Ladies and gentlemen, greetings and welcome to Enforcers Limited Q1-FI27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindra. Thank you and over to Mr. Mahindra. with Salil and Jaish.

Kindly note that anything we say which refers to our future outlook is a forward-looking statement that must be read in conjunction with the risks that the company faces. A full statement explanation of these risks is available in our filing with the SEC, which can be found on www.sec.gov. I'd now like to pass on the call to Nandan.

Thank you, Sandeep, and it's really a pleasure to talk to all of you. I joined this call to make an important announcement. As you know, Salil has done a stellar job as a CEO for almost 10 years, and under his leadership, the company has grown from $10 billion to $20 billion. He's done the transition to the digital era, and he's laid the foundation for a differentiated AI strategy which will serve the company in good stead for many more years. However, his term is coming to an end on March 31, 2027. And the board has decided today to appoint a CEO, a new CEO who is coming from inside Infosys, from within, an internal candidate. His name is Ashish Dash. Ashish Dash has been in Infosys for more than 31 years since he joined as a software engineer from IIT, Kharagpur. and he has all-around experience of Infosys. He has worked in delivery for many years. He has worked on account management. He has been involved with starting a DC in Bhubaneswar. He has been in sales and of course, he has been a sales and segment head for many years running the Shure practice, which has many verticals. And he is an outstanding person. He's very good at his job. He's very collegial. He's very good collaborative. He's accepted and liked by everybody in the company. He has quintessential Infosys values. At the same time, he's focused on the market and being able to get good deals at good revenue and good margin. And because of his technical background, he understands the AI, what is happening in AI, and that will help him in the future. So the board has appointed Mr. Dash as the CEO-designate. He will work with Salil over the next few months. For the next two, three months, he'll focus on getting more coaching and training on being a CEO. And then for six months, he will work as a mentee under Salil's leadership who will groom him for the complex job of managing a $20 billion company at a very transformational time. So we are all very excited by the choice. It has got a very good response internally and with customers. And you will get to see him in a few months, so you can maybe keep that in mind. Maybe now I'll ask Salil to add a few words on Dash.

Thanks, Nandan. Good morning, good evening, everyone. It's an absolute pleasure for me to have Dash be the next CEO of the company. I've had the opportunity to work with him over the last several years. In my mind, he's a fantastic leader and very good with the people around. He's worked very closely with clients and built a portfolio, which is, I think, quite strong and exceptional on the growth dimension and the way it's managed operationally and economically. So all of the ingredients which make for a successful business. In addition to his leadership, Dash is a very good friend, and I'm delighted for this. Congratulations to him. And then I look forward to working with him over the next, the course of the next few months, as Nandan mentioned, in the way we transition, in a smooth transition there. So look forward to all of that. And as Nandan said, you will get to meet Daesh in the coming quarters as well.

Thank you. And I'll excuse myself and Salil and Jayesh and the team will continue the quarterly call. Thank you very much.

Thanks, Nandan. Good evening and good morning to everyone on the call. Thank you for joining us. Let me start off with the update for the business in this quarter. Our revenue growth for Q1 was 2.4% year-on-year and 1% quarter-on-quarter in constant currency terms. We had a one-time revenue impact of a client decision during this quarter. Our AI services revenue was 8.2% of overall revenue. Our large deals were at $3.6 billion with a net new of 61%. Our operating margin was 21.1%, free cash flow at $9.55 million. And our earnings per share were higher by 15% in Q1 in rupee terms. We saw a strong acceleration in our AI business, as I shared earlier, with AI revenues for the quarter at 8.2%. This is growing at double-digit quarter-on-quarter over the last several quarters. With this momentum, we see long-term relevance of our services for our clients. From a delivery team, over 80,000 employees are working today on coding tools such as cloud code or codex for our clients and for some projects inside. We saw strong traction across the six areas of growth in our AI strategy hexagon. We see client work, for example, in building agents for processes, work on data in AI, in modernization, and of course in coding tools. For a healthcare As a healthcare company, we implemented AI agents to automate Medicaid eligibility verification and operation support. The solution reduced eligibility verification time from six to eight days to approximately four minutes. We are building a team of Frontier engineers to support our client work. Our plan is to have 6,000 Frontier engineers over the next few years. We built a platform, Topaz Fabric, that allows our clients to get benefits of AI while keeping the sovereignty of their data and company knowledge with themselves. Our clients are able to work with any foundation model, closed, open, on cloud, on their server. Topaz Fabric provides a harness to our client to enable them to more fully deploy the benefits of the foundation models into their organization. Our clients are also able to optimize their token cost by ensuring appropriate models are used for appropriate tasks. Overall, we see a good pipeline for AI services, and that gives us a good view for continued AI work with our clients. Outside of that, we continue to see the macro environment remaining uncertain. With our Q1 results and a view of the rest of the financial year, we change our revenue guidance, revenue growth guidance to 1.5% to 3% year-on-year growth in constant currency Operating margin guidance remains the same at 20% to 22%. Thank you. And with that, let me hand it over to Jayesh for his update.

