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Infosys Q2 net profit rises 6% to ₹7,823 crore

Infosys, India’s second-largest IT services company, has posted a 6.3 per cent rise in consolidated net profit at ₹7,823 crore for the second quarter ended September 30, even as it cut its revenue growth guidance for the current financial year to 1-2 per cent from the earlier 1.5-3 per cent.

This compares with a net profit of ₹7,364 crore recorded during the same period a year ago, the company said in a regulatory filing on Friday (October 23).

Revenue from operations rose 10.7 per cent to ₹49,244 crore, from ₹44,490 crore a year earlier. Total income increased 10.2 per cent to ₹50,092 crore, against ₹45,472 crore. Sequentially, net profit was up 0.8 per cent from ₹7,775 crore in the June quarter, while revenue from operations rose 2.1 per cent from ₹48,211 crore. The company retained its operating margin guidance at 20 per cent to 22 per cent.

“We had strong large deals of $5.2 billion, including a mega deal of over $2 billion, reinforcing our position as a trusted partner in the marketplace when clients embark on large and complex transformation programs. Our AI revenue was at 10.5 per cent and grew 29 per cent quarter-on-quarter. As enterprises move to AI adoption at scale, the strong growth in AI revenues is a recognition of our differentiated market positioning and client confidence,” said Salil Parekh, CEO and MD.

“We are advising some of the largest global enterprise on their AI strategy and continue to invest in deep domain and technology capabilities to bring new ideas and an integrated ecosystem to help businesses unlock AI value at scale,” he added.

Dividend

The board declared an interim dividend of ₹26 per equity share of face value ₹5, up about 13 per cent from ₹23 a year ago. The record date is November 3, with payment due by November 11.

On a standalone basis, Infosys posted a net profit of ₹7,893 crore, up 1.7 per cent from ₹7,759 crore a year ago. Revenue from operations rose 10.3 per cent to ₹40,719 crore, from ₹36,907 crore. Profit before tax was ₹10,905 crore, against ₹10,469 crore. Sequentially, standalone profit rose 8.9 per cent from ₹7,249 crore in the June quarter.

“We delivered operating margins of 21 per cent in Q2 amidst heightened volatility. Focus on cost and operational efficiency measures while making the required investments, have led to stable margins. Free cash flow of $928 million, representing 113.3 per cent of net profit, underscores the financial strength of the business,” said Infosys CFO Jayesh Sanghrajka.

Infosys delivered $5,145 million in Q2 revenues, posting a 1.5 per cent year-on-year growth and sequential growth of 1.2 per cent in constant currency. Operating margin was stable at 21 per cent. EPS growth was 8.7 per cent year-on-year in rupee terms. TCV of large deal wins was $5.2 billion, with 62 per cent et new. The half year (H1) revenues grew at 1.9 per cent year-on-year in constant currency. Operating margin for H1 was at 21 per cent.

Brokerages: Buy, hold

The lowering of FY27 revenue growth guidance to 1-2 per cent reflects persistent near-term demand challenges, including softer volumes and pricing pressure, according to a report by financial services firm 360 One Capital.

“Post the recent rally in the stock (and sector) owing to negative sentiments surrounding AI-related developments, we believe any major upside remains capped, given the uncertain near-term growth outlook and continued demand challenges,” it said.

360 One Capital maintains its ‘hold’ rating on the stock with an unchanged target price of ₹1,060 per share.

Emkay Global Financial Services said that the FY27 revenue growth guidance was trimmed based on lower margin projections, and added that the market will continue to watch execution speed and order inflows closely as Infosys navigates a challenging macro environment.

“Wage hikes (in two phases in Q3 and Q4), softer revenue seasonality, AI-driven productivity pass-throughs, and ramp-up of large deals should weigh on margins in the second half of the fiscal year, partly offset by Project Maximus,” Emkay Global, which has a ‘Buy’ on the stock, said.

Infosys missed expectations across key financial metrics and cut its FY27 revenue growth guidance for the second consecutive quarter, despite strong deal bookings and net headcount additions, Systematix Institutional Equities said in a report.

“The downgrade reflects weaker-than-expected volumes, pricing pressure from heightened competition and client productivity demands, and subdued discretionary spending, particularly in retail and high-tech. In addition, structural headwinds from increased offshoring and Infosys’ decision not to pursue a large European manufacturing deal are estimated to reduce full-year growth by 1.8–2 per cent,” it said.

“Seasonal furloughs and fewer working days are expected to weigh on 2H growth. A significant portion of the European manufacturing-client impact is expected in 4Q, alongside seasonal weakness in third-party revenues,” the brokerage which has a ‘hold’ rating, said.

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