A very good evening, everyone, and wishing you all a very happy New Year. Thank you for joining us today. My name is Rishi, and on behalf of Infosys, I'd like to welcome all of you. As always, since this is the New Year, my rules don't really change. One question from each media house, we try our best. But with that, let me invite our Chief Executive Officer, Mr. Salil Parekh, for his opening remarks. Over to you, Salil.
Thanks, Rishi. It's good to see that you're very consistent, and I'm sure the media team is as well. Good afternoon everyone and thank you for being here. Warm wishes for the new year to all of you. We've had a strong performance in Q3. Our revenue grew 0.6% sequentially and 1.7% year-on-year in constant currency terms. Our large deals were at $4.8 billion with 57% net new. This was across 26 deals. Our adjusted operating margin was 21.2 percent we generated free cash flow of 915 million dollars one of the most significant large deals we won was with the national health service in the uk this 1.6 billion dollar deal expands our work in the healthcare sector we will help NHS leverage AI to streamline operations and improve patient care for UK citizens. We have deepened our Topaz AI capability with an agent services suite called Topaz Fabric. This suite helps our clients manage and implement AI agents across the enterprise. we had strong momentum in AI adoption across our client base today we work with 90 percent of our largest 200 clients to unlock value with AI we're currently working on 4600 AI projects our teams have generated over 28 million lines of code using AI we've built over 500 agents we're scaling our forward deployed engineer team we are now witnessing six ai-led value pools emerging that could unlock a large incremental opportunity we also see productivity-led benefits that compress some legacy areas the six large ai-led value pools are ai engineering services data for ai agents for operations, AI software development and legacy modernization, AI deployed in physical devices and AI trust and risk services. We believe we are uniquely positioned to capture market share across these value pools and emerge as the leading AI value creator for global enterprises. We will share a comprehensive view of our approach at an investor day later this quarter. With a strong performance in this quarter, we have revised our revenue growth guidance for the financial year. The new revenue growth guidance for this financial year is 3% to 3.5% growth in constant currency. Our operating margin guidance for the financial year remains the same at 20 to 22%. With that, let's open it up for questions.
Thank you, Salil. We will now open the floor for questions. Joining Salil is Mr. Jayesh Sangrajka, Chief Financial Officer, Infosys. The first question is from Ritu Singh from CNBC TV 18.
Hi, thank you and Rishi, sorry, this is our only chance to speak with the management every quarter, so we'll have to exceed that one question limit. With that, you know, Salil and Jayesh, to begin with, I wanted to start with your headcount number. We've seen an increase of 13 to 46 over just the last two quarters and this is interesting because it's coming at a time when your peer TCS is cutting 30,000 jobs how should we read into this I mean is this a real indicator of how you see the demand environment improving and with that I wanted to get to your guidance figure being raised to three to three and a half percent how much of that upgrade is because of you know large T's like NHS being factored in how much of the versant acquisition which is yet to be completed as we understand is being into that number and you know because last quarter you were telling us for instance there are segments like retail that remain the weakest link so where are you seeing improvement that has led you to upgrade your guidance that's one also sequentially we've seen a very light you know bit of a marginal dip in your margins that is to 20.8 this is at a time when you know there are tailwinds emerging from the rupee depreciation so if you could break down why that has been the case and and while you continue to tell us about how you're uniquely place to you know exploit that AI opportunity and you know the likes of ACL tech and TCS have been giving us concrete numbers why does Infosys refrain from doing so thank you so let me start I think on margin Jayesh might have some points I think the first part I missed a little bit it was the headcount increase right yeah so on the headcount increase I think it demonstrates that we have
confidence in where the market is what we are seeing in terms of the demand and that also feeds in in a way to the second point you had in terms of how are we raising the guidance the growth guidance so first in terms of the growth guidance we are just finishing the third quarter so only one quarter is left so this we have had a lot of large deals in the previous few quarters plus we had a very strong execution in this quarter we have also seen you asked a little bit about the industries we've seen for example in financial services and we've seen in energy utilities resources services we see that the way the deals have come the way we have become AI partner of choice with our largest clients we see a good outlook even as we look into the next financial year and And that's, in part, helped us to increase the guidance, which is only for this financial year, which is for ending in March at the end. On margin, do you want to?
