INFY

Ladies and gentlemen, greetings and welcome to Infosys Limited Q4 FY 2026 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 Mahindroo. Thank you, and over to Mr. Mahindroo.

Thanks, everyone. Welcome to this earnings call to discuss Infosys Q4 FY 2026 financial results. Joining us on this call is CEO and MD, Mr. Salil Parekh, CFO, Mr. Jayesh Sanghrajka, along with other members of the leadership team. We'll start the call with some remarks on the performance of the company. Subsequent to which, we'll open up the call for questions. Please note that anything we say that refers to our future outlook is a forward-looking statement that must be read in conjunction with the risks that the company faces. A complete statement explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I'd now like to pass on the call to Salil.

Thanks, Sandeep. Good afternoon, good evening, good morning to everyone. Thank you for joining in. We delivered a strong performance in the financial year 2026. We had a growth of 3.1% for the full year in constant currency terms. Our Q4 revenue growth was 4.1% year-on-year in constant currency terms. We had strong growth in financial services, in the communications industry, in manufacturing industry, and for the Europe geography for the full year. Large deals were strong. For the full year, we had $14.9 billion of large deals. This is a growth of 24% over the prior year. For Q4, we were at $3.2 billion. A strong showing for the quarter. We shared our AI strategy during our AI Investor Day a few weeks ago.

We see a large addressable market for AI services across six areas: AI strategy and engineering, data, process, legacy modernization, physical AI, and trust. With our Topaz Fabric platform for AI, our Cobalt for cloud, we have differentiated capabilities to serve our clients across the six areas of AI. Some examples of the work we are doing for a consumer products retail company, Ralph Lauren, we helped build a conversational and personalized AI tool that led to converting customer interest into a shopping experience. This resulted in an increase in their revenue by 12% and customer engagement by 50%. For a large transport company, Hertz, we helped with a legacy migration to bring 3 million lines of COBOL code to a modern microservices environment using AI foundation models. The cost was 60% lower. The timeline was 60% quicker than how they would have done it without AI.

For a large energy company, BP, we deployed 50 AI agent initiatives across trading, supply chain, sustainability, and core operations to transform the software development, knowledge automation, legacy modernization, and digital decision support. This resulted in 95% payment accuracy, 50% faster contract validation, and 18% improvement in IT operations efficiency. We have strategic collaborations with emerging foundation model companies such as Anthropic and OpenAI, which help us support our clients' transformation for software development, legacy modernization, and agent building. We also have established strategic AI collaborations with Google Gemini, NVIDIA, Microsoft, AWS, Google Cloud, and Intel, among others. We've deployed over 30,000 deployer developers on GitHub Copilot. As we look ahead to financial year 2027, we see large opportunities in AI services, continued competitive intensity, and AI productivity impact.

With a clear AI strategic roadmap and real-world toolkit of Topaz Fabric, we are well positioned to support our clients' transformation technology and operations objectives. Our revenue growth guidance for financial year 2027 is 1.5%-3.5% year-on-year in constant currency terms. We expect acceleration in growth in financial services and the energy utilities resources services vertical from financial year 2026 to 2027. We expect H1 to be stronger than H2, consistent with our normal seasonality. Our operating margin guidance for financial year 2027 is 20%-22%. With that, let me hand it over to Jayesh for his update.

Thank you, Salil. Good morning, good evening, everyone, and thank you for joining the call today. Financial year 2026 performance demonstrates our ability to maintain financial discipline and operational excellence in a challenging and evolving business environment. Client spending is guarded with greater focus on cost optimization engagement as against growth-led transformation programs. We are seeing increasing momentum in AI-driven initiatives, particularly around productivity, automation, and platform-led modernization initiatives. Let me start with the key highlights for the year and the quarter. FY 2026 revenues crossed $20 billion and grew 3.1% in constant currency terms within the upgraded guidance band given in January. This was after lower third-party costs, which was down by 1% as a percentage of revenue and 0.7% reduction in on-site mix. Acquisitions contributed about 70 basis points on full-year growth.

For FY 2026, communications, manufacturing vertical, and Europe geography grew more than double the company average, led by ramp-up of the large deal wins. Additionally, FS and EURS grew above the company average in constant currency terms. Volumes for the year were flattish. Growth was led by increase in realization, thanks to Project Maximus. Adjusted operating margin was stable at 21%. Gains from currency and Maximus were reinvested in talent, AI investment and sales and marketing. Q4 revenues grew by 4.1% year-on-year. Sequentially, revenues declined 1.3% in constant currency due to seasonality and slower decision-making in the month of March. Growth in Q4 was broad-based across major geographies. Communications, EURS and LS verticals grew well above the company average on a year-on-year basis in constant currency terms. Q4 operating margin stood at 20.9%, down 0.3% sequentially, adjusted for the labor code impact in Q3.

