Tech & AI
Infosys lowers its sales outlook as AI pressures pricing
Infosys missed second-quarter forecasts and cut its full-year sales outlook, saying AI is lifting new business while shrinking revenue and pricing on its older outsourcing work.
Quick Read
- Infosys missed second-quarter forecasts for revenue and earnings and lowered its fiscal 2027 sales growth outlook.
- The company blamed cautious client spending, geopolitical uncertainty, energy costs and inflation.
- Chief executive Salil Parekh said AI sales are growing fast but AI is also cutting revenue and pricing on traditional services.
- Operating margin held steady, large deal signings were strong and the board raised its interim dividend.
What did Infosys report?
Infosys (NYSE: INFY) shares fell Friday after the Indian IT services company missed second-quarter forecasts for revenue and earnings. It also lowered its full-year sales outlook.
Why it matters: Revenue rose from a year earlier but came in below the consensus, the average analyst forecast. Earnings per share were flat from a year earlier and also missed estimates.
The company cut its fiscal 2027 revenue growth forecast, measured in constant currency, which strips out exchange-rate swings. It cited cautious client spending, geopolitical uncertainty, high energy costs and inflation.
How is AI affecting the business?
Chief executive Salil Parekh said on the earnings call that AI-related sales grew quickly from the previous quarter. Demand came from AI agents, updating older systems, process automation and data work.
Parekh also said AI is weighing on traditional services. Clients get more done with AI tools, so some existing work brings in less revenue. Clients are also pressing for bigger savings, which sharpens price competition.
He named cybersecurity and company-run technology hubs as growth areas. These hubs are centers that large firms set up to handle their own tech work.
Were there any bright spots?
Infosys signed several large deals in the quarter. Management expects one new contract to add to revenue growth next fiscal year.
Operating margin, the profit the core business keeps from each dollar of sales, held steady. Free cash flow, the cash left after running and investing in the business, fell from a year earlier. The board raised its interim dividend.
What comes next?
What’s next: The news landed on a down day for U.S. stocks. The S&P 500 fell 0.5% on Friday. The technology sector fund rose 0.5%.
The open question is whether new AI work can outgrow the revenue AI takes from older contracts. The company's next quarterly results would be its next formal update.
For readers
What it could mean for you: People who own Infosys directly carry this news in full, with no other holdings to offset it. The lower outlook could keep attention on whether AI work grows fast enough to replace revenue lost on older contracts. If clients keep pushing for deeper discounts, margins may come under pressure. They held steady this quarter. The higher dividend and large new contracts could offer some support, depending on how management's forecasts hold up.
Questions and answers
Why did Infosys lower its sales outlook?
Infosys cited cautious client spending linked to geopolitical uncertainty, high energy costs and inflation. Its chief executive also said AI-driven productivity is reducing revenue from existing work and increasing price competition.
Is AI helping or hurting Infosys?
Both, according to chief executive Salil Parekh. AI-related sales grew quickly from the prior quarter. But AI tools are also shrinking revenue from traditional services as clients seek bigger savings.
Did Infosys beat earnings expectations?
No. Both revenue and earnings per share came in below analyst estimates, and earnings per share were flat from a year earlier.
The numbers
| S&P 500 change | −0.52% |
|---|---|
| 10-year Treasury yield | 5.00% |
Friday’s close
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