Infosys FY26 Guidance Raised to 3.0-3.5% Despite Oct-Dec Profit Dip on One-Off Charge

Infosys raised its revenue growth guidance for the fiscal year ending March 2026 to 3.0%-3.5% in constant currency terms The company previously projected growth of 2.0%-3.0%.

Management retained the operating margin guidance at 20%-22%.

For the quarter ended December 31, the company reported consolidated revenue of ₹454.8 billion, an increase of 8.9% from a year earlier. Sequentially, revenue rose 2.2%. In dollar terms, revenue stood at $5.1 billion, representing year-on-year growth of 1.7% and sequential growth of 0.6% in constant currency.

Net profit declined 2.2% year-on-year to ₹66.5 billion. Sequentially, profit fell 9.6%. The company attributed the decline to a one-time charge of ₹12.9 billion ($143 million) for increased gratuity and leave liabilities under new labour codes. Consequently, basic earnings per share fell to ₹16.17 from ₹16.43 in the prior year, while diluted EPS stood at ₹16.14.

The one-off charge impacted margins. The reported IFRS operating margin narrowed to 18.4%, compared to 21.3% a year ago and 21.0% in the preceding quarter. However, the adjusted operating margin—excluding the charge—improved by 0.2% sequentially to 21.2%. Operating profit decreased 6.3% year-on-year to ₹83.6 billion.

Cost analysis disclosed in the financial statement shows broad increases. Cost of sales rose 12.1% to ₹326.5 billion, resulting in a gross profit of ₹128.3 billion, up 1.4%. Total operating expenses jumped 19.8% to ₹44.7 billion. Specifically, selling and marketing expenses increased 24.6% to ₹22.9 billion, and administrative expenses grew 15.2% to ₹21.8 billion.

Profit before income taxes fell 4.6% to ₹92.3 billion. Income tax expense was ₹25.6 billion, a reduction of 10.0% from the previous year. Other income, net of finance costs, increased 15.3% to ₹8.7 billion.

Large deal total contract value reached $4.8 billion across 26 deals, with 57% comprising net new business. Free cash flow was reported at ₹81.8 billion ($915 million). Adjusted FCF was ₹86.3 billion ($965 million), representing a conversion of 113.1% of adjusted net profit.

For the nine months ended Dec 31, 2025, revenue grew 2.8% in constant currency. The reported operating margin for the year-to-date period was 20.0%, while the adjusted margin stood at 21.0%. The company added 5,043 employees during the quarter.