Thank you, Salih. Good morning. Good evening, good evening, everyone, and thank you for joining the call today. We entered FY27 against a backdrop of a dynamic and evolving business environment, which is reflected in lower-than-expected volumes. Clients continue to prioritize investments in AI, modernization, cloud, and productivity initiatives, while remaining selective in discretionary spending. Our focus remains on disciplined execution, supporting clients' transformation agenda, and delivering sustainable financial performance. Q1 revenues were at $5082 million, increase of 1% sequentially and 2.4% year-on-year in constant currency terms. Acquisition contributed approximately 1.1% sequentially. Our AI revenue momentum is very strong, with AI revenues at 8.2% of our overall revenues, growing at a strong double-digit sequentially over the last many quarters. We are seeing strong traction across all six value pools with higher share of revenues coming from process AI, AI strategy and engineering, and data for AI. Q1 revenues growth was lower than our expectation, mainly due to one of 50 basis point impact on account of program termination by an EURS client during the quarter. This was not factored in the earlier guidance. Volumes were soft and weaker than expectations and also versus the historical Q1 trends. Additionally, client expectation on productivity along with high competitive intensity is resulting in softer increase in price versus our expectation. Sequential revenue growth was also impacted by higher offshoring to de-risk our business model along with lower revenues from a European manufacturing client, as I mentioned in the last earning call. Despite lower-than-expected growth, gross margins improved by 60 basis points sequentially. Operating margin improved by 20 basis points sequentially to 21.1%. Major components of the change are as below. Tailwinds of 70 basis points from rupee depreciation, 20 basis points from Project Maximus, 20 basis points net benefit due to amortization of cost on intangibles incurred in Q4, offset by impact of new acquisitions in Q1. Headwinds of 50 basis points from investment in AI sales and marketing, 40 basis points from one-time revenue impact arising out-of-program termination. We also had one-time cost benefit of approximately 30 basis points, which was offset by 20 basis points due to increase in various other expenses. Our tight focus on improving operational efficiency led to utilization, excluding trainees, improving by 1.9% to 84.9%. On-site mix, excluding new acquisitions, dropped by 30 basis points. However, including acquisitions, it remained flat. We expect OnsetMix excluding new acquisitions to reduce by 75 basis point to 1% over for the year. DSO reduced by 4 days sequentially to 63. DSO including unbuilt net of unearned was 76 days versus 78 in Q4. Headcount reduced by 500 employees after adding over 2,000 employees from acquisition. Attrition increased slightly to 13% versus 12.6% sequentially in line with Q1 seasonality. We plan to give salary hikes to most of our employees effective October, while the rest of the employees will be covered in January 27. We expect effective tax rates for the year to be in the range of 29 to 30%. EPS for the quarter stood at 19.19 rupees, up approximately 15% year-on-year. Q1 yield on cash investment balance was at 6.8%. Our balance sheet continues to be strong and debt-free. consolidated cash and cash investments were at $3.9 billion at the end of the quarter after returning more than $1 billion to the shareholders through dividends. Free cash flows were strong at $955 million at 116.5% of net profit. Large deal wins were strong at $3.6 billion with high net new of 61% reflecting the relevance of our value proposition. Out of the 22 large deal wins, we had three deals worth $400 million each. We have been on the positive side of vendor consolidation, with 20% of the total large deal CCV being from new vendor consolidation deals. Vertical-wise, we won five deals in financial services and communications, four in EURS, three in manufacturing, two in retail, one each in life science, high tech, and others. Region-wise, we signed 11 deals in North America, eight in Europe, and three in the rest of the world. Coming to verticals, In financial services, uncertainty and geopolitical instability is causing some clients hesitancy as spending patterns are taking a more cautious approach. Client priorities are centered on efficiency, productivity, and modernization, with discretionary spend being evaluated more carefully. We see momentum across banking payments, capital markets, and wealth management. AI adoption has been incremental and additive, with clients increasingly engaging us to support their AI journeys across strategy, platforms, engineering, and operations. This is reflected in our strong deal wins this quarter. With approximately $1 billion in large deal net new TCV, GCCs continue to expand, and we are partnering with our clients both in setup and growth of GCCs. Growth in manufacturing continues to be impacted due to lower revenue from a large client. Clients remain cautious on discretionary spend and decision-making is elongated, especially in European auto. The impact of tariffs, geopolitical uncertainty, and energy costs is keeping budgets tightly controlled. While AI adoption is creating new opportunity areas, it is also raising productivity expectations from clients. We are getting better pricing on AI skills and consulting. We remain focused on supporting clients through digital AI modernization and consolidation initiatives, while balancing growth opportunities with discipline, deal selection, and sustainable pricing. The QRA segment was impacted by one-off client termination, adjusted for which the growth was strong. Macroeconomic uncertainty continues to influence client spending patterns and decision-making timelines. Clients are driving business priorities, including cost optimization, operational resilience, productivity improvements, and regulatory compliance. Generative AI is emerging as a strong growth catalyst, driving process reimagination, and productivity initiatives. Our partnerships with hyperscalers and AI-native companies is allowing us to experiment and ideate faster. In retail and CPG, consumer spend remains muted and budgets are tightly controlled due to geopolitics, inflation, and tariffs. Spend is shifting towards AI modernization and productivity-led programs funded through operational efficiency and cost optimization. Clients are asking for AI-led productivity commitments leading to new pricing structures. We are leveraging our native knowledge of the client's business processes and technology landscapes and augmenting it with AI. Large deal pipeline is healthy, but decision cycles are longer. In communications, operating environment remains challenging as clients continue to exercise discipline on discretionary spending and closely scrutinize investment decisions. AI is reshaping spending patterns. Enterprises are increasingly prioritizing initiatives that deliver near-term gains. Telcom is undergoing significant transformation with consolidation and M&A with increased investments, especially for OEM. We remain focused on aligning our offerings to these evolving client priorities and helping enterprise realize measurable business outcomes. Considering lower-than-expected Q1 revenues and revised view of the rest of the year, we are revising our revenue guidance to 1.5 to 3%. This includes approximately 1.7% contribution from recently closed acquisitions of optimum healthcare and status, slightly over 1% impact from large European manufacturing clients due to reduced client spend along with our conscious decision to not pursue certain deals that were not aligned to our return expectations, approximately 0.75 to 1% impact from shift towards offshore. Overall business environments continue to remain volatile. Lower end of the guidance assumes further deterioration in macro. Top end of the guidance assumes an improvement in macro, though lower than what we had assumed in April guidance. FS and URS are expected to grow higher than the company average. The underlying fundamentals of our business remain strong. We continue to see healthy client engagements leading to a robust pipeline. We are taking decisive actions to capitalize on the opportunities ahead, especially on six identified AI value pools. Spending is shifting towards areas with clear business cases, such as AI-led modernization, cost transformation, cyber security, cloud optimization, and vendor consolidation. As we look at the rest of the year, we remain confident in our strategy, disciplined in our investments, and focused on delivering stronger performance. Margin guidance is maintained at 20 to 22 percent. This assumes headwinds from wage hikes, productivity pass-throughs, AI investments, and 50 basis point impact from acquisitions of optimum healthcare and status.

