Infosys Forecasts Revenue Growth of 0-3% for Fiscal Year 26
BENGALURU: Infosys has issued a cautious revenue forecast for the fiscal year 2025-26, predicting growth between 0% and 3%. This outlook reflects ongoing macroeconomic uncertainties and concerns over tariffs, which have led clients to adopt a more conservative approach to spending. Despite these challenges, the company has maintained its margin guidance of 20-22% for the current financial year. This forecast marks one of the lowest revenue projections for Infosys in over a decade, excluding the pandemic period when the company suspended its guidance due to widespread economic instability.
Market Response and Historical Context
The announcement of this subdued revenue guidance has had immediate repercussions in the market, with Infosys’s American Depositary Receipts (ADRs) dropping approximately 3% in early trading on the New York Stock Exchange. The company’s revenue growth for the fiscal year 2024-25 was reported at 4.2%, which fell short of its target range of 4.5-5%. In the March quarter, revenue grew by 4.8% year-on-year but saw a sequential decline of 3.5%. This performance is particularly concerning when compared to larger peers; Tata Consultancy Services (TCS) reported a revenue increase of 4.2% in constant currency, while Wipro experienced a decline of 2.3% during the same period.
Historically, Infosys faced its most significant growth challenges during the global financial crisis of 2009-10, when growth plummeted to just 3%. The current forecast suggests that the company is navigating a similarly challenging environment, prompting a reevaluation of its growth strategies.
CEO’s Insights on Future Strategies
In a recent earnings conference, Infosys CEO Salil Parekh addressed the uncertain economic landscape, emphasizing the company’s commitment to agility in its operations. He noted that recent deals are continuing to ramp up, but acknowledged that the shifting economic outlook has led to increased discussions about cost efficiency and vendor consolidation among clients. Parekh reassured stakeholders that the guidance provided considers various potential scenarios, reflecting the rapidly changing market conditions.
Infosys signed contracts worth $11.6 billion in the last fiscal year, representing a 34% decline compared to the previous year. This decrease in deal value underscores the cautious sentiment prevailing in the market, as clients prioritize cost management in light of economic pressures.
Employee Retention and Salary Increments
Regarding employee compensation, Infosys Chief Financial Officer Jayesh Sanghrajka did not provide specific updates on salary increases for the ongoing financial year. However, he reiterated that the company is following through with planned increments that were implemented in January and April of the previous financial year. The attrition rate at Infosys has seen a slight increase, rising to 14.1% in the March quarter, up from 13.7% in the previous quarter. This uptick in attrition may reflect the broader challenges facing the IT sector as companies navigate economic uncertainties and changing workforce dynamics.
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