So first of all, very happy new year to all of you. Before I come to margin, I just wanted to also touch upon the headcount part. If you recollect last year, we had called out that we are going to hire 20,000 freshers this year, right? And we have onboarded roughly around 18,000 freshers, and we are well on our way to, you know finish our 20,000 number for this year which in a way reflects in a headcount also because many of them are under training and if you look at you know our our utilization including trainees has come down so that is our our investment into building capacity for future in a way right so that's that's on the headcount if you look at margins we have expanded a margin this quarter by 20 basis points versus the last quarter we are now on a nine-month basis at 21% margin, which is midpoint of the guidance that we have given. The puts and takes of 20 basis point expansion this quarter is 40 basis points came from currency, 50 basis points came from the project Maximus, mainly on account of value-based selling and the lean-in automation that we have done on multiple projects, offset by the furloughs and working day that we had. We also accrued a higher variable pay compared to last quarter, which was offset by some of the one-offs that we got. So that's the broad margin walk in a way. But if you look at a nine month period margin, which is 21%, we have invested in our sales and marketing, which has gone up by 50 basis points on a year-on-year basis. So that has been absorbed in the margin. The lower utilization of almost one person has been absorbed in our margin. So this margin is after absorbing all of that, where on one side we are building capacity for future, on the other side we are investing in sales and marketing and we still had a stable margin.
Do you have an outlook for next year now that you're completing this 20,000 for the year you've had a lower attrition as well this quarter?
We will have an outlook you know once we give our guidance for next year in April.
And also the wage hikes you know what's planned for the year and what kind of impact that could have on the margins from here?
So we just finished one cycle of our wage which was in two parts in January and April we haven't yet decided on the next part yet we will decide on that as we progress.
Yeah, on AI, I think one of the points I shared, and we have a lot of that sort of information, was with our largest 200 clients, with over 90% of them, we are doing AI work. What we are doing in AI is unique AI services with clients, and also we've reshaped all of our existing services leveraging AI. And for example, we are using agents in several of our service lines to help enhance either growth or productivity. So that's what we are sharing in terms of what our impact is.
Thank you, Ritu. The next question is from Mansi Dave from ET Now.
Good afternoon, Salin and Jaish. This is Mansi Dhabi from ETNOW, ETNOW Swardesh. My question is on demand visibility, tech spending and AI adoption. Now, looking at the constant currency growth scenarios and commentary around fewer billing days and deal timing, how are clients thinking about calendar year 2026 tech spending, especially discretionary versus transformational led programs and at the same time, pace of enterprise AI adoption as well as tech spending outlook are amongst the key monitorables which we were looking towards how does the scenario look like and how are the pricing models evolving evolving according to you so i'll start with that maybe a little bit on the pricing uh uh jayesh might have some views on the demand we see a good demand outlook in the sense of we have had strong large deals our large
deals pipeline remains healthy and we are seeing in the two industries that I mentioned on financial services on an energy retail sorry energy resources utility services a way that our work on AI is going and the way the deals have shaped up we see a good outlook as we look even beyond this financial year into the next financial year on financial services specifically we see discretionary spend and good traction in what we are seeing across the market. Having said that overall we want to still see all of the other industries and segments start to show that but these two are definitely something that we are seeing today.
Another pricing I think you know as a newer and newer technology evolve every time there's a change like that you see a new pricing model evolving as well. We are seeing multiple new pricing model evolving some of them are being led by us you know whether it is outcome based pricing or whether it is you know pricing which is specific to agents etc so little early in my mind in terms of calling out specifically what are the pricing model is going to evolve on this but everybody is testing new pricing models at this point thank you the next question is from Srishti achar from the economic time so couple of quick questions and one I wanted to know in the sharp decline in operating margins that we're seeing so I want to know if the impact is beyond the labor code charges that the company has taken and I also wanted to know in terms of there's also been a sequential decline in your
top contribution every contribution from a top five and top ten clients so why can you give us a sense of why that is happening and what the next couple quarters look like around that on the third I also wanted to know as far as I this is the last one so I also wanted to know in terms of you know the whole H1B that is going on so this morning also we saw some claims of you know in employees being different on the same as well so I wanted to just know what is going on and on that yeah so if you look at the margins if you're looking at reported margins yesterday reported margins were impacted because of labor code but if you look at the adjusted margins as we have called it out also the adjusted
margins have actually expanded you know if we exclude the impact of labor codes adjusted margins have expanded by 20 basis points sequentially and on a full year basis it's it's remained 21 percent which is similar to our last year margin so and that's that as i said earlier that was despite after absorbing the investment that we have done in sales and marketing which would have impacted margins by 50 basis points after absorbing the impact of lower utilization which is building capacity for future so after absorbing both of that we've been able to uh you know maintain margins uh you you had a second question client contribution yeah client contribution i think sequentially client contribution is uh is not a way to see in my mind because there is a seasonality involved right every q3 you typically have furloughs etc which would have impact certain specific clients and larger the clients you know larger will be the impact of furloughs if there is one in that account typically you will see that year on year and you we don't really see a significant uh change in the year-on-year grand metrics on your last question I just want to read out.
