Infosys Set for Modest Revenue Growth Amid Profit Decline

As Infosys approaches its earnings announcement for the fourth quarter on April 17, analysts predict a slight uptick in revenue but a decline in profits for the January-March period. This forecast is attributed to seasonal trends and ongoing macroeconomic challenges that are impacting the IT sector.

Revenue Projections: A Mixed Bag

The anticipated growth in revenue is expected to be marginal, with various brokerages forecasting a cautious outlook for the fiscal year 2026. The persistent slowdown in discretionary IT spending, driven by geopolitical uncertainties and trade disputes, is weighing heavily on the company’s guidance.

• Kotak Institutional Equities predicts a 2.3% decline in sequential revenue, attributing this to diminishing sales from third-party products and a lack of demand.
• ICICI Securities estimates a smaller revenue drop of 0.6%, while Elara Capital and Nuvama expect a constant currency revenue dip of 1% to 2% quarter-on-quarter.

Profit Margins Under Pressure

In terms of profitability, expectations are similarly grim.

• Kotak anticipates a 3.3% decrease in net profit.
• Nuvama suggests a slightly smaller decline of 1.3%.

These profit projections reflect the challenges posed by annual wage hikes for senior staff and increased operational costs. ICICI Securities foresees a 50 basis point contraction in Ebit margins, which may only be partially offset by favorable currency fluctuations and reduced costs from third-party software licensing. On the other hand, Motilal Oswal predicts a more significant margin reduction of 70 basis points, although they believe cost-cutting initiatives could offer some respite.

Deal Closures and Market Dynamics

Despite a robust pipeline, deal closures at Infosys are sluggish as clients are increasingly prioritizing cost-saving measures over new investments. Kotak estimates the total contract value for large deals this quarter to hover around $3 billion, a decline from the previous year. Investors will be keenly observing the annual contract value and the overall quality of these wins.

Cautious Outlook for FY26

Looking ahead to FY26, the revenue growth forecast remains modest, projected between 1% and 6% in constant currency terms. Most analysts agree that Infosys will stick to its operating margin guidance of 20–22%. Investors are particularly interested in management’s insights regarding client spending habits, the impact of AI-driven automation on pricing, and the broader effects of trade tensions in critical industries such as manufacturing.

Hiring Strategy Under the Microscope

Hiring trends also capture attention, with BNP Paribas noting that Infosys is focusing on internal talent mobility rather than external recruitment. Investors will be looking for commentary on hiring of fresh graduates, lateral moves, and overall workforce strategy, as these factors play a crucial role in understanding demand dynamics and cost management in the upcoming quarters.

In summary, while Infosys may experience slight revenue growth, the projected profit decline, coupled with external pressures and cautious spending trends, raises questions about the company’s immediate future. Investors and analysts alike will be watching closely as the company navigates this challenging landscape.