These handwinds will be partly offset by initiatives under project maximals and currency benefits with that we can open up for the questions thank you thank you very much we'll all begin the question and answer session anyone who wishes to ask a question may press star and 1 on the touchstone telephone if you wish to move yourself from the question queue you may press star and 2 participants are requested to use handsets while asking a question a kind request to all the participants, kindly use handsets while asking the question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.

Hi, good evening and thank you for taking my question. My first question was a bit of clarification around the guidance, especially the like-to-like guidance, what we had given last quarter versus this quarter. So if I'm looking at the new guidance that is at the midpoint suggesting 2.25% sort of a growth, which I understand you indicated includes acquisition of about 1.7%, so that would employ an organic growth of about half a percent or slightly higher than that, versus 2.5%, which was in the last quarter. So is that about two percentage point of cut at the midpoint in the guidance, or am I reading that wrong?

Hi, Kumar. So the last quarter would be, midpoint would be around 2.2% in the guidance, because as you say, as you remember, we had said, you know, 20 basis points was the status, which was already baked in in the guidance, which was 1.5 to 3.5.

Okay, got that. So in that case, like to like this time, it would be about 0.8 point sort of a number, excluding the incremental acquisition that we have baked in. Got that. And looking into the second quarter, given some of the impact that we have seen in this quarter with lower than expected volume and one-time client-related decision as well, how much of that you are expecting that to flow into second quarter as well, and how you are looking at the demand environment and the growth momentum?

