---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 305452
conversation_id: 89687871-464d-48c2-b57e-4e7724e900ca
citations: 22
created: 2026-05-31 19:15:53Z
---

# Provide a one‑year narrative of Infosys, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# Infosys (INFY) — One-Year Narrative: June 2025 → May 2026

The past twelve months for Infosys can be characterized in three acts: (i) a confidence-building first half driven by mega-deal momentum and an AI go-to-market reset, (ii) a mid-year inflection when sentiment crystallized around the buyback and rising street-side optimism, and (iii) a late-cycle reset where management's cautious FY27 guidance and a large-client ramp-down dented the stock's prior premium even though Q4 earnings printed a clear beat.

---

## 1) Setting the Stage — FY25 Exit and the June 2025 AGM

Entering the year, Infosys had just closed **FY25 with 4.2% constant-currency revenue growth, USD 19.2B in revenues, a 50 bps op-margin expansion to 21.1%, USD 4.1B in free cash flow (+41.8% YoY), and large-deal TCV of USD 11.6B** [1]. Management's narrative at the 44th AGM in June 2025 framed Infosys as the "stability partner" for clients navigating an increasingly fragmented macro (tariffs, supply-chain re-routing, AI-driven legacy modernization, energy transition) [1]. The set-up: strong cash generation, a debt-free balance sheet, and a re-platforming under Topaz and Cobalt to anchor AI/cloud offerings.

The CLSA India IT team had previewed this set-up in early May 2025 with the report **"India IT 4QFY25 — Expect V-shaped recovery"**, which framed the sector (Infosys included) for a sequential reacceleration from the Q4-FY25 trough. By late June 2025, however, CLSA's **"India Gen AI Access Day Summary"** flagged a "high amount of uncertainty" around productivity-led deflation — the central tension that would shadow Infosys's stock for the remainder of the year.

---

## 2) Q1 FY26 (July 2025) — Quietly Solid Start

Q1 came in at **+2.6% sequential CC growth**, setting a stronger base than the FY25 exit and giving the company room to begin tightening its earlier 0–3% FY26 guide. The narrative held: discretionary recovery in Financial Services, soft retail/CPG, and AI deal momentum building.

---

## 3) Q2 FY26 (October 16, 2025) — The Inflection: Mega-Deal + Buyback

Q2 was the pivotal quarter for sentiment:

- **Revenue +2.2% QoQ and +2.9% YoY in CC; operating margin expanded 20 bps QoQ to 21%; large deals of $3.1B with 67% net-new** [2].
- A **post-quarter $1.6B mega-deal** was announced alongside results — a clear positive surprise [2].
- Q2 consolidated EPS came in at **INR 17.74 vs. StreetAccount consensus INR 17.47** [14], a modest beat.
- Management **raised FY26 CC revenue growth guidance from 1–3% to 2–3%**, signaling rising confidence at the lower end [3].

A few days later (Oct 23), the founders' decision to **opt out of the INR 180B (≈$2.1B) share buyback** acted as a catalyst — non-promoter shareholders' acceptance ratio became more favorable, and the stock jumped **+4.0% to INR 1,533** intraday [15][16]. This was the high-water mark for the year's positive sentiment: the combination of mega-deal, raised guidance, EPS beat, and buyback mechanics drove broad analyst upgrades into October.

A late-September overhang did emerge — **the US Chamber of Commerce filed suit against the Trump administration's new H-1B visa fee structure**, with Infosys among the named-impact stocks [17]. Management at the Q2 call later played this down, noting that the "majority of US employees are employees who don't require any Infosys immigration support."

---

## 4) Q3 FY26 (January 14, 2026) — Peak Optimism and a Defining AI Deal

Q3 marked the high in valuation and the broadest positive reading on the year:

- **Revenue grew 0.6% QoQ and 1.7% YoY in CC**, demonstrating resilience through a seasonally weak quarter [4].
- The headline win was a **$1.6B deal with the UK's National Health Service** — a marquee net-new logo cementing Infosys's healthcare credibility and validating Topaz-led AI delivery [5].
- Operating margins printed at **18.4% reported / 21.2% adjusted**; the 280 bps wedge came from a one-time labor-code reclassification charge in India [6], which the street largely looked through.
- **FY26 guidance was raised again to 3–3.5% CC**, the second upward revision of the year [7].
- Q3 EPS of **INR 16.14 vs. year-ago INR 16.39** [18] — flat on the year due to the labor-code charge.

The stock printed around **INR 1,599–1,689** in mid-to-late January [18], and broker action was split: **IDBI Capital downgraded to Hold from Buy** on valuation, but **Nirmal Bang upgraded to Buy from Hold**, reflecting confidence in the back-half acceleration. The key forward statement: management called out that **energy/utilities/resources and financial services were expected to accelerate in FY27 vs. FY26**, and disclosed AI partner-status at 15 of 25 top clients in each vertical.

