Infosys Shines in Q2 with 1.5% Revenue Growth and Strong AI Performance

Infosys, the Indian multinational consulting and outsourcing company, has reported a solid performance in its second quarter of fiscal year 2026-27. Despite a challenging global economic environment, Infosys has managed to achieve revenue growth of 1.5% year-on-year and 1.2% sequentially in constant currency terms.

The standout performer for the company was its AI business, which accounted for 10.5% of total revenue and grew by an impressive 29% sequentially. This represents a significant increase from last quarter's 8.2%. The company attributes this growth to its differentiated market positioning and client confidence, as well as its deep investments in Topaz Fabric, which enables clients to seamlessly navigate between AI models and optimize tokenization.

Infosys also reported strong large deal performance, with two mega deals worth over $3 billion being executed during the quarter. One of these deals was a seven-year contract worth over $2 billion with a large international company, while the other was a one-year renewal valued at $1 billion. The company's large deal pipeline remains healthy, with several other mega deals in the works.

Operating margin was stable at 21%, and free cash flow was strong at $922 million for the quarter. The company's CEO, Salil, attributed this performance to its ability to navigate the shift towards AI-driven enterprise transformation, saying "As enterprises adopt AI at scale, another quarter of strong growth in AI revenues is a recognition of our differentiated market positioning and client confidence."

Infosys also reported that it has continued to gain market share, especially where economics aligns with stakeholder interests. The company remains the preferred AI strategy and deployment partner for its top clients, citing its unique ability to navigate between different AI models through its Topaz Fabric.

In terms of guidance, Infosys has revised its revenue growth forecast to 1%-2% year-on-year in constant currency terms, citing softer Q2 performance and increased uncertainty. Operating margin guidance remains at 20%-22% for the year.

When asked about the impact of salary hikes on margins, CFO Jayesh Sanghrajka noted that pricing pressure and competitive intensity have resulted in a softer volume and higher ask on productivity, which are factors baked into the revised guidance.