You know, as you know, typically whatever happens in Q1, it will have a cascading effect in Q2, and especially if the volumes have been softer through the Q1 automatically, you know, it will have some impact on Q2 and therefore the rest of the year. That kind of largely explains the guidance change. You know, as I said earlier, the multiple reasons on the change in guidance is, First of all, one-off that we had in one of the URS clients, the volumes that were softer with the cascading effect, the ask of productivity from clients and increased competitiveness, competition in pricing that reflected in a lower than expected pricing this quarter, which will again have effect on the rest of the year. And as I had called out at the beginning of the year, we expect our onsite mix to be lower by roughly around 0.75 to 1%, which will have impact on a year-to-year comparison if you're doing. We had called out a European manufacturing client's impact between 0.75 to 1% last time, which is now clearly above 1% as we have progressed on certain other deals as well. So that is an additional headwind as well. So all of that is baked in in the revised guidance.

Thanks a lot, Jayesh, for that. Just one clarification around the one-time client decision which you spoke about. If you could give some context to that, that would be great. That's all from my side.

Thanks, Umar. So this is with respect to a client which has terminated a project in the EURS vertical.

Got it.

Thank you.

Thank you. Next question is from the line of Jonathan Lee from Guggenheim. Please go ahead.

Great, thanks for taking my questions. You know, you mentioned that softer volumes of pricing contributed to Q1 alongside the program termination and that the upper end of the prior guide had assumed macro stabilization that's not materialized. Can you walk us through how the quarter progressed relative to internal expectations, whether April, May, and June trended differently when the program termination was communicated to you and whether decision-making velocity and discretionary spend deteriorated or stabilized through the quarter? And what have you seen in the first few weeks of July that may inform your shape of Q2?

So, Jonathan, sorry, I wasn't very clear with the question, but from whatever I understood, the question is, you know, whether we saw the change through the quarter and, you know, the increase in volatility. The softness that we saw in terms of volumes was through the quarter. The one-off impact that we saw was mainly on account of a client termination, which happened towards the end of the quarter, and the additional deal that we talked about European client that was also towards the end of the quarter. So I think all of those factors reflected in the revised guidance, if that is what you're looking at.

And given your commentary on pricing, particularly around the competition, has been building for several quarters, and Maximus explicitly includes value-based selling. Why were pricing headwinds not more fully contemplated in the April outlook? What has changed over the last three months? Is the pressure concentrated in specific verticals or deal types or renewals versus the new? And what gives you visibility that pricing may actually stabilize from here?

Jonathan, we are not saying that we are not seeing a price increase. What I am saying here is we haven't seen as much price increase that that we envisage at the beginning of the year on on the back of you know the air productivity ask of the clients plus the you know intensifying competitive competitiveness in the market but we are still seeing the net increase in the pricing appreciate that clarification thank you very much next question is from line of God over a theory from Morgan Stanley please go ahead.

Hi, thank you for taking my question. My first question is on, you know, the multiple client-specific issues. One is the European Automotive that we highlighted last quarter, then this quarter on the EURS vertical. How should we think about all these, like, are completely disconnected issues and just happen to have, you know, take place at the same time coincidentally? Or there are certain common links which basically could be, you know, early renewals uh you know competitive pricing etc going on because of the technology change so just trying to understand how much of it is led by underlying changes in technology happening and you know driving clients to take these decisions and creating competitiveness in the market or is are they completely disconnected events there are two parts of the question one is the european manufacturing client that you talked about uh it you know we knew sudden certain part of the deals that we knew at the beginning of the year, which was in April,

and there were additional deals that happened in Q1 of this year. Both of these were the deals where we decided not to pursue the deals beyond a certain point because it did not make economic sense for us or commercial sense for us. And that's the reason. And that has nothing to do with, you know, the client behavior or, you know, in terms of AI, etc. The other deal is a contract where the client has terminated the contract for various reasons. Again, nothing to do with AI here. It's a termination of the contract and therefore, you know, a reduction in revenue.

Got it. My second question is on your margin outlook. I know that you maintained your outlook on the bank. But now that, you know, you have announced the wage hike for the second half for the company as a whole. So there will be incremental headwinds around that. So just want to understand what would be, you know, some levers that will help you to offset these pressures in the second half. And would it be fair to say that our aspiration will be to just hold on the margin level compared to the last year and this year?