No Infosys employee has been apprehended by any U.S. authority. A few months ago, one of our employees was denied entry into the U.S. and was sent back to India.
Thank you. The next question is from Chandra Shrikant from Money Control.
Employee who wasn't allowed and sent back, are you contesting that in any form? Secondly, you know, one of the big trends this quarter we've seen is a big acquisition from Coforge where they acquired Encora for $2.35 billion. TCS has acquired Coastal Cloud for $700 million. So, can we expect more action on the M&A front? Are there, you know, assets that attractive?
If you can take us through your M&A strategy. on M&A so we have as we've looked at over the last few quarters we've done acquisitions on cyber on consulting and energy services and we will continue with that sort of an approach we have a good pipeline of possible companies that we are looking at and discussions we have you know strong support in terms of our balance sheet so we will continue with that it's not something that is different in that sense from what we were doing in the past we have a set of areas we're also looking sort of in geographies which are new we're looking
at expanding in some service areas where we can go deeper so that will continue on the IC any any other details that you can show that's that's what I have to thank you sorry just one thing on the labor code so according to your fact sheet infuses incurred 1289 crore on account of labor codes so has the full impact been absorbed or will it sort of be staggered how will that work so whatever is to be accrued till this quarter and has been accrued in the books right which is for the i mean labor code has impact across multiple aspects whether it is gratitude whether it is you know other aspects of wage and that has been
accrued there will be an ongoing impact of roughly around 15 basis points that will happen on an annual basis that is a regular impact of the labor code as we go ahead thanks Chandra the next question is from Haripriya Suresh from Reuters news good evening a few questions one on the H1B front will you be looking at making new applications or is it primarily just hiring in the US and the employees that you have already um in retail is there specific softness because of how america is right now and when do you sort of see that recovery and uh third is um suddenly your term for a ceo ends in march 2027 at least the five-year term what is succession planning has that started
and what is that looking like thank you uh on the first one i think we we uh on h1 and what the recruiting is and so our approach is very clear we have as we shared in the past majority of our employees in the US who are not requiring any visa situation we are continuing with our deployments and our delivery using a mix of what we have work in the US and work in India so no changes to that approach at this stage we are continuing with our process because there's an existing set we will examine it as it comes up in the future on retail what we are seeing is there is some places where we see positives there are some places where we see different client situations which are under some cost containment for that sub vertical within that so we are waiting and we are pushing to make sure that the retail pipeline which is growing becomes converted into what we drive into the retail growth on my own situation no comment yeah no no comment from my side thank you the next question is from Avik Das from the business standard thank you quick questions one a little
bit more on the bfsi commentary because what we understand that financial services bfsi overall has been improving in the not in the north american geography so which sectors or which sub-segments within that sector is actually growing if you can just throw some more light and north america seems to have de-grown in a constant currency basis any any reason was it a client specific or was it any sector specific maybe retail that pulled it down if you can just throw some more light. And Jayesh, there seems to be that idea that new large deals will be smaller or maybe far and few to come by as more AI-led deals sort of take the center stage. Keeping that in consideration, how do you think the margins are going to play out across the industry and for you in specific in the long run, if you can just throw it? Thank you.