On-site mix further reduced to 22.8% from 23.1% in Q3. Utilization, excluding trainees, was 83% in Q4 and 84.4% in FY 2026. Utilization, including trainees, was at 81.1% for FY 2026, reflecting the investment made towards creating future capacity. Strong focus on collections aided by technology interventions helped us reduce DSO, including unbilled net of unearned to 78, which is the lowest in seven years. Reported EPS in INR terms grew 23.8% YOY in Q4 and 11% in FY 2026. EPS adjusted for income tax orders and the labor code grew double digits for the year at 13.9% in Q4 and 12.1% for the full year in INR terms. Free cash flow adjusted for the labor code and income tax refunds stood at INR 33.5 billion for FY and INR 882 million for Q4.

Adjusted free cash as a percentage of net profit continued to be well above 100% at 106% for FY 2026 and 111% for Q4. We had a strong large deal wins in financial year with a TCV of $15 billion with 55% net new. Large deal pipeline continues to remain strong. Our $50 million-plus clients increased by three, and $100 million-plus clients also increased by three, $400 million by two in financial year last year. Headcount at the end of the year was over 328,000. Voluntary attrition reduced by 1.5% to 12.6% for the year, reflecting continuous toughness in our interventions towards talent retention. We onboarded more than 20,000 freshers in FY 2026 and expect to hire a similar number in FY 2027. We will continue to calibrate the overall requirement depending on growth expectations and attrition trends. Operating margins for Q4 declined by 0.3% to 20.9% sequentially.

Major components of the changes are as below. Headwinds of 50 basis points impact from past acquisition on account of additional amortization of intangibles. 30 basis points for normalization of last quarter's one-off gain. 20 basis points from compensation-related costs offset by lower variable pay. This is partially offset by tailwinds of 40 basis points for currency and 30 basis points for Maximus, comprising of value-based selling, lean and automation and critical portfolios. Q4 yield on cash and investments balance was at 6.2% and 6.7% for the year. ROE stood at 31.6%. Consolidated cash and investments were at $4.5 billion after returning over $4 billion to shareholders in FY 2026, reflecting our strong cash generation. We signed 19 large deals during the quarter with TCV of $3.2 billion.

This includes five each in financial services and manufacturing, four in retail, two each in life science and communication, and one in EURS. Region-wise, we signed 11 deals in Europe, five in America and three in the rest of the world. In FY 2026, we signed 96 large deals with TCV of $15 billion, 55% net new. This includes three mega deals for the year. Tax rate for the quarter is lower due to reversal of prior year tax provisions as a result of favorable tax orders. We expect effective tax rates for the Financial Year 2027 to be in the range of 29%-30%. In line with our capital allocation policy, board has proposed a final dividend of INR 25 per share, which will result in a total dividend of INR 48 per share, an increase of 11.6% over last year once the final dividend is approved by the shareholders.

Coming to verticals. Financial services for FY 2026 grew above company average at 4.4%, led by ramp-ups of large deal wins and continued momentum in AI-led transformation, legacy modernization and vendor consolidation. Overall market sentiment remains positive, resulting in continued consumer spending across U.S. banking, capital markets, and Europe. FY 2026 budgets are expected to grow in U.S. We signed a large GCC deal for a regional bank in the U.S., an industry first and a large AI first GCC deal. We are strategic AI partner for 18 out of the top 20 clients in this vertical. Significant large deal closures and a new account opening in FY 2026, along with a strong large deal pipeline, will drive growth acceleration in FY 2027. Clients in manufacturing remain cautious amidst softer demand, particularly in automotive and parts of Europe.

There is continued uncertainty on account of tariffs and ongoing Middle East conflict, which is resulting in delayed decision-making in pockets. Discretionary spending remains constrained while clients prioritize cost optimization and operational resilience. Large deal pipeline comprises infra outsourcing, AMS, S/4HANA rollouts, etcetera. Near-term and FY 2027 growth will be impacted due to low revenue from one large client. Across the EURS segment, demand environment remains constructive, supported by a strong large deal pipeline. Clients continue to prioritize cost reduction and operational efficiency, which is driving vendor consolidation. In energy, we see increased outsourcing leading to healthy deal momentum. Utilities demand is structurally higher, driven by grid constraints, renewable integrations, and accelerating electricity needs for data centers. 80% of the large deal TCV of FY 2026 was net new, which will help growth and acceleration in FY 2027.