So Gaurav, at this point in time, we have given a guidance of 20 to 22%. Let me say that at the outset, we are very confident of that guidance. Of course, as I had called out at the beginning of the year, we will have a headwind coming out from the acquisition that we have done in terms of amortization of intangibles and retention to the founders or the management team, et cetera, or the acquired entities. But we also have tailwinds coming from currency, coming from Project Maximus. As you see this quarter also, we've got 20 basis points of tailwinds from Project Maximus, 70 basis points of currency. So all of those are tailwinds. As we look forward, you know, as I said earlier as we're in the call, we will have 75 to 1% reduction in on-site mix. So that is the tailwind. So all of those are tailwinds.

Puts and takes of all of that put together, we are still very confident of uh you know maintaining our margin guidance thank you all the best thank you very much next question is from the line of abhishek from mohdelal aswan please go ahead uh yeah hi i'm audible yeah yeah yeah hi hi um so i think my questions on deal wins it does look like we've had a you know pretty decent quarter on deal tcv that new seems to be um decently strong as well as compared to historical levels but clearly that's not kind of trust you know translating into kind of you know guidance so um how's the tcv versus acv dynamic playing out um are we seeing extended tcv um sort of you know or extended 10 years right now which is leading to lower acv or are we seeing um sort of you know delayed ramp ups but but clients are still committing to spends that that will be very help you understand it with regards to the conversion of the deals that we are winning shake if you look at you know the deal typically the the terms of the large deals have not have not gone up they still remain between on an average between three to five years of course when you look at some of the mega deal the terms are could be longer but it's you know in the current year these we

have most of the deals which are you know not mega deals the deals that we They signed, you know, most of them were less than $500 million. We did have some deals between $400 to $500 million, three of them. What we also need to remember is whenever the deal comes up for renewal, we always used to have the additional productivity asked from the clients, which is how traditionally this industry has been. On the back of AI, there is a deflation, additional deflation on the AI-led deflation, as we call it.

So that's a headwind that's there. that's only on the large deal portion that's also there on the non-large deal portion so that that is what is uh getting offset by the net new business that uh that we are seeing uh understood and could you quantify the deflation if you can uh you know i know it's i mean it's not dynamic but just just a quantification of what the deflation entails will be helpful and lastly um how do we define ai led revenues um you know is this ai implementation or ai infused just a broad sort of sense of that will also be very helpful. That's all from my side.

Hi, this is Salil. On the AI land, and I'll come to the other one after that, I think what we are seeing on the AI revenues is these are revenues which are coming from the strategic framework we described at the investor day, which are the six areas that we see new growth, the new addressable market of $300 billion. For example, process AI, for example, making AI engineering strategy work, for example, data which is needed, the data layer for AI. And each of those six areas we see a good growth. This revenue is 8%, 8.2% growing double digit Q on Q over the last several quarters. and that's the primary AI revenue. Internally, we also look at AI revenue which you referenced like infused or augmented or where AI is and part of an existing work stream that becomes more AI. But this specific one that we shared externally is what we see from the AI strategy that we put together. On the quantification, we don't quantify that compression part externally, but we acknowledge, of course, there is the compression, and internally we track it to see how that works. Now, in many cases, when there is the compression, we typically, given the work we are doing with clients, have the opportunity to do more work in other areas, so the contract terms, scope, et cetera, gets redefined. And in many cases, we see adjacent to that other pieces of work, not related to that, which come through. So it's not easy to simply say like for like in many cases, but there definitely we see a compression.

Just to add to what you were saying, the AI-first revenue is everything that is around the hexagon. And AI augmented revenue is what we presented on the AI day also. That is not part of this. While we track it internally, that is still not part of this. So AI-first is everything that we do in terms of hexagon and the subservices that we called out at hexagon. We have a very robust process inside the company of identifying these as a child sub-project level. and tracking it and monitoring it. It is growing at a very strong double-digit growth.

Thank you, and that's all from my side.

Thank you very much. Next question is from the line of Ankur Rodra from JPMorgan. Please, go ahead.

I'm just curious to start with on the demand environment worsening, especially from AI productive pass-through demand that you've been getting. Can you talk about how secular this is across your industries and geographies? And how often do you see clients...

Ankur, sorry to interrupt you. We are losing your audio in between. Can I request you to please come in a better reception area?

Is it clear now? It's still breaking. Is it any better now?

Yes, go ahead.

Okay. Sure, thank you. So my question was on the worsening demand environment from an AI productivity pass-through perspective. How secular is this across industries and geographies? and how often do clients ask for productivity increases in the middle of a contract as opposed to on renewal?

