Infosys Raises FY26 Guidance, Posts $5.1B Q3 Revenue and INR 18,000cr Buyback
Infosys reported Q3 revenue of $5.1 billion, up 1.7% year-over-year in constant currency, with large-deal TCV of $4.8 billion (57% net new) and $965 million in adjusted free cash flow. It raised FY26 constant-currency revenue guidance to 3–3.5%, kept a 20–22% margin outlook, and returned INR 18,000 crore via buybacks.
1. Rating Upgrade Reflects Improving Growth Trajectory
Global research firm upgraded Infosys Ltd to Buy this week, citing stabilizing growth trends and stronger guidance for fiscal 2026. Analysts raised the company’s revenue growth forecast to 3–3.5% for the year, up from a prior 2.5–3%. Europe is highlighted as a key structural tailwind, with revenue there up 7.2% year-over-year in constant currency for Q3. Management now anticipates Q4 will deliver the strongest sequential exit growth rate in four years.
2. Q3 Performance Underlines Margin Resilience and Headcount Expansion
For the quarter ended December 31, Infosys reported constant-currency revenue growth of 1.7% year-over-year and 0.6% sequentially, delivering $5.1 billion in top-line for the period. Operating margins held in the 20–22% target range despite labor code changes in India, with adjusted margin dilution of just 15 basis points. The firm added 23,000 employees in Q3, bringing total headcount to 365,000 and signaling management confidence in sustained client demand.
3. Large-Deal Momentum and Robust Cash Returns
Infosys secured $4.8 billion in large-deal total contract value (TCV) during Q3, 57% of which was net-new business. Year-to-date large-deal TCV stands at $11.7 billion, surpassing full-year fiscal 2025 levels by 15%. Notable wins include a $1.6 billion engagement with the UK’s National Health Service to implement AI-driven process automation. Adjusted free cash flow reached $965 million, equivalent to 113% of adjusted net profit, and the company ended the quarter with $3.9 billion in cash and investments after returning $3 billion to shareholders through dividends and buybacks.
4. AI Strategy, Vertical Demand and Regional Trends
CEO Salil Parekh outlined six AI-led value pools—ranging from AI engineering services to agents for operations—backed by 4,600 active AI projects and 500+ custom agents built to date. Financial services is a standout vertical, growing 3.9% year-over-year, driven by modernization and AI-led transformation programs, while manufacturing and communications face tariff-driven uncertainties. Regionally, Europe led growth at 7.2% constant-currency, while the firm is investing in capacity there to capture future demand. Infosys reaffirmed its full-year operating margin outlook of 20–22%, noting that seasonal working-day effects are factored into Q4 guidance.