Infosys Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Guidance tightened, not raised: Full-year constant-currency revenue growth revised to 2%–3% (from 1%–3%), lifting the floor on Q2 strength, but the upper end stayed put because the environment remains uncertain and H2 is seasonally softer.
• A \$1.6 bn mega deal lands after the quarter: The net-new NHS transformation win, announced post-close, is the standout proof point that Infosys can still win large-scale modernization work, with AI as a central enabler.
• Margins inch up as Maximus delivers: Operating margin expanded 20 bps sequentially to 21%, with Project Maximus contributing 30 bps, partly offset by higher subcon costs and lower onsite utilization.
• AI is everywhere but still undisclosed: Management is comfortable with its AI strategy and will share revenue externally "at the right time," but for now investors get project counts (2,500+ GenAI/AI projects, 200+ agentic) and no dollar figure.
• What to watch next quarter: Whether the \$1.6 bn NHS deal starts ramping meaningfully, the pace of margin expansion as freshers come onboard, and any signal on AI revenue disclosure.

Demand Environment

• Q2 strength, H2 caution: Revenue grew 2.2% sequentially and 2.9% YoY in constant currency, with 4 of 5 large verticals and 3 of 4 geographies growing YoY, but management flagged the normal H2 pattern of lower working days, furloughs, and seasonal softness.
• Where growth came from: Financial Services and Manufacturing both grew above 5% YoY in constant currency in Q2 and H1; Europe outperformed with greater than 5% YoY growth, driven by good investments across countries and clients opening up to Infosys for transformation and cost efficiency.
• Where it did not: Retail remains constrained, though the pipeline there is good.
• The macro bet embedded in guidance: At the lower end, management assumes worsening of the uncertain environment; at the upper end, stability. The revision reflects increased confidence after a strong Q2, not a call on macro improvement.
• Volumes soft, realization did the work: The bulk of revenue growth came from realization increases, partly from higher working days reflected in pricing and partly from Project Maximus driving effective pricing through various levers.

Parekh: "The previous guidance was 1% to 3%, and now it is 2% to 3%. So, in a sense, we have much more confidence with the lower end being increased in what we see into the outlook for the year."

Deal Wins & Large Deals

• The \$1.6 bn NHS mega deal was announced after the quarter closed but before results; it is a complete transformation program supported by new technologies including AI, working with many partners, and is 100% net new. Per an analyst's math, it represents a \$100 mn+ ACV deal. It will start ramping this fiscal year.
• What large deals are about: The vast majority focus on cost reduction, vendor consolidation, using AI for productivity, and lean automation. Management has a disciplined approach to margin discipline at the start and through the program, with the Chief Delivery Officer involved actively from the very beginning.
• Smaller deal activity has remained similar compared to last year, with a strong pipeline and nothing unusual to call out.
• Modernization is the next wave: Management sees modernization as a huge opportunity because AI tools shorten the time horizon and improve client ROI; as AI tools mature and stabilize, more will be deployed on modernization programs. Infosys also expects to participate as a partner for AI companies deploying into enterprise modernization, leveraging its knowledge of client landscapes.

Parekh: "With some of the AI tools, the time horizon becomes less and as a consequence, the ROI for the client on that program is much better."

Margins & Project Maximus

• H1 margin resilience: H1 FY26 operating margin was 20.9% vs 21.1% in H1 FY25, with gross margin flat YoY at 30.8% after absorbing compensation headwinds, reflecting Maximus progress.
• H2 margin outlook: Seasonally softer with lower working days and furloughs as headwinds; Maximus tracks (pricing, lean/automation, large program optimization) will be tailwinds, and freshers getting onboarded will benefit the pyramid.
• Investment continues: Sales and marketing cost grew 12.8% in H1 over H1, reflecting ongoing investment in the business. Onsite mix reduced by 40 bps for the quarter and 60 bps for the half year.
• Subcon costs fluctuate with demand and skill requirements, but have come down consistently from 11% a few years back to 8.5% currently; management does not expect subcon to increase significantly from current levels.