Hi, this is Salil Ankur. I think what we are seeing is there is a demand for AI productivity which is across most industries. Now, if you look at where AI is most getting used, we probably see telcos, we see financial services, We see even on retail utilities, that's where their usage is pretty high, especially with the foundation models, the modernization, the coding tools. On the productivity side, it's a broad sort of coverage that we see. And it typically, at least in the recent past, has come up, you know, as there's progress made by the AI foundation model companies or there's a perception that that sort of a benefit can be achieved, the discussion starts. And, of course, at the renewal time, it's definitely there. Sometimes it does come in between the timeframe of the contracts renewal as well.

Okay, thanks for clarifying that. I just wanted to sort of follow up on AI revenues which have been doing at a very high pace like you've been highlighting. If we think this out a few years, at what size of your world portfolio do AI revenues have to be so that you can overcome the AI deflation of the compression in the rest of the portfolio? Any thoughts, right?

So we don't have a view in that sense externally on what you're sort of referencing. But I think if we are able to execute on this AI transformation as we have done in the last few quarters, we get this sort of a momentum. it's not that difficult to see that in the coming few quarters it will start to become more and more larger part of our overall revenue and that will drive the growth of the overall company if I go back to how we saw it, not that it's the same thing but there's some lessons maybe on the digital. We saw that there was a way that at one stage we were at 20% and then over a few years we then went to 60% of our revenue becoming digital. So if that sort of a path becomes followed, we can see a big sort of a transformation and a long-term sort of support to the view that what we are doing remains relevant in terms of services for our clients. now here there are strong partnerships with the foundation model companies there is extremely strong internal work on topaz fabric we are building things where clients can use multi-model scenarios within our topaz fabric where they can use different models for different types of work so the token cost is optimized we have a ability to provide a harness so that they can build what they want to build and keep the sovereignty of the data and like the knowledge of the company more within themselves so to me all of that points to that it's a nice growth area for the long term and we are now looking at at eight percent it's fairly sizable and we're looking at it becoming more and more sizable in the quarters to come appreciate it just one last clarification I would want to add is if

you remember in February we talked about you know I are a revenue which is five and a half percent for Q3 and in two quarters it's already become eight point two-person so you can you can imagine the rate at which it's going growing and you know it's even if you look at a longer five six quarter you know view it's it's going at a strong double digit and that kind of gives us a confidence that this is becoming our growth engine.

I appreciate it maybe there's one clarification Jayesh can you confirm that the program termination was fully absorbed in Q1 or will it have an impact in the second quarter also in from a sequential basis program has been terminated what we know has been you know it's obviously been taken in q1 at this point in time so no follow-through in q2 interpret under that program specifically what we know at this point in time has been considered in this okay thank you thank you very much next

question is from now Brian Bergen from TD Coven please go ahead hi thank you good evening and first just silly oh congrats to you and congrats to Ashish Dash. My first question is on AI talent and competition. I'm curious what your view is on hyperscale like AWS and Microsoft recently announcing new investment in their own FTE practices. Just considering their historic use of the services channel around cloud deployment, they seem to be a bit more surprising than OpenAI or Anthropic doing it. So what are your thoughts there? And you've announced plans to add 6,000 frontier engineers, but it seems everyone is looking to add that base of talent. So can you just talk about how you plan to navigate that elevated competition for top-tier talent?

So first, thank you. I think on the, you know, with other companies launching services, companies to help large enterprises with making AI work, But at a high level, I see that as a positive for Infosys because it reconfirms that what we do and now with the AI revenue growth that we are demonstrating, that we have sort of relevance for the long term for our clients. um what i what i think works for us is we have over 300 000 employees we have deep knowledge and context of the select clients that we work with and that becomes the way to really ensure that ai gets leveraged into that environment which is typically quite complex We are also in a position where we are partnering with some of the companies you named, and I've spoken with them as they have launched their programs, and the intent and the idea is really, in terms of scale, a few hundred or a couple of thousand is not going to be the same as 300,000 from Infosys. but there is a way to partner and make all of that work for the benefit of the client. That's how at least we're looking at it for now. And the similar type of models existed, as you probably know well, in the past when there were software companies which had their own small services businesses. In terms of talent, first, we have already people within Infosys who are operating at the level of frontier engineers and so we have put together a program to bring all of that together to make them at the same type of a global level then we have training for the people that we will recruit and build out to be like that frontier engineers and then of course we will look externally but the primary method is recruitment in college training and taking internal people who are doing some of that type of work and making sure they're fully deployed into the frontier engineer work. So we feel that we have a decent start to it. It's not that we are going to tomorrow morning recruit 6,000 from the outside. But equally, we also have, as has been always the case with Infosys, the approach of training the people from ground up, so building out that skill set, which is slightly longer, and that's why I've sort of said it's not, you know, it's over a few years, you want to build it out and make sure that we support our clients in that.