In retail segment, clients are operating in continued uncertainty from supply chain disruptions, geopolitical conflicts, and shifting trade policy. Consumer demand remains muted across the sector and budgets are tightly controlled with discretionary spend under pressure. Clients expect saving from AI-led productivity to do more with the similar budgets. We will see higher demand for AI-assisted legacy modernization. Topaz Fabric and AI Next platforms are helping clients in ideation from concept to deployable stage with the right guardrails for privacy, ethics, and controls. In communication sector, growth for FY 2026 was led by large deal ramp-ups. Overall environment remains cautious amid macro uncertainty and margin pressures for clients. Budgets are flat to negative, which is impacting discretionary spend. Non-discretionary spends are selective and increasingly AI-led. There is a shift from generative to agentic AI with clients consolidating IT and BPM cuts.

We see a strong uptick in AI deals in areas like IT operations, software replacement, and mainframe migration. As we enter FY 2027, we continue to see a measured and selective approach to enterprise budgets amid macro and geopolitical uncertainties, higher interest rates, rapid technology shifts, and high competitive intensity. We expect FY 2027 growth to be 1.5%-3.5% in constant currency terms. The FY 2027 guidance includes contribution from Seterus, which we closed earlier this week, but excludes Versent JV and Optimum Healthcare acquisitions that are yet to be closed. Reduction of 0.75%-1% due to a lower revenue from one of our large European manufacturing clients. This was due to reduced client spend on account of challenging macro environment, along with our conscious decision to not pursue a certain deal that was not aligned to our return expectations. Further reduction in onshore mix by 0.75%-1%.

We expect third-party costs for FY 2027 to remain at similar levels as FY 2026. Our operating margins guidance for the year is 20%-22%. This assumes headwinds from wage hikes, productivity pass-throughs and AI investments offset by initiatives under Project Maximus. The impact of Optimum Healthcare strategy on operating margin will be approximately 0.7% on a full-year annualized basis post-closure. With that, we can open up for the questions.

Thank you very much. We'll now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. First question is from line of Yogesh Aggarwal from HSBC Securities. Please go ahead.

Yeah. Hi. Just couple of questions. Firstly, Salil, can you talk about the push-pulls for the guidance, like at the lower end, at the upper end, what are you assuming? Secondly, you guys had a very successful Project Maximus. The quality of business, the revenues has also improved. But the entire INR depreciation, which is very significant, has not impacted the margin outlook. I was just curious which are the areas where all the INR depreciation has been invested and if you can talk a little bit about that. Thank you.

Yogesh, this is Jayesh. At the lower end of the guidance we have assumed higher deterioration in the environment and at the upper end we have assumed improved environment, similar to what we've done in the last year as well. In terms of margin work, I did give you a broad margin work, but largely we have invested all the benefit that we got from Rupee as well as from Maximus back into the business, whether it is sales and marketing cost, which has gone up by 40 basis points on a full year basis, the AI talent and the AI partnerships, etcetera, that we have. I think all of that has been absorbed in the margin in the financial year.

Just a quick follow-up. You mentioned productivity pass-through impacted margins. I was just wondering why should that be the case if there was productivity improvement?

Yogesh, market is competitive, right? As I said, the competitive intensity in the market has gone up and the productivity will get passed back to the client largely.

Thank you.

Thank you. Next question is from the line of Ankur Rudra from JPMorgan. Please go ahead.

Hi. Thank you. I noticed you've chosen to guide in a 200 basis point band, versus a slightly wider band in the last couple of years. Is your visibility better this year versus the last few years? Furthermore, if you can dig a bit more into the guidance, as a follow-up to the previous question. You're guiding for a 2.25% organic at the midpoint approximately, which appears to be a bit of a slowdown versus the 2.5% or 2.4% organic in FY 2026. Can you maybe talk about what are the puts and takes of the outlook? If you can especially elaborate on if the slowdown is because of, A, demand environment, B, structural AI deflation, or C, the impact from that one large account which is ramping down this year. Thank you.

Yeah. Ankur, if you look at the guidance, last year, we gave a three-point guidance because the whole environment changed pretty much very close to the time when we were giving guidance, right? We had very little clarity in terms of how that environment changed because on the back of tariff changes is going to impact the client behavior, etcetera. Where we stand today, I think there is a better clarity in terms of what's happened. The environment has been like this for last few quarters, and we know how clients are behaving, at least at this point in time. Of course, if things change, the client behavior will change. That's given always. At this point in time, from a comparative perspective, we have a better clarity and better handle, versus the last year.