So I'll start off on financial services. We see a good traction across most of the sub verticals we have within financial services. So we are seeing good traction with retail banks. We're seeing good traction with what are considered mid-market banks. We're seeing good traction on payments. We're seeing good traction in the mortgage area. So overall, pretty strong. Some are stronger, some are less strong, but overall we see a good demand environment. there's good adoption of AI across the the spectrum with our large financial services clients. We recently announced, for example, a partnership with Cognition which is very strong and we are working with them jointly in some of the financial services companies. On North America, nothing very specific, it's a mix of different industries and different plays the overall situation on energy utilities on financial services remain strong on some of our other verticals remains something that is coming back over time but not yet on the third on the mark yeah on the last days you know if you look at the the deals that we have signed we have signed 4.8 billion dollars this quarter if you look at even on a nine-month basis compared to the last year you know our deals large deal signings have gone up so while there is always a productivity ask that goes up because of ai etc there is also you know a lot of deals that are getting
structured because of cost optimization of cost takeout etc from the client side so a lot is getting bundled when you look at it and on the margin side you know large deals always have slightly lower margin than the company average but as a portfolio you always make up on a margin because a new work that comes up comes up at a better margin etc so that's that's a trend that we have seen we have not seen a change in the trend from that perspective thank you the next question is from Sanjana from the Hindu business line hi hi good evening gentlemen so manufacturing and Europe they've grown significantly for emphasis this quarter both of these were previously seeing some softness so can
Speaker 3
you expand on what were some factors contributing to this growth and also I think the tech budgets for the calendar year 2026 are expected to be rolled out soon based on client conversations what are you hearing you know is there any sign of uptick in discretionary spending and also the guidance was raised upwards despite seasonalities and uncertainties any reasons for this and the last question you know regarding the collaboration with cognition which is an AI startup what were the gaps in your AI portfolio that you were looking to bridge with this particular collaboration how is this contributing to your role of AI you know
momentum just that thank you so starting on manufacturing Europe firstly I think Europe's been in a good position for us for many quarters and actually even manufacturing that a strong activity across the board we've seen good traction there are pieces within the manufacturing client base so which are benefiting massively from the ai growth for example we do work with companies that provide power solutions we do work with companies that provide manufacturing into those solutions that provide engine capacity that provide generating capacity so there's a lot of those pieces which are doing well those client industry components which are doing well and where our team is really active on that. We've also got some good traction within manufacturing on the engineering part of the work. The second one on the discretionary spend overall so first on financial services we are definitely seeing that what we shared earlier we are seeing a good set of deals which have happened and then we see that with the AI traction we have in that industry we will become more the next financial year will have better outcomes than this financial year on that and financial services is going well this year. Similarly on energy and utilities we are seeing a good set of deals that have come together across the whole industry vertical and that is helping us with that momentum so those are the ones we are seeing on the others we are not seeing any deterioration so which is one sign and we see overall the macro environment seems to be where people are expecting maybe some interest rate cuts so we'll see if that happens especially in the US and then some of the other expansions we are doing for example we have a program where we're working with some of our smaller sets of clients and those are growing pretty well so overall we feel that as we look out into the next year these are things that support our growth then on AI itself we are seeing what I shared earlier you know these six areas where we see potential good growth over the next several years not just in the next year and that will as we start to execute on that that will help us on cognition so it's not so much a gap so what the cognition people are doing is they've built an agent which is working to do software development and we are working with our clients as a partner with them where we are also doing we are building agent capacity and we are enabling those agents to work in a client environment so the advantage is we have a detailed understanding of how the client technology landscape is set up and we have a good understanding of what are the industry constraints or opportunities and that combined with the software agent with cognition becomes a very powerful combination in many clients so that's something that will expand quite nicely here thank you the next question is from just part there from the mint good evening sounds just
two-pronged question in what segments and for what clients will you all be using these AI software engineers and how will this impact delivery how will this impact billing and more importantly how will it impact future hiring that is FI 27 onwards considering you're using a lot of these AI software engineers in to work in client projects actively so what what we see there first where will it be used my senses as I've interacted with our clients and with some of these partner companies the usage is going to be across essentially every industry every client over time so it's a function of what is the client landscape
and what it is that they want to achieve. My sense is there are, for example, in those six that I described earlier, there are places where the economics have changed completely from a client perspective. If you take legacy modernization, here if you use software agents plus our expertise plus our knowledge, the whole economics from a client perspective becomes much better and that allows a lot of these projects which were not happening before to start happening there's not a case of something which was being done which is now being done differently that will also happen but this is more a case of something which was not being done which will now start to happen so in that light we will continue to hire as Jayesh mentioned earlier we will announce as we do in April our plan for next year we are going to hire on campus we know that today this year we have been we've done 18,000 we will do 20,000 campus as and we will continue in that sort of a range for next year because these are new areas of demand and so it's incremental to what we are doing and we will have our people working and these software agents which makes the overall economics for the client much better billing what was the the value that we create will drive the billing so a lot of these things will be based on the traditional ways as jayesh was saying of billing and lot over time will change as the ai market itself develops so today there is not any immediate change, but over time we'll see that.
