Infosys cut its FY27 revenue growth forecast to 1-2% as market recovery remains slow. Chief executive Salil Parekh said, "Things are a little bit more uneven," noting that technology spending has not improved as expected. While AI revenue grew, traditional services face pressure as clients look to cut their costs.
Infosys has lowered its FY27 revenue growth forecast to 1-2%, indicating challenges in recovering technology spending. Chief executive Salil Parekh noted uneven market conditions, with some sectors yet to experience improvement. Despite growing AI-related revenue, traditional services are facing productivity compressions as clients aim to cut costs. The company achieved large deal wins worth $3.6 billion, with most being net new business.
Infosys had expected technology spending to recover in the second half of FY27, but the improvement is proving more uneven than anticipated, chief executive Salil Parekh said, as the IT services company cut its revenue growth guidance for the year.
"We had a sense that the macro was settling down, so we had a guidance where the upper end looked at maybe things would settle down in the second half. Things are a little bit more uneven," Parekh said during the post-results press conference.
He added that technology spending could still stabilise over time, allowing the company to benefit if client budgets recover.
The comments came as Infosys cut its FY27 revenue growth guidance in constant currency terms to 1-2% from 1.5-3% earlier, reflecting a more cautious view of the pace of recovery.
Parekh said the revised guidance reflected what the company was seeing in the market rather than a precise prediction of when spending would improve.
AI gains traction, but broad-based recovery remains elusiveWhile AI-related work is growing, the company is also seeing productivity gains from AI affect parts of its traditional services business as clients seek to lower costs.
Parekh said the company had not quantified this compression but remained focused on growing AI-led revenue to offset the impact over time.
Chief financial officer Jayesh Sanghrajka said AI-related revenue had risen to 8.2% of total revenue from 5.5% in the third quarter, with double-digit sequential growth over recent quarters.
Parekh said the company saw a substantial long-term opportunity in AI services, with an addressable market of about $300 billion across six focus areas.
However, the recovery remains uneven across industries. Parekh said Infosys was yet to see a pickup in retail, while communications remained another challenging segment.
North America had also been softer over recent quarters, partly due to lower discretionary spending and client-specific ramp-downs, Sanghrajka said.
The company reported large deal wins worth $3.6 billion in the quarter, of which 61% was net new business. Sanghrajka said a major net-new deal would contribute minimally to FY27 revenue as it was expected to ramp up only towards the end of the fourth quarter, but could add more than 1% to revenue growth next year.
Infosys retained its FY27 operating margin guidance of 20-22%.