Ankur, on the construction of the guidance, what we are seeing positive, where the changes are. Jayesh mentioned many of those points. I'll elaborate. We are seeing the growth on AI services. We are seeing very good traction on that. We've started a program where we are working with large companies with a smaller footprint that Infosys has. We're expanding that quite nicely. We saw the large deals, the net new was 55%, so that will contribute for this financial year, in a significant way. On the other hand, there is the productivity benefits that are coming through, which our clients are looking for with AI on the existing portfolios. Jayesh shared a couple of situations with manufacturing Europe, with onsite mix, sort of some technical factors. Those, if I sort of add and subtract, is where we came on that guidance.

The environment I find is good. Our large deals pipeline is good. The way we had done it on that AI Investor Day, we had sort of said, look, there's a growth side with what will be the AI. We have a couple of other growth drivers. There's the compression side, and that's the balance that we are seeing. In the past year with 3.1%, and if you adjust for the one-timers from the prior year, we had a growth rate which was more than the compression we were seeing. This coming year, the guidance that we have started with also sees that. We'll see, as Jayesh said, on the environment, how it changes, improving or not improving, and then see how the year goes after that.

Thank you for the elaboration, Salil Parekh. If I could, just a quick follow-up. What would need to happen for you to see an acceleration at the midpoint on an organic basis? Thank you.

These are things which are always sort of more difficult to estimate, as you know well, Ankur. However, the view emerging is that the situation in the Middle East may find some sort of a good outcome resolution. The underlying economic trends are pretty good in the markets where we are large. That could give rise to a more stable macro environment. Our AI traction and partnerships are good. If those things, the first and the second accelerate, then we will see some good outcomes. It's more of going in. We see the environment today, we've not seen some big change to give us a view that we have to do a three-point range and so on at this stage. Overall, we see growth which is more than compression.

Appreciate it. Thank you.

Thank you. Next question is from the line of Bryan Bergin from TD Cowen. Please go ahead.

Hi. Thank you. I wanted to ask on the AI productivity that you're seeing here. With the AI model advances happening as fast as they are, has the amount of productivity during compression that you're seeing changed in the current contracts relative to what you may have been seeing, say, one or two quarters ago? And can you dimension maybe the mix of the business that is directly exposed to the productivity pass-throughs versus maybe the mix of the business that is more insulated?

On the first one, the models are and the technology is moving with great innovation. We have not seen in one or two quarters the change that you referenced, though what we are seeing is the competitive intensity is pretty high. Every now and then, we see a competitor doing something which looks outside the range of what we think the models can do today. That sort of thing we do see. Not that there's just an attack in the last two quarters. Meaning over the last two years, of course, there have been changes. In terms of exposure, I think we have not shared that data, but I think we've shared very clearly what our service line data is, and so you can make some estimates with that, I think.

Okay. Then my follow-up is on kind of how you're thinking about the overall business and headcount. Like hiring intentions for fiscal 2027, I think I heard you say roughly targeting the fresher target of around 20,000 again. Do you envision a scenario where, I guess, the total headcount could ultimately be down in total when the year is over? Also, if you can help talk about the subcontractor intensity that you're anticipating in the year ahead.

On the overall headcount first, as you pointed out, we will recruit 20,000 college graduates. That's our plan today. We have a model which does some of it at one particular time and the rest of it throughout the year. We have a variability built in if we see some changes. What we see today, we think 20,000 looks like a good place to start. We still have, at least now if I look out for this quarter, next quarter, very good demand for people which are coming at higher levels, lateral recruitment. I think that will continue. I don't see that our headcount is going to be less. We don't have a plan that the headcount will be less at the end of the year.

Now we'll see how the demand environment plays out, but it's not the going in sort of a view that we have. Of course, we basically look at Q1, Q2, and the rest we build out on the models we have.

Subcons.

Yeah. The Subcon, Bryan, if you look at last few years, you know the Subcons as a percentage of revenue has come down. Obviously, it's also a factor of the growth. Typically, we use Subcons to meet the demand which comes in immediately. We don't have the requirement skills, etcetera. We backfill that through the employees, and that's a cycle that goes on. We don't really expect Subcons to significantly change from these numbers. Over a medium-term period, we expect to maybe go towards the lower end. I mean, to slightly go down from the current level, but at this point in time, not significantly change.

Okay, that's helpful. Thank you very much.

Thank you. Next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.

