Manufacturing, Retail, and CPG verticals faced headwinds from tariff uncertainties and geopolitical factors, leading to cautious discretionary spending.

    04

    Margin Drivers and Investments

    Adjusted operating margins expanded by 20 basis points sequentially to 21.2%, benefiting from currency movement (40 bps) and Project Maximus (40 bps), which includes value-based selling and lean automation. These tailwinds were partially offset by furloughs and lower working days (70 bps) and higher variable pay. The company continues to invest significantly in sales and marketing, which increased by double digits year-to-date, impacting margins by approximately 50 basis points, and is building capacity through lower utilization.

    05

    Capital Allocation and Shareholder Returns

    Infosys successfully completed its largest-ever buyback, returning INR 18,000 crores to shareholders, which is expected to aid EPS accretion. The company also paid out an interim dividend for FY26. Consolidated cash and investments stood at $3.9 billion at quarter-end, after returning $3 billion to shareholders through dividends and buybacks, demonstrating disciplined capital allocation.

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