Infosys Beats Q1 Revenue Estimates. Is This the Start of a New Growth Cycle?

The Q1 FY26 quarter has been subdued for many Indian IT companies, with most facing a slowdown or muted growth in revenue and profit.

According to early results, top Indian IT companies experienced one of the weakest performances in about five quarters.

Among largecap IT firms, Infosys stood out as an exception by reporting a 2.6% constant currency sequential revenue growth. This is as against the other big IT firms that saw declines in sequential revenue for the quarter.

Infosys Q1 FY26 Revenues Better than Estimates

Infosys demonstrated resilience amid a generally tough environment for Indian IT firms. Revenues were Rs 422.79 billion (bn) for Q1 FY26, up 7.5%, compared to Rs 393.15 bn in the corresponding period last year.

The operating margin dipped slightly to 20.8% from 21.1% in the previous quarter.

The net profit was Rs 69.21 bn, up 8.7% against Rs 63.68 bn in the corresponding period of last year.

These figures beat analyst estimates and reflect a good quarter for Infosys. The company also raised the lower end of its FY26 revenue growth guidance to 1-3% from earlier 0-3%.

Infosys saw strong free cash flow generation, which was US$ 884 million (m), 109.3% of net profit. Total contract value of large deals was impressive with the company winning US$ 3.8 bn, with 55% of them being new.

North America, the largest market, contributed 56.5% of total revenue. Growth here was muted at just 0.4% year-on-year in constant currency terms.

Europe, the second largest contributor, accounting for 31.5% of revenue, showed strong growth at 12.3% YoY in constant currency terms.

Infosys Financial Highlights 1Q FY26 (Rs bn)

Particulars	Jun 30, 2025	Jun 30, 2024	Growth % YoY	Mar 31, 2025	Growth % QoQ
Revenues	422.79	393.15	7.5	40,925	3.3
Gross Profit	130.55	121.38	7.6	12,350	5.7
Operating Profit	88.03	82.88	6.2	8,575	2.7
Operating Margin %	20.8	21.1	-0.3	21	-0.2
Net Profit (after non-controlling interests)	69.21	63.68	8.7	7,033	-1.6
Basic EPS (Rs )	16.7	15.38	8.6	16.98	-1.6

Source: Equitymaster

Infosys's Q1 FY26 results were good with beats on profit and revenue, positive guidance revision, and strong deal wins. However, margins were under pressure.

The employee attrition rate for Infosys in Q1 FY26 was reported at 14.4% on a trailing twelve months (LTM) basis, up from 12.7% in Q1 FY25, indicating a rise in voluntary employee departures.

Despite beating estimates, the growth rates are modest compared to earlier years, reflecting a cautious demand environment and sectoral headwinds such as global economic uncertainty and tariff impacts.

Is This the Start of a New Growth Cycle?

Infosys declared its results on 23 July post market hours. At the time of writing, the stock has lost 1%, indicating subdued sentiment.

One of the positive features of the results was that Infosys increased the revenue guidance. Now, the projected revenue growth of 1-3% is, at best, tepid in a normal environment. However, we need to examine the guidance in the context of a very challenging demand environment.

According to the management, the performance in Q1 demonstrated the strength of Infosys' enterprise AI capabilities, the success in client consolidation decisions.

Going forward, the company plans to continue to leverage Project Maximus to make investments in strategic priorities to drive profitable growth.

The next leg of growth will also have to be led by AI developments for most of the IT companies.

Infosys is currently working on around 400 generative AI projects and deploying over 300 agentic AI solutions that reportedly deliver 5-15% productivity gains for clients. The company has also built 200 AI agents internally and is involved in 30 AI agent-based client engagements.

Infosys is aggressively enhancing its AI capabilities through extensive internal development, employee training, generative AI projects, and client engagements.

Overall, the market considered Infosys' results as positive due to strong deal wins, robust digital transformation capabilities (AI and cloud), stable revenue growth, and raised revenue guidance for FY26, despite the broader sector challenges.

However, growth is expected to be modest and margins face pressure from wage hikes and acquisition costs, which tempers exuberance.

The industry itself is facing headwinds in the form of global economic uncertainty and cautious client spending. These have contributed to slower revenues or muted growth in many IT firms, reflecting a cautious demand environment.

So, is this the start of a new growth cycle?

The investor sentiment around the stock, post results, answers the question as a clear no. The company too has answered this question in the form of a near flat 1-3% revenue guidance for FY26.

How Shares of Infosys have Performed Recently

Over the last one month, the share price of Infosys has fallen from Rs 1,581 to the current levels of Rs 1,553. In the past one year, shares of the company have lost 15%.

The stock hit a 52-week high of Rs 2,006.8 on 13 December 2024. The stock also hit a 52-week low of Rs 1,307.1 on 7 April 2025.

About Infosys

Infosys is one of India's leading IT services companies with a strong presence in digital transformation, enterprise AI, cloud computing, and consulting.

It's a global leader in digital services and consulting. The company enables clients in 59 countries to navigate their digital transformation.

Infosys has four decades of experience in managing the systems and workings of global enterprises, as they navigate their digital transformation.

The company became the first Indian IT company to list on the NASDAQ in 1999.

To know more, check out Infosys fact sheet and latest quarterly results. You can also compare Infosys with its peers on our website.

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