Hi. Thank you for taking my question. My first question is on the construct of growth. When I look at that, there are broadly three factors that comes to my mind. The first is the macro. Compared to last year, it appears that the headwinds related to tariff, etcetera, are not there. There is slight improvement, which is reflected in 40% of your portfolio that you talked about. The second factor is AI services, which probably has become larger than the last year and growing faster, which again, is a tailwind. The last factor could be the deflationary impact on existing business on account of productivity savings. The fundamental question is that the first two tailwinds look better than last year, and the growth rates in organic terms does not look better at the midpoint of guide.

Is it that the deflationary impact assumed in your guidance at the midpoint is slightly higher than what you have seen in the last year?

Hi, Gaurav. This is Salil. I think what you described is the way it starts off, which is we see very strong activity on AI services. On the macro, as the year progressed last year, the situation of the tariff got better and better understood, as you know. When the war started, that again had a little bit of a constraining effect on the macro. There's a general view that there's coming to a resolution, but it has not happened. While some of the economic indicators are forecasted in a better way, it's not yet into the system in that sense. We'll see when it actually comes in.

If you look at the couple of things that Jayesh shared on the specific, on the manufacturing Europe, on the on-site mix, when you put all that together, we see actually something which looks stronger in that sense to what we saw last year. Now, the compression is definitely there, but it's not. I don't know if I have a sense that it's more than last year. We are definitely seeing the compression, but we're also seeing the growth, and that's how we are sort of dissecting it, if you will. Jayesh might add something there.

Also, Gaurav, maybe a couple of points in addition to what Salil said. If you look at last year, we started with 0%-3%, and as the visibility improved, every quarter we either tightened the band or improved the guide from where we are. Right? The idea of guidance is to reduce the asymmetry and provide a view as to what we see today. This is what we see today. We do have a client in manufacturing in Europe where we have stayed away from a deal where it did not meet our return estimations. There's some ramp downs on that client happening because the client is going through a challenging macro environment. That is baked in. We have also baked in the onsite mix that will impact in the guidance.

The exit trajectory of onsite mix is already pretty much 40-50 basis points from the future year perspective. That is baked in the guidance already. The resultant is 1.5%-3.5% guidance that we have announced. Of course, if the visibility improves as we go through the year, we will redo the guidance.

Thank you for the detailed answer. The second question is on the new AI services. Would it be fair to say they come at a relatively higher revenue productivity than the core business and also better gross margins or not? Lastly, Jayesh, any color on when would the wage hike cycle kick in during the current financial year? Thank you.

Gaurav, we have seen generally the AI projects come at a better pricing and therefore it reflects in a better margin. Of course, it also has a higher cost compared to the regular projects because the talent is a premium talent at this point in time, right? It's always a factor of how much ahead of the curve you are in terms of benchmark and that's what will define the premium that you'll get in the market, right? If you are at the benchmark level, you wouldn't get a premium. If you are ahead of the curve, you do get a premium. At this point in time, if you look at the numbers in terms of deals that we are winning, we have won $15 billion deals. That kind of talks about our positioning in the market.

You did see on the AI Day everything that we presented in terms of our capabilities and what clients are saying in terms of our AI capabilities. I think that kind of gives us the comfort and confidence that we are in the right direction and it's also reflected in the pricing and the margins on the AI deals. In terms of wage increases, we haven't really decided the timing at this point in time. We do take multiple factors when we decide that in terms of the level of attrition that we have, when did we do the last wage increases, what the market scenario, what's the inflation, etcetera. We will take all of those decisions into consideration and decide.

Thank you and all the very best.

Thank you.

Thank you. Next question is from the line of Sumeet Jain from CLSA India. Please go ahead.

Yeah, thanks for the opportunity. Salil, firstly, wanted to check in the last two months with the latest launch of Anthropic models, have you seen increased productivity demand from the clients? I mean, you mentioned in the press conference that nothing material has changed in the last three months. Can you just specify what kind of client conversations are happening around productivity?

There, the sense I have is the need for productivity is similar. There is some level of competitive intensity which is higher, which then leads to more sort of demand. There are some cases where it's way outside the bound where there is not a lot of engagement then, meaning that is something which we don't see a way of getting to. We are not going down those paths. Those are very infrequent. If you look at the vast majority, we see not just something is complete, big changes has come literally in the last two months or so at this stage. Now things are moving fast, productivity over time, which is over multiple quarters, year that has changed. It's not that something suddenly is like a step change in the last two months that we've seen.