Okay, okay, that's clear. My thoughts on AI productivity, can you just give us a sense of how much of your existing backlog has been repriced under the higher levels of market productivity? I'm trying to understand how long the company may face outsize compression as you renew the install base of work where there wasn't any meaningful gen AI driven efficiencies before so as you can imagine it's something we look at internally but it's not something we share externally understood thank you thank you very much next question is from land of web or single from nuama please go ahead yeah hi uh thanks for taking my questions

uh just two questions from my side uh one question uh salil on the uh basically the overall uh environment in which we are operating uh some of our peers have kind of called out and i think it's kind of what is also the concept which is getting traction is that more and more belief that enterprises might not just basically look to deploy the premier large language models for their enterprise needs and they might be now more going more towards more like customized small language model the slms uh before which can be basically cater to their own specific needs and to that extent more and more deals and largely specifically are basically uh basically uh come

making their way into the market uh towards the players uh is that also right is that also that we are also seeing upon our you know conversations with the clients uh do we see some of those kind of deals on the horizon and uh do you see that basically playing out over the next few quarters there uh i think the way you describe it what we are seeing it is the large companies large enterprises are becoming more sensitive to what is a foundation model like best equipped for and for the various tasks and activities and processes that they have inside their company which model should be used for which thing can we use like a company might think like a less parameter model also less expensive model like an even an older version of some of the big company models for some tasks and the most recent one for like some very specific let's say high-end type of tasks which needs it so that that optimization is going on and that's where we think what we have built in topaz fabric allows the company to do this in a very efficient way then it also looks at companies also looking at okay i will use for the simpler task a slightly older model or less expensive then let me also then look at the cost of token usage for that model and even there there's a way for the same effectiveness you can get a lower token cost approach in a model so this whole approach of this multi-model is critical for the task and the cost at least we are seeing the large companies are being sensitive to that and that's where what we have built and how we can work with them so today we are working in fabric topaz with 15 different models so let's say you come as a large company global 100 when you want to do something you don't even have to decide by looking at the task we will decide between the 15 where to put it and give you the most efficient outcome so those are things like that will help the companies to do the things in a better way we feel it got it got it so overall this should basically i mean if i were to next let's take a uh a top view of this this would mean that there is an increasing level of customization that or let's say a specific requirement that each client would require rather than more of a standardization to begin with it depends also a little bit like some companies might see this is available but some companies might take a look i want model x i want to build deep capability in that model x like a company x will have three models they can go with an older model in the company X. So, you know, it's not like there's one answer, meaning people are all doing different things, but the flexibility exists today. So depending on how a company wants to do it.

Got it. Got it. Just one last question on the margins front. Jayesh, if I could just bother you on that. In FI 26, we had the wage hike, which was spread over Q4 FI 25 and Q1 FI 26. So we just probably had a basically half of the impact of the wage hike in FI 26. In FY27, we are going to give the wage hike in Q3 and Q4, so the entire impact is going to be absorbed by in this year itself, plus we have the acquisition impact which you called out in the call. So, are we looking at more headwinds this year on the margins than FY26? I know we are in the same guided range of 20 to 22%, but vis-a-vis FY26, are we looking at more headwinds than FY26?

So, Vibor, if you look at FY26, we had a full year impact of the wage hike that we we gave in January, as well as in April, right? Of course, whatever we gave in January, the flow through of that was for three quarters, but whatever we gave in April, the whole full-year impact of that came in the year. Versus in FY27, we have only half-year impact of whatever we'll do in October, and one-quarter impact of whatever we'll do in January. So to that extent, the relative impact is going to be lower in FI 27 versus FI 26 and of course there will be a 50 basis point impact on on account of the acquisition that we have called out but if you look at the tailwind that I called out there is a currency tailwind at least as we stand today versus the last year the project maximum system creating value we have seen pricing benefit a little bit lesser than what we uh estimated at the beginning of the year uh utilization has gone up uh quarter and quarter significantly our on-site mix is going to go down so i think there are uh puts and takes on both

sides got it got it got the map uh thanks a lot for taking my questions and thank you thank you very much next question is from land of pacman from bmo capital markets please go ahead good Good evening.

Good morning. I wanted to ask about your thoughts on headcount growth trends through FY27. And I'm not looking for specifics, but just generalities. Is headcount going to grow, be flat, reduce as you look at the next 12 months? And even if you opined on the next few years, how do you see the headcount growth in relation to revenue growth?

