Infosys lowers revenue growth outlook as North America weakness deepens

Infosys has lowered its revenue growth outlook for the year, with weakness in its key North American market deepening, according to CNA. In premarket trading, the American-listed stock of the Indian IT company slid 7.5 per cent after the announcement.

Forecast trimmed more than expected

For fiscal 2027, the company now expects revenue to grow by 1 per cent to 2 per cent, down from an earlier range of 1.5 per cent to 3 per cent. Most analysts had predicted only the top of the range would come down, to 2.5 per cent.

Chief financial officer Jayesh Sanghrajka told a conference call that the second quarter was softer and that pricing pressure was building from competitive intensity and a higher ask to pass on AI-led productivity. He said both were built into the revised guidance. According to him, the region's results were dragged down as hi-tech and retail customers in North America cut back the scale of their projects.

North America at its weakest in two years

Over half of the sales at Infosys come from North America. In the second quarter, the region's revenue declined by 1.5 per cent, which marked its poorest result in two years.

UnearthInsight founder Gaurav Vasu, who runs the market intelligence firm, said the forecast "indicates that demand hasn't picked up in the North America market as tech spend moves towards AI players." In his view, companies in North America continue to channel their budgets into AI, cloud services and AI startups based in the US, and the region might stay behind for the following two to four quarters.

Wider pressure on the IT sector

The IT sector, worth $315 billion, has been dealing with AI disruption as clients look for productivity gains, push for lower prices and shift spending to AI-related projects. AI is opening new revenue opportunities, but it is also straining the traditional outsourcing model as fees are tied more to outcomes and productivity than to billable hours.

Other results

According to LSEG data, total revenue grew 10.7 per cent to reach 492.44 billion rupees ($5.19 billion), a touch higher than the 491.32 billion rupees analysts had estimated. When currency movements are excluded, the increase in revenue was 1.5 per cent. Analysts had expected 79.29 billion rupees, but net profit came in lower, rising 6.2 per cent to 78.23 billion rupees. Deal wins reached $5.2 billion, compared with $3.1 billion a year earlier.