Can you also help throw some light in the new deals what you have signed? I mean, are the productivity levels with usage of AI tools similar to what you are in a way passing on in the existing business? Can you give? Because the order book looks pretty strong on a YOY basis for the full year. That is not translating into your improved organic growth in FY 2027. Is it like the base business is seeing a much higher deflation than what each one of us were expecting? With the improvement in AI models, can it actually further accelerate in the coming quarters? Can you throw some light as to how you are seeing the market?

there, we are not, let's say, sharing the specifics on what we are seeing in the portfolio in the growth compression side as opposed to what we've shared, which is our overall guidance with some of the points.

That Jayesh mentioned, the on-site makes the manufacturing, etcetera. I think we see with that a solid growth outlook where we're keeping pace, making sure that what we are seeing in the AI services growth, some of the other areas of growth that we see is growth, which then manages the compression that we see on some of the other parts of our business. We don't have a way of sharing, that this is the compression, this is the growth, and then this is the net sort of a growth, if you will.

No, got it. I think that's always a difficult thing to quantify, but also if you can just flag in terms of any quantification you can give the impact of the European manufacturing client sort of ramp down or maybe some competition kicking in there. I guess, Jayesh, you also mentioned that the shift to more offshore will have a 40-50 basis points impact in FY 2027. I guess there were some articles around Vanguard insourcing. If you can quantify these three things, how much is the impact on your guidance in this year?

If you look at what I said earlier, 75 basis points to 1% impact will come from the European client, which is combination of a deal, which does not meet our returns expectation and the ramp downs in this client through the year as the macro environment is challenging in that sector. 70 basis points is a reduction in on-site mix we are expecting. 40-50 basis points is already visible in the exit trajectory and as we go forward, we still believe there'll be even further improvement on the on-site mix. That will also impact the revenue growth from that perspective.

No, got it. That's very helpful. All the best. Thank you.

Thank you.

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

Great, thanks for taking my questions. Percentage of net new deals came in at the lowest level we've seen in recent years. Can you help unpack whether that's a function of capability set, AI pressure potentially impacting demand environment or any other factor there? Can you walk us through your expectations for net new deals for the year, given what you're seeing today in the pipeline?

Jonathan, sorry, can you repeat the question?

We're seeing percentage of net new deals come in at the lowest level we've seen in recent years. Can you help us unpack whether that's a function of capability set or AI pressure impacting the demand environment or any other factor there? Can you walk us through what you expect for net new deals for the year, given what you're seeing in your pipeline today?

Yeah. Jonathan, if you look at the combination of net new and the renewal is what percentage of deals are coming in for renewal and what percentage of deal are in the pipeline from net perspective. For the full year if you look at, we did sign $15 billion of deals, 96 of them, pretty much 55% net new in that. I think by any stretch of imagination, that's a strong performance. This is almost 25% growth on a year-on-year basis.

Got it. As a follow-up, can you help us understand what transpired over the course of the quarter and how that may have tracked relative to your internal expectations? I'm hoping to get a better understanding of when you may have started to see some of the outside deflationary impact or some of the downtick in revenue realization or any other dynamics at play there.

We don't really give a visibility in terms of what were we setting as goals or looking at plans in terms of net large deals and performance against that. I think in our view, $3.2 billion is a strong performance. Yeah, we do see in some pockets some slower decision-making in March. I don't know if it has got a significant impact in the large deal sign-ups. I wouldn't call that at this point in time.

Appreciate the color there. Thank you.

Thank you. Next question is from the line of Vibhor Singhal from Nuvama. Please go ahead.

Yeah. Hi. Thanks for taking my question. Two questions from my side. The first question, Salil, is basically on the AI deflation or the compression part that we've been discussing a lot. Just wanted to get some color as to where do you think we are in that revenue deflation cycle. Let's say if I were to compare it to the last digital cycle, we had revenue compression which kept kind of increased and then we reached a trough, and from there basically that risk started coming down and along with we had incremental revenue coming from the digital business. I would assume the cycle should pretty much follow the same order. While our GenAI revenue and which is for the other companies also is reporting very strong growth, the revenue compression continues to be quite substantial at this point of time.

Do you think we are already at the trough of that revenue deflation cycle? If not, I know it's difficult to quantify the timeline, so basically, are we still a ways away? Is there more deflation that you think might come in? Or do you think we are basically done, with the worst behind and the deflation will still continue, but it might be not as much as, let's say, going forward as it was before. Then I have a follow-up for Jayesh.