Hi, this is Salil. So first, what we saw in the last financial year, as you know, is we recruited 20,000 college graduates for the full year. This year, we have a plan to recruit 20,000 college graduates. In the first quarter, we have recruited over 4,000 already. our plan is to continue to bring in talent make them more and more AI well-versed and then have them work with our clients what we are seeing with the 8% revenue of the AI is that to make many of these things work it's a combination of foundation model agents and people of course there's more efficiency so the same amount of work can be done maybe with fewer people but there's more work so overall at least right now we are seeing that we don't have an exact external view on the end year headcount but we continue to look at recruitment we think it looks like it'll be part of you know the headcount will be part of our future as our revenue grows as well Okay, okay.

It'll be interesting to see how, I understand the recruitment process, it'll be interesting to see how your net headcount trends unfold. Can I go to the dislocation? You talked about 20% of your CCV was vendor consolidation deals. Could you provide some context on really the economics associated with those deals? What I mean by, you know what was the leverage that enabled you to win those deals in particular you talked about price was a little more aggressive uh this quarter how were pricing trends during the dis enabling you to win those deals just any any kind of attributes that you could throw out uh you know such as was it more competitive or was price downs anything along those lines I'll start and Jayesh will add a little bit more to it.

What we saw in the reasons for winning a consolidation deal, typically what we are noticing is there's a complex tech environment and the clients are seeing that what we have done for them over the past in terms of delivering value is very significant, more reliable. And that's typically when we are the beneficiaries of the consolidation deals. In terms of pricing for those specific deals, there's always productivity benefits because that is in the nature of the discussion in this period. But the reason primarily for the wins are more about the depth of delivery, understanding of technology.

Just to add to this, what Sanil said, you know, on an aggregate level, all of these consolidated deals came at a very healthy margin, even when you compare to our overall large deals portfolio. As I said earlier, we will compete aggressively in the market, but we are not going to underwrite uneconomic productivity assumptions. And in those cases, we would prefer to not pursue those deals further when it doesn't make economic sense to us.

Thank you. Next question is from the line of Jamie Friedman from Susquehanna. Please go ahead.

Good evening. So, well done piloting the company in ASH. We look forward to working together.

I had a bigger picture question back to the strategy hexagon.

I'd be interested in your perspective on the supply side, what sort of re-skilling does that require? And on the demand side, Sulila, you mentioned what you're finding is resonating most, obviously it's performing well. Is there anything, though, that needs to be adjusted? So supply and demand question about the strategy hexagon, thank you.

Thank you for that. On the supply side, first, we have taken a view, and I'm sure you know that, we have not done any staff restructuring in the company. we have done essentially all reskilling and that is a significant work for the company but I think we see a benefit of that over time what we are seeing is and as another reason for doing the college graduate hiring because what we see from colleges up, people coming in with a lot more native understanding of the AI landscape and the tool set. And then building, like training them on our fabric and topaz is the next step after that. And also training them on our tools, which are pre-AI, so that they have a sense of how software development works. So we think we will be able to manage a lot of that supply side with the people we bring in. But there are also specialized things where there will be some accelerations needed when a specific tool is very much in demand. And for that, of course, we have some recruitment, which is more lateral as well. Even there, we need a little bit of reskilling or training, but not massive. There's good understanding. But that, of course, is in short supply. So we will still rely more heavily on the bringing in from college training, which by design is a longer duration process. On the demand side, we are now tracking each of the six areas pretty granularly, as Jayesh mentioned earlier. We have good traction on the process AI side. It's going pretty well. on the AI engineering is going pretty well meaning in terms of scale all of them are growing very fast but those things are pretty scale already the data AI part is going pretty well and so you know the whole work of building agents doing the coding doing the modernization doing the data those things are really scaling up meaning have a decent scale today and we think those will continue going pretty well.

Okay, thank you. So I'll drop back in the queue.

Thank you very much. Ladies and gentlemen, we'll take that as our last question. With this, I now hand the conference over to the management for closing comments.

Thank you. So first, thanks everyone for joining. A couple of points to summarize from my side. Overall in the quarter, we had neutral revenues, strong margins, strong free cash flow, and very strong large deals the more critical thing ai services revenue eight percent growing across quarters q on q double digit and becoming more and more of scale for us and showing us therefore that there's a long-term relevance of what we are doing for our clients and that gives us a tremendous benefit given the client connects that we have across the different industries and across the different markets. So thank you all for joining in and we'll catch up at the next quarterly call.

Thank you very much. Members of the management and ladies and gentlemen, on behalf of Infosys Limited, that concludes this conference call. Thank you all for joining us and you may now disconnect your lines. Thank you.