AI & GenAI

• Scale without a revenue number: Infosys is delivering more than 2,500 Generative AI and AI projects and 200-plus agentic AI projects for clients. Eight industry analyst firms have ranked Infosys as a global leader in 20 separate AI rankings over the last 12 months. Management will share AI revenue externally "at the right time."
• Agentic AI in production: Built 4 small language models for banking, IT operations, cyber, and enterprises. Developed more than 200 enterprise-grade AI agents in collaboration with Google Cloud. Over 22,000 developers are on GitHub Copilot.
• Responsible AI posture: Among the first companies certified on ISO 42001:2023 for management systems implementing Responsible AI projects; partnering with OWASP on LLM security, advising policymakers, and collaborating with regulators.
• Academic and ecosystem depth: Engagements with Cambridge, Columbia, Cornell, Stanford HAI, and MIT.
• The liability question is unresolved: On who bears risk when something goes wrong on hyperscaler AI platforms, management said liabilities are "still not fully clarified from a legal perspective" and the guideline is to take responsibility only for what Infosys controls.
• Forward-deployed engineers are a capability management shared externally for the first time this quarter; they have been using this model across the AI landscape for some time.

Parekh: "We believe there is a huge amount of opportunity in the enterprise AI space. And with our experience on how to navigate within the enterprise landscape, we are quite well positioned to help with that."

People, Delivery Model & Visa Dynamics

• Hiring reflects visibility: 8,000 net additions and over 12,000 freshers onboarded in H1; utilization is at 85%. Management is on track to hire close to 20,000 freshers this year. Every fresher goes through training depending on requirement and skill set; the company does not split out how many are higher-skilled vs regular.
• Attrition marginally dropped sequentially but increased from the prior year.
• The delivery model is shifting: The approach is localization in all geographies outside India, comprising local technology hubs, local recruiting, nearshore centers (Canada, Mexico, South America), and offshore. From early client discussions, there will be an increase over time in what clients want to offshore, though management has no specific target for the offshore ratio.
• H-1B questions met with a wall: Management declined to share specific numbers on H-1B employees, the percentage of employees abroad on visas, or whether it remains viable to pay the increased costs. The repeated answer: localization and nearshore are the strategy, and the majority of U.S. people do not require Infosys immigration support. On whether the visa change could be a margin tailwind via higher offshoring, the CFO said it is "difficult to say" because it depends on the extent of offshoring vs local hiring and will be a balanced act.
• Hubli campus is being built out with senior people incentivized to move there, then building teams below; a few local hires have already been made.

Sanghrajka: "Difficult to say at this point in time. But I mean, mathematically, if you do more nearshoring and more offshoring, it should mean more margin, but it depends on to what extent you are able to do offshoring, nearshoring and to what extent we will end up doing more local hiring. So, I think it is going to be a balanced act there."

Capital Return & Inorganic Moves

• Buyback: Rs. 18,000 crores through tender route at Rs. 1,800 per share announced; expected to be completed in Q3, subject to shareholder approval. The postal ballot is already out.
• Dividend: Board approved Rs. 23 interim dividend, 9.5% higher than FY25 interim dividend.
• Capital return policy: The policy is to return 85% of free cash flow over a 5-year period; the company is in the second year. Last year's strong cash flow on the back of tax refunds created headroom for additional capital return.
• Cash generation: Free cash flow was \$1.1 bn at 131% of net profit, above 100% for the sixth consecutive quarter, bolstered by tax refunds. H1 free cash flow conversion was at 120%.
• Versent JV in Australia is not yet closed, pending regulatory approvals; expected to close this year but exact timelines are unknown. It is not baked into guidance. Last year's numbers were already disclosed in stock exchange filings at the time of announcement.
• Inorganic strategy: Primary focus is organic growth; acquisitions are pursued where they add capability in industry, skill area/service line, or geography. A good pipeline exists but timing is uncertain.
• Egypt subsidiary was incorporated for a specific project requirement where the client is based in Egypt.

Guidance & Commitments

Key Metrics