Hi, this is Salil. On that, what we are seeing is there are different sort of dimensions to the compression, meaning we are now working with clients where some of the productivity discussions were baked into the deals over the past year or so. Then you have multiple year outlooks. All of that has not happened on the first year. It goes through it. The actual compression will be dependent on the mix, first year deal, second deal, and so on. We've not got a sense of where we are on that path, but we have a sense of what the foundation models and other tools are able to sort of support and use that as a basis for what we are doing with forward deals, like three-year, five-year deals and so on.

On that sort of a scenario, we don't have a view we can share on where that path is. We are definitely very clear on where, when you're working with a foundation model and tools, what is possible, where is it effective? Different models or different tools are more relevant for different parts of the AI work that we are doing with clients. That we are very, I would say, close to.

Got it. If I may just extend a bit on that. Let's say the deals that we are signing at this point of time, you mentioned many of them have that productivity benefit already baked in or, let's say, built into the original deal. As the cycle evolves, are we also seeing, let's say, deals which we had signed, let's say maybe 6 months ago or 12 months ago, and there the client has come back and asked for incremental productivity benefits to be passed? I'm talking about the recent deals, not the earlier deals. I'm sure the earlier deals are seeing that kind of a response sometimes. In recent deals also, are we seeing that kind of a movement in our conversations?

No, Vibhor, I don't think we have seen scenarios where what we signed a few months back, a client has come back and asked us different productivity to be baked in again. What Salil was talking about when a deal comes up for bid or when you're bidding for a new deal.

Right. Got it. Sure. Just one last question for you, Jayesh. In terms of the margins, I think this quarter had a very good tailwind from INR depreciation. Now, we know that for long the industry has matured to a state where the rupee depreciation doesn't lead to much of margin expansion over the medium to long term. We have generally seen a temporary quarterly bump up in margins because of INR depreciation. Has that benefit also kind of stopped trickling in because not just for us, but for most of the players in the industry, we're not seeing any kind of a margin expansion in this quarter specifically? Is it that those benefits are being invested somewhere else? Or is it that those benefits have stopped accruing at all and those are being passed to the client immediately?

Two points there, Vibhor. Generally, you do have rupee benefits that sometimes gets offset by, or most of the time gets offset by cross-currency headwinds, right? Because when U.S. dollar appreciates, it appreciates against most currencies and that kind of offsets each other. Your portfolio of non-U.S. as it grows, that offset becomes larger and larger across us and across the industry also, you have seen that. There were times when the U.S. dollar used to be 70+% , or U.S. used to be 70, 75+% . That obviously has gone down significantly, and therefore the headwinds from the other currencies comes in. If you look at this quarter, specifically for us, as I called out in the margin walk, there was close to 50 basis points of headwind that we got because of amortization of one of the acquisition-related intangibles.

Last quarter, we had a 30 basis points gain. In a way, these two went into two different directions for us in terms of margin impact. Both became a headwind, 20 basis points on account of employee-related costs. All of those were headwinds that were offset by 40 basis points from currency and 30 basis from Maximus.

Got it. Great. Thank you so much for taking my questions, and I wish you all the best.

Thank you.

Thank you. Next question is from the line of Abhishek Pathak from Motilal Oswal. Please go ahead.

Yeah. Hi, I'm audible?

Yes, sir.

Hi, Salil. I had a question around the deals that we left on the table. We saw a similar comment from one of your sort of peers as well. Just curious, sort of what is happening over here? Are we being disrupted by, let's say, leaner sort of more AI-native sort of companies who are pricing the deals very low by the delivery model changing? Or is this a race to the bottom from traditional vendors who are just essentially sort of creating irrational pricing? Very curious as to what's happening here. Over the next two to three-year period, do you think the industry needs to find newer linear models to sort of price their deals and how much is possible to kind of change over here in the short term? Thank you.

There, it's not that this is something widely prevalent. We do see sometimes a particular sort of competitor doing pricing which seems sort of unusual. This is something that's happened over the course of years for different reasons. Just now, it may be linked in a client's mind to AI productivity. In other times, it's got other things. I don't see that it's something which is sort of across everything. At the end, we had 96 deals with close to $15 billion in large deals for last year. It's a very sort of broad-based, robust outcome. Plus, the pipeline is pretty good. There are anecdotal things where some of the productivity thing looks out of the range that we see with what's possible with what we have understood with some of the foundation models.

It's more of that sort of a comment, not at least we don't see that as being a sort of trend of some sort.

Understood. Thank you so much. I'll request.

Thank you. Next question is from the line of Keith Bachman from BMO Capital. Please go ahead.

