Infosys has upwardly revised its revenue forecast for the 2026 fiscal year, signaling renewed confidence as the global information technology giant secures a robust pipeline of large-scale client contracts. The Bengaluru-based company narrowed its projected growth in constant currency to a range of 2 to 3 percent, an increase from its previous estimate of 1 to 3 percent. This adjustment, which effectively raises the lower boundary of its financial expectations, reflects a strengthening demand for its services despite lingering macroeconomic uncertainties that have tempered corporate spending globally.
The optimistic revision is largely propelled by a significant uptick in deals centered around artificial intelligence. Clients across various sectors are moving beyond exploratory AI projects and are now actively investing in comprehensive implementations aimed at driving automation, enhancing productivity, and modernizing legacy technological frameworks. This surge in AI adoption has become a primary engine for growth, allowing Infosys to capitalize on a market increasingly focused on leveraging technology for tangible efficiency gains. The company’s performance suggests a broader recovery within the IT services industry, which had previously faced headwinds from clients deferring discretionary projects.
A More Confident Financial Outlook
In its second-quarter report for the fiscal year ending in 2026, Infosys presented a more bullish stance on its annual performance. By adjusting its revenue growth guidance, the company communicated to investors that it anticipates a more stable and predictable path for the remainder of the year. While the upper projection of 3 percent growth remains unchanged, the increase in the lower-end forecast from 1 percent to 2 percent is a critical indicator of the company’s solid deal pipeline and its ability to convert those engagements into revenue. Alongside this, the company reaffirmed its operating margin forecast, maintaining a target of 20 to 22 percent, indicating that it expects to manage profitability effectively while pursuing growth.
Company executives noted that this revision was made despite an external environment that continues to present challenges. During a conference call following the earnings release, CEO Salil Parekh expressed that while the second half of the fiscal year is traditionally softer, the strong and consistent traction in winning new business provided the confidence needed to lift the guidance. This move suggests that while global economic conditions are not fully settled, the demand for strategic technology partnerships, especially those that promise cost optimization, remains resilient. The adjustment was received positively by the market, seen as a sign of both Infosys’s strong competitive positioning and the beginning of a potential demand revival in the broader IT sector.
AI Adoption as a Primary Growth Driver
The strategic emphasis on artificial intelligence is the central pillar of Infosys’s recent success. The company has proactively invested over the past three years to cultivate an “AI-first” culture, focusing on reskilling its workforce to collaborate with and leverage intelligent systems. This preparation is now paying dividends, as clients are increasingly seeking partners who can deliver value from AI in a complex business environment. According to company leadership, there is a “huge” opportunity in the enterprise AI space, and Infosys is benefiting from its ability to guide clients through large-scale automation and efficiency initiatives.
The numbers behind this trend are compelling. For the quarter ending September 30, Infosys reported securing large deals with a total contract value of $3.1 billion. Significantly, 67 percent of this value represented net new business, highlighting the company’s success in winning new clients and expanding its market share rather than relying solely on existing contracts. These deals are not merely conceptual; they are focused on the practical application of AI to modernize core business processes, streamline operations, and unlock new sources of value. This transition from AI experimentation to widespread implementation is a crucial market shift that well-prepared IT service providers are poised to capture.
Dissecting the Quarterly Financials
The company’s second-quarter results provided the concrete evidence backing its improved forecast. Infosys reported revenue of $5.08 billion, an increase of 2.9 percent compared to the same period in the previous year. Net profit saw a more substantial year-over-year rise, growing 13.2 percent to reach ₹7,364 crore. This performance slightly surpassed analyst expectations on the top line, demonstrating solid execution. Sequential revenue growth in constant currency was 2.2 percent, marking the second consecutive quarter of such expansion.
However, the report also contained points of moderation. The company’s operating margin was 21 percent, a figure slightly softer than the 21.4 percent that some analysts had anticipated. This suggests that while growth is accelerating, the company is also navigating pricing pressures and making strategic investments that impact short-term profitability. Nonetheless, other financial health indicators were robust. Infosys generated a strong free cash flow of $1.1 billion during the quarter, equivalent to 131 percent of its net profit, underscoring its operational efficiency and strong cash management.
Performance Across Business Verticals
A deeper look into the company’s performance reveals that the recovery is not uniform across all client industries, with specific sectors showing remarkable strength while others continue to lag.
Strength in Financial Services and Manufacturing
The primary drivers of growth during the second quarter were the financial services and manufacturing verticals. The financial services segment, which is Infosys’s largest, grew 5.4 percent as banks and other institutions increased spending on technology to modernize their platforms and manage regulatory demands. The manufacturing sector was even stronger, posting 6.6 percent growth as companies invested in smart factories, supply chain automation, and other digital transformation projects. These sectors have been key to the company’s deal pipeline and continue to be a focal point for AI-led efficiency improvements.
Persistent Weakness in Retail
In contrast, the retail sector experienced a decline of 2.3 percent. This reflects ongoing caution among consumer-facing businesses, many of which are still grappling with shifting consumer behavior and economic pressures that limit discretionary technology spending. The divergent performance highlights the uneven nature of the global economic recovery and its impact on different industries. A notable success underscoring the company’s capacity for large-scale, long-term partnerships was a recently announced £1.2-billion deal with the United Kingdom’s National Health Service, expected to deliver significant revenue over the next 15 years.
A Sector-Wide Trend Emerges
Infosys’s positive results are not an isolated event but rather part of a broader, encouraging trend within the Indian IT services industry. Competitors such as Wipro and LTIMindtree also reported quarterly results that beat market estimates, similarly pointing to a rebound in demand driven by clients’ growing willingness to fund technology projects, particularly those involving artificial intelligence. This collective upswing suggests that the sector may be turning a corner after several quarters of struggle, during which many clients tightened their budgets and paused non-essential projects due to economic uncertainty.
Another tangible sign of this renewed optimism is the reversal of hiring trends. After a period of cautious workforce management, Infosys reported a sharp uptick in hiring, adding more than 8,200 employees to its headcount in the second quarter alone. Analysts view this significant increase as a leading indicator of anticipated volume-led growth, as the company staffs up to service the large deals it has recently won and prepares for future demand. This expansion contrasts with the more conservative hiring patterns seen in the recent past and signals a strategic shift toward preparing for a new phase of growth.
