Infosys trimmed its revenue growth outlook for the year through March 2027 to 1% to 2% in constant currency, a notch below the earlier 1.5% to 3% target and shy of the 2.03% analysts expected. The reset hit sentiment fast, with ADRs sliding up to 7.6% in early New York trading on Friday.
Management pointed to clients reining in tech budgets as they navigate geopolitical strains such as the Iran conflict, higher energy costs and persistent inflation. That caution has cooled momentum across India's more than $280 billion software services industry, where Infosys sits behind only Tata Consultancy Services.
AI is pulling revenue in and squeezing at the same time. As Salil Parekh put it, "There is the AI which is giving us the growth. There's AI which is also seeing the compression. There's competitive intensity because of that." Reflecting that shift, he noted that AI features are present in nearly every $50 million-and-up engagement at Infosys, and "one or two" are full business transformations with AI at the core.
The delivery model is changing too. New tools from Anthropic PBC and OpenAI can generate code far faster, challenging the old labor-heavy outsourcing setup. Infosys Chairman Nandan Nilekani argued the technology will energize small businesses and boost demand for new skills, saying new roles will be "in understanding client requirements, in collaborating, in getting people to work together."
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TCS, Asia's largest IT services firm, reported gradually improving contract flow earlier this month and said annualized AI revenue reached $3.1 billion. The company is collaborating with OpenAI on AI data-center builds and is pursuing comparable discussions with other large tech firms. Investor worry remains broad, though: Infosys shares are down about 30% this year, with TCS and Wipro seeing similar drops.
Infosys posted September quarter revenue of 492.4 billion rupees, helped in part by a weaker rupee. Work tied to AI contributed 10.5% of sales. Profit came in at 78.2 billion rupees, up 6.3% and equivalent to $824 million, landing just under the 79 billion rupees average analyst estimate.
Policy risk also surfaced in the US. At the start of the month, President Donald Trump's administration alleged Infosys was among firms misusing immigration rules and set restrictions on green-card sponsorships for foreign employees. Parekh said the move does not affect Infosys because most US hires are local. "We feel we have a good ratio in terms of bringing people on and in terms of cost efficiency," he said. "We don't see a change in that."
Guidance is softer, client budgets look cautious, and AI is simultaneously lifting demand and intensifying competition. Meanwhile, rivals such as TCS are booking rising AI revenue and building infrastructure partnerships. For your portfolio, watch how quickly AI work scales from components inside big deals to full transformations, and how that mix flows through growth and pricing in the quarters ahead.
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