The company has revised its revenue guidance for FY26 upwards to 3-3.5% in constant currency terms, while margins estimate was retained at 20-22%.
“Infosys delivered a strong Q3 performance demonstrating how our differentiated value propositions in enterprise AI, through Infosys Topaz, are consistently driving higher market share,” said Salil Parekh, CEO and MD.
During the quarter, Infosys incurred an exceptional item to the extent of Rs 1,289 crore due to the impact of labour codes. In constant currency terms, revenue increased 1.7% YoY and 0.6% QoQ.
Operating profit during the quarter fell to Rs 8,355 crore, down 6% YoY and 10.7% sequentially. Consequently, the operating margin narrowed to 18.4%, compared with 21.3% in the December quarter last year and 21% in the September quarter.
The margin contraction highlights the impact of labour codes, higher sales-related costs and investments in new developments.
The company clocked TCV (total contract value) of large deal wins at $4.8 billion, with net new of 57%.”Clients increasingly view Infosys as their AI partner with demonstrated expertise, innovation capabilities and strong delivery credentials. This has helped them unlock business potential and enhanced value realization,” said Salil Parekh.
Free cash flow generation at the end of December quarter was at $915 million. Adjusted free cash flow generation was $965 million, 112.8% of adjusted net profit.
“Our performance was broad-based in Q3 with 0.6% sequential revenue growth, 0.2% adjusted operating margin expansion, stellar large deal wins at $4.8 billion and robust adjusted free cash generation at $965 million in a seasonally weak quarter” said Jayesh Sanghrajka, CFO.
Infosys’ largest revenue contributor financial services, reported 4.8% growth in the quarter and 3.9% in constant currency. Manufacturing revenues grew 10.8% in reported terms and 6.6% in constant currency.
Growth in energy, utilities, resources and services was muted with 1.3% reported growth and 0.5% constant currency growth. Revenues from retail declined 3.8% in reported terms and 5.5% in constant currency, as global retailers remain cautious on technology spends amid weak consumer demand in key markets.
Meanwhile, the communication segment delivered strong growth of 11.6% in reported terms and 9.9% in constant currency.
On a year-to-date till December basis, revenues grew at 3% YoY in constant currency and reported IFRS operating margin was at 20%.
The exceptional cost of Rs 1,289 crore recognised from Infosys during the quarter comes in the wake of a similar hit seen with peers TCS and HCL Tech. Both these companies have also reported declining profits in the third quarter.
Global brokerage Jefferies had warned that the rollout of India’s new labour codes could erode IT companies’ profits by as much as 10–20%.
On Wednesday, Infosys shares closed 0.8% higher at Rs 1,608 on NSE.