Infosys (NYSE:INFY) reported modest revenue growth for the first quarter of fiscal 2027 while lowering its full-year revenue outlook, citing softer-than-expected volumes, a client program termination and continued macroeconomic uncertainty. The company also announced a planned CEO transition, naming longtime executive Ashiss Dash as CEO designate.
Chairman Nandan Nilekani said Chief Executive Officer and Managing Director Salil Parekh’s term will end on March 31, 2027, after nearly 10 years leading the company. Nilekani said the board has appointed Dash, an internal candidate with more than 31 years at Infosys, to succeed him.
Nilekani described Dash as an executive with broad experience across delivery, account management, sales and segment leadership. Dash will work with Parekh over the coming months as part of the transition, including a period of coaching and mentoring, Nilekani said.
Revenue Growth Slows as Guidance Is Revised
For the quarter, Infosys reported revenue of $5.08 billion, up 1% sequentially and 2.4% year over year in constant currency terms, according to CFO Jayesh Sanghrajka. Parekh said the quarter included a one-time revenue impact tied to a client decision.
Sanghrajka said first-quarter revenue growth was below the company’s expectations, mainly because of a one-off 50-basis-point impact from a program termination by a client in the EURS vertical. He said volumes were “soft and weaker than expectations” and weaker than historical first-quarter trends.
Infosys revised its fiscal 2027 revenue growth guidance to 1.5% to 3% year over year in constant currency terms. The company maintained its operating margin guidance at 20% to 22%.
Sanghrajka said the updated revenue outlook includes about 1.7 percentage points of contribution from recently closed acquisitions of Optimum Healthcare and Stratus. He also cited a slightly more than 1% impact from lower spending by a large European manufacturing client and the company’s decision not to pursue certain deals that did not meet return expectations. In addition, he said a shift toward offshore work is expected to reduce revenue growth by about 0.75 to 1 percentage point.
“Overall business environment continues to remain volatile,” Sanghrajka said. He said the low end of the guidance assumes further macroeconomic deterioration, while the high end assumes improvement, though less than what the company had assumed in its April outlook.
Margins, Cash Flow and Large Deals Remain Areas of Strength
Infosys reported an operating margin of 21.1% for the quarter, up 20 basis points sequentially. Sanghrajka said gross margins improved by 60 basis points sequentially despite lower-than-expected growth.
Key quarterly metrics included:
- Revenue of $5.08 billion, up 1% sequentially and 2.4% year over year in constant currency terms.
- Operating margin of 21.1%.
- Free cash flow of $955 million, equal to 116.5% of net profit.
- Earnings per share of INR 19.19, up approximately 15% year over year.
- Large deal wins of $3.6 billion, with 61% net new.
Sanghrajka said Infosys ended the quarter with $3.9 billion in cash and cash investments after returning more than $1 billion to shareholders through dividends. He said the company’s balance sheet remains “strong and debt-free.”
The company won 22 large deals during the quarter, including three deals worth about $400 million each. Sanghrajka said 20% of large deal total contract value came from new vendor consolidation deals, adding that Infosys has been “on the positive side of vendor consolidation.”
AI Services Gain Momentum
Parekh highlighted artificial intelligence as a growing part of Infosys’ business. He said AI services revenue represented 8.2% of overall revenue in the quarter and has been growing at a double-digit sequential rate over the last several quarters.
“We saw strong traction across the six areas of growth in our AI strategy hexagon,” Parekh said, citing work in process agents, data for AI, modernization and coding tools. He said more than 80,000 Infosys employees are working with coding tools such as Claude Code or Codex for client projects and internal initiatives.
Parekh gave the example of a healthcare client for which Infosys implemented AI agents to automate Medicaid eligibility verification and operational support. He said the solution reduced verification time from about six to eight days to approximately four minutes.
The company also plans to build a team of 6,000 “frontier engineers” over the next few years, Parekh said. He said Infosys’ Topaz Fabric platform is designed to help clients use AI while maintaining sovereignty over their data and company knowledge. The platform allows clients to work with multiple types of foundation models and optimize token costs by matching models to appropriate tasks, he said.
In response to an analyst question, Parekh said the externally reported AI revenue refers to “AI first” work tied to the company’s six strategic AI areas, not broader AI-augmented revenue embedded in existing workstreams. Sanghrajka said the company tracks that AI-first revenue at a detailed sub-project level.
Client Spending Remains Selective
Sanghrajka said clients continue to prioritize investments in AI, modernization, cloud and productivity initiatives while remaining cautious on discretionary spending. He said spending is shifting toward areas with clear business cases, including AI-led modernization, cost transformation, cybersecurity, cloud optimization and vendor consolidation.
By vertical, Sanghrajka said financial services clients are focused on efficiency, productivity and modernization, with discretionary spending being evaluated more carefully. Manufacturing growth remains affected by lower revenue from a large client, particularly amid caution in European automotive, tariffs, geopolitical uncertainty and energy costs. Retail and consumer packaged goods clients are also tightly controlling budgets because of geopolitics, inflation and tariffs, he said.
In communications, Sanghrajka said clients continue to scrutinize discretionary spending, while telecom is undergoing transformation related to consolidation and mergers and acquisitions. He said AI is reshaping spending patterns as enterprises prioritize initiatives that can deliver near-term gains.
During the question-and-answer session, management said clients are increasingly seeking productivity benefits related to AI. Parekh said those discussions are broad across industries and can occur both at renewal time and during the life of a contract. However, he said Infosys does not externally quantify the amount of AI-related compression in its existing work.
Wage Hikes and Margin Levers
Sanghrajka said Infosys plans salary increases for most employees effective October, with the rest covered in January 2027. He said the company remains confident in maintaining its 20% to 22% operating margin guidance despite headwinds from wage hikes, AI investments, productivity pass-throughs and a 50-basis-point impact from the Optimum Healthcare and Stratus acquisitions.
He said those pressures are expected to be partly offset by currency benefits and initiatives under Project Maximus, which contributed a 20-basis-point margin tailwind in the quarter. Sanghrajka also said utilization improved to 84.9%, excluding trainees, and that the company expects its onsite mix, excluding new acquisitions, to decline by 75 basis points to 1 percentage point for the year.
Infosys’ headcount declined by 500 employees in the quarter after adding more than 2,000 employees from acquisitions. Attrition rose slightly to 13% from 12.6% sequentially, which Sanghrajka said was in line with first-quarter seasonality. Parekh said Infosys still plans to hire 20,000 college graduates during fiscal 2027, including more than 4,000 already hired in the first quarter.
About Infosys (NYSE:INFY)
Infosys Ltd. is a digital services and consulting company, which engages in the provision of end-to-end business solutions. It operates through the following segments: Financial Services, Retail, Communication, Energy, Utilities, Resources, and Services, Manufacturing, Hi-Tech, Life Sciences, and All Other. The company was founded by Dinesh Krishnan Swamy, Senapathy Gopalakrishnan, Narayana Ramarao Nagavara Murthy, Raghavan N. S., Ashok Arora, Nandan M. Nilekani, and S. D. Shibulal on July 2, 1981 and is headquartered in Bangalore, India.
