Infosys Cuts Sales Forecast After Companies Curb IT Spending

Infosys Ltd. lowered its annual sales forecast as clients continue to hold back on technology spending, signaling that a broad-based recovery in IT budgets could prove elusive anytime soon. 

Revenue will climb 1% to 2% on a constant-currency basis in the year through March 2027, the company said in a statement Friday. Analysts estimated a growth of 2.03%. 

The revenue forecast, down from its July guidance of 1.5% to 3%, sent Infosys ADRs down by as much as 7.6% in early New York trading Friday. 

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Infosys, India's second-largest IT outsourcer, and larger rival Tata Consultancy Services Ltd. lead India's $280 billion-plus software services industry that's been grappling with a slowdown. Companies are limiting spending in the midst of geopolitical crises such as the Iran conflict, surging energy prices and elevated inflation.

The IT services business also risks a disruption from AI. Infosys and its peers have long depended on armies of engineering graduates to write code for clients. But new tools from the likes of Anthropic PBC and OpenAI can now write programs much quicker, threatening to upend the outsourcing model.

Shares of Infosys have declined about 30% this year as investors have assessed its chances to cope with the challenges posed by AI. Peers TCS and Wipro Ltd. are down by similar amounts.

The Indian IT giants, though, say their businesses remain agile and resilient. TCS' earnings earlier this month showed gradually improving contract flow, with Asia's largest IT services provider's annualized AI revenue reaching $3.1 billion.

“There is the AI which is giving us the growth. There's AI which is also seeing the compression. There's competitive intensity because of that,” Infosys Chief Executive Officer Salil Parekh said in a news conference in Bangalore. “And that is what's reflected into our guidance.” 

Almost all of Infosys' large deals, worth $50 million or more, have some AI component, Parekh said, adding: “One or two of them have full business transformation driven by AI as the fundamental element.”

Infosys Chairman Nandan Nilekani just last week shrugged off worries about AI eliminating jobs and said the technology will instead galvanize small businesses and fuel demand for new skills.

The new jobs will be “in understanding client requirements, in collaborating, in getting people to work together,” Nilekani said at the Bloomberg New Economy Forum in New Delhi.

The outsourcers are also pivoting their business models for AI. Mumbai-based TCS has partnered with OpenAI to build AI data centers and is in similar discussions with other tech giants.

On Friday, Infosys posted revenues of 492.4 billion rupees for the quarter through September, partly helped by a declining rupee. AI related work accounted for 10.5% of its sales, it said. Net income rose 6.3% to 78.2 billion rupees ($824 million) for the quarter. Analysts estimated 79 billion rupees on average.

Earlier this month, President Donald Trump's administration named Infosys as one of the companies abusing immigration policies, imposing restrictions on their ability to sponsor foreign workers for permanent residency in the US. Parekh said the measure doesn't affect Infosys as majority of its US hires were local.

“We feel we have a good ratio in terms of bringing people on and in terms of cost efficiency,” he said. “We don't see a change in that.”

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)