Thank you, Jas. The next question is from Palami Chatterjee from the Financial Express.
Good evening. So I wanted to ask, like, recently we've seen across Indian IT there's been a trend, there's been a slew of, like, AI-related acquisitions. So what is your approach with regards to that? And also, like, IT companies Companies are now competitively building, hiring specialized AI talent among freshers who are getting paid significantly more. So what does the talent pool look like and what are you looking at when you're hiring these set of people?
So in terms of acquisitions in the landscape, there are not so many AI services companies today that we see. What we do see are companies where we are partnering, which are really AI, whether they build agents or models or foundation tools, which exist, and those are the funds we are partnering. We will look in our acquisition approach to AI as they start to appear as larger AI services companies. And we have some that we are looking at, which is part of our overall acquisition, meaning there are other things in the acquisition as well. In terms of the compensation, I think Infosys has always been a leader in making sure that we put new constructs in regard to our employees and the new people we recruit. What we have now done with the most recent approach and launch is put together an approach for very good software engineers who will work in AI and who will have that level of expertise to be specialized engineers within our structure and with different and higher or much higher compensation levels. so in the ai world there will be different types of people working jointly with ai agents with different levels of training and we want to make sure that we remain in that leading position in that recruitment environment and with that what we have launched for specialized
engineers that's the approach we put in place thank you palami the next question is from Uma Kannan from Deccan Herald.
Good evening gentlemen so last year you announced AI first GCC model so I want to understand how it is shaping up and a follow-up question on partnership this month alone you have announced a couple of partnership going forward will there be more AI native collaboration and one more question some of your peers have made it mandatory to stay at the office for six hours so do you have any plans when it comes to office requirement office hours requirement or will you continue the present hybrid flexible model thank you so on the GCC we have as as you mentioned launched the AI specific approach we have a lot of client activity in that we have some
clients we are already working on that there are several others which are in the pipeline for large AI specific capability building in GCC so beyond regular GCC work that we're doing and that's going pretty well at this stage. In terms of partnerships we will have a number of different partnerships because there are several companies, smaller companies but with great capability on AI, on the foundation model, on coding, on agent development, on customer service so we will continue with that because those are the areas which our clients are most interested in and we will continue we have already working with those companies but we will have these sort of strategic announcements as well and the third one yeah no we are not making any change to our approach we will remain flexible in the way we are today in the way that our employees are interacting
with the company and with our clients thank you Padmini sorry thank you Uma the next question is from Padmini Dharvaraj from the new Indian Express Yes.
Hi, good evening. Sorry if these questions have been already asked. So one is going forward, do you see labor code having an impact on profit margins? And do you see this having an impact on your appraisals going forward? And the U.S. government plans to cap their credit card limit, interest limit at 10%. So do you see this also having an impact?
So let me start with the second one, labor code that Jayesh mentioned, I can also mention on the appraisal. On the U.S. credit card, what you mentioned, that is something that the U.S. banking system will look at and how they have to implement it. What we do with our clients, with the large banks, is help them as they have to go through different regulatory changes and if that requires our help and support we will continue to do that. On the margin impact Jayesh will mention the number on the appraisals there'll be no change in our appraisal approach.
Yeah so on the labor code you know whatever is the impact till quarter till December and is already taken in a financial statement that's a one-time impact because the regulation has changed and there is a there's an impact for the number of years the employees would have served for us etc so that impact has already been taken in the financial statements there will also be an ongoing impact because of the wage code that has changed and that that will be taken as and when we go through that is approximately 15 basis points on an annual basis thank you Padmini thank you with that we come to the end of this press conference we thank our friends from media thank you Salil and thank you Jayesh before we conclude please note that the archived webcast of this press conference will be available on the Infosys website and
on our YouTube channel later today. Thank you very much and please join us for HIT Outside.