Hi. Thank you very much. I have two questions. The first question is related to pricing, and I wanted to understand the context of how pricing competitiveness has changed, and you started the answer on the last question under the A. Is it more competitive today than it has been over the last couple of years? B, the spirit of the question is, my understanding when some of your competitors are getting more aggressive on pricing, they're introducing cost curves associated with the deployment of AI that may have more uncertainty surrounding those cost curves because this is new technology and I think everybody's trying to figure out what it can and can't do at the current level. Does that introduce incremental risk in how you're philosophically thinking about pricing?

If you could just talk a little bit about pricing dynamics with the introduction of AI, and I do have a follow-up?

I'll start on that pricing sort of point. The way we are seeing it is the point you made about competitive intensity, we do see there is increased intensity. If you look at last financial year, we had a growth, some other players had negative revenue. One can sort of imagine some of that sort of a scenario. In pricing, actually, Jayesh will talk a little bit about it. I think overall our realization is better in the year than we have seen before. Maybe the execution is better and the portfolio, at least we feel is less risky in that sense. I don't think we have what, if I understood well what you were describing.

If I can just add to what Salil was saying. If you look at a little elevated level, despite the softer volume through the year, most of our growth came from the realization. That reflects in what we have been able to get on the back of AI. That reflects in the value that we are creating for our clients. To some extent, that also reflects the contribution from Project Maximus, through the lean automation, value-based selling, and all of those tracks. That is given. If you look at, despite the competitiveness in the market, despite all of that, we've been able to maintain our margins for the year. We've invested back in the business 50 basis points, or 40-odd basis points in sales and marketing, the AI talent that we are building, the AI capabilities that we are building, all other AI related investments.

All of that has been absorbed in the margin, while keeping margin conscious.

Okay. Let me ask my second follow-up question, and it also speaks to or questions the growth algorithm. I'm trying to understand how the growth algorithm may change from a volume perspective given the AI efficiency gains on the supply side. The way I think about it, and we've had this conversation with one of your competitors, if you're trying to grow at 3% in the past years, you might have to grow volumes by 5% or 6% to get to 3% growth. One of your competitors suggested that volume variance may need to double because of the efficiency gains to get to the same revenue growth trajectory.

I just wanted to see if you could think about how is the growth algorithm on a volume basis different today because of those AI efficiency gains as you look out over the next 12 months versus what it's been over the last couple of years?

Keith, the reality is, as Salil was saying earlier, we do see some deflation from our existing services, right? Largely part of that is getting offset by the new services and new AI-driven services. Overall, at this point in time, the volumes for the last year has remained flattish. As we go forward, we continue to see volumes remain flatter or marginally positive as what we have baked in the guidance at this point in time, which is reflected in the lower end. In the upper end, as I said earlier, we have expected better macro environment, which should reflect in better volumes.

Okay. Thank you. All right, many thanks. Good luck.

Thank you.

Thank you. Next question is from the line of Apurva Prasad from Franklin Templeton. Please go ahead.

Hey. Hi. Any comments on the direction of the onsite mix? I'm trying to understand if the AI compression or just AI embedded in services and contract structures, is that impacting the delivery mix?

No, Apurva. I think it's multiple factors. Little bit of the environment, little bit of the visa situations in some of the countries. Little bit of our own initiative to deliver more from offshore. I think it's a combination of all of that.

There's a pushback, correct? That third party you expect that to be similar.

Sorry, just to add, the discretionary spend has also come down, which generally means higher onsite.

Okay. For FY 2027, the onsite mix should be similar, and third-party cost, I think you said, will be similar next year also this.

The third party cost, I did say that earlier, we expect it to be in the same similar range. FY 2027 exit, it's difficult to project at this point in time. As I said, the FY 2026 exit itself gives us approximately 40-50 basis points of lower onsite mix. We think this trend will continue to some extent. It's very difficult to predict what will be FY 2027 exit.

Sure. Thank you. Thank you.

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

Thank you. First, thanks, everyone, for joining. Just want to share a quick summary. We had a strong FY 2026, 3.1% growth, 21% margin. Very good large deals, close to $15 billion. We have a growth guidance for the coming year. We have a mix of growth drivers and compression, overall growth guidance, and adjusting for some of the one-off technical factors, a larger growth like-for-like basis. The AI services approach and strategy, I think we've laid out, is resonating with our clients very well. We see all of the six areas in our pipeline, very good partnerships with the AI foundation model companies and other tool companies. With all of that, we look ahead to a strong, successful year in this coming year and look forward to seeing all of you, catching up with all of you in the next quarterly call. Thank you. Take care.

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