---

## 5) Q4 FY26 (April 23, 2026) — The Reset

This is where the narrative pivoted. The print itself was strong, but the FY27 outlook reframed the year:

**The strong:**
- **Q4 EPS INR 20.98 vs. FactSet consensus INR 18.55** — a meaningful beat [19].
- **Q4 revenue +4.1% YoY** in CC (sequentially -1.3% on seasonality) [10].
- **Full-year FY26 large-deal TCV of $14.9B, +24% YoY** [8]; **96 large deals, $15B TCV, 55% net-new** for the year [12].
- **Adjusted operating margin held at 21% for the year**; **free cash flow at 106% of net profit**.
- **Voluntary attrition declined 1.5 ppt to 12.6%** [11] — pointing to better retention and a more disciplined cost base.

**The disappointment — FY27 guidance:**
- **CC revenue growth of just 1.5–3.5%** [9] — a step-down from FY26's 3–3.5% delivered, and below the rebound trajectory the street had extrapolated post-Q3.
- The principal drag: **a 75–100 bps headwind from a large European manufacturing client ramp-down**, combined with a "conscious decision to not pursue a certain deal that was not aligned to our return expectation" [13].
- Onsite-mix shift expected to remove another 75–100 bps.
- Margin guidance reaffirmed at **20–22%** but with productivity pass-throughs to clients flagged as competitive intensity rose.

**Pre-print catalysts in the days around the result:**
- **April 22, 2026 — OpenAI collaboration announced** (stock at INR 1,268) [21], reinforcing the AI partnership ecosystem (alongside earlier Cognition/Devin and Anthropic/Microsoft work flagged on the Q3 call).
- **April 24, 2026 — DAM Capital downgraded to Neutral from Buy** with the stock at INR 1,158, citing the slower FY27 ramp [20].
- **April 29 → May 5, 2026 — Optimum Healthcare IT acquisition closed** (~INR 1,168 reference price) [22], completing a healthcare-vertical bolt-on initially announced earlier.

The stock declined from a pre-print INR 1,322 area to **INR 1,167–1,242** in the sessions after Q4 [19][20], reflecting investors marking down the multiple to recognize: (i) the AI-driven productivity passthrough is genuinely deflationary on core legacy revenue, (ii) one large account can move the FY27 growth print meaningfully, and (iii) "competitive intensity has gone up," in management's own words.

---

## 6) How the Three Forces Shaped Sentiment and Valuation

| Driver | Direction | Net Effect on Sentiment |
|---|---|---|
| **Business performance** — sequential growth Q1→Q4, two guidance raises during FY26 | Positive | Supported a re-rating into Jan 2026 highs (INR ~1,690) |
| **Mega-deals + market share** — $1.6B Q2 deal + $1.6B NHS in Q3 + $15B annual TCV (+24%) | Positive | Established "share-gainer" thesis |
| **Buyback (INR 180B) with founders opting out** | Positive | Mechanical EPS / float boost; +4% intraday in Oct 2025 |
| **AI partnerships (OpenAI, Cognition, Anthropic, Microsoft)** | Positive narrative, mixed P&L | Stock initially viewed AI as growth, then re-rated as productivity-passthrough became visible |
| **One large European manufacturing client ramp-down** | Negative | 75–100 bps FY27 drag, key reason for the April 2026 sell-off |
| **Macro / tariff uncertainty + H-1B fee shock (Sep–Oct 2025)** | Negative (transient) | Brief overhang; managed by reduced US visa exposure |
| **AI-led pricing compression on renewals** | Structural headwind | Forced the narrower 1.5–3.5% FY27 guide |

**Net for the year:** Infosys was the share-gainer narrative through Q2–Q3 FY26 (revenue accelerations, mega-deals, buyback), but the Q4 print reframed FY27 around productivity-led deflation and a single-client manufacturing drag — collapsing the optimism premium that had built up by January. The valuation now reflects a more conservative low-single-digit FY27 growth outlook anchored to a 20–22% margin band, with the AI partnership ecosystem (OpenAI, Anthropic, Cognition, Microsoft) and the Optimum Healthcare IT bolt-on as the primary forward-growth optionality.

---

**Sources**

[1] Infosys 44th AGM (FY25 Results Review) — Infosys Ltd. shareholder/analyst call, June 25, 2025
[2][3] Infosys Q2 FY26 Earnings Call — October 16, 2025
[4][5][6][7] Infosys Q3 FY26 Earnings Call — January 14, 2026
[8][9][10][11][12][13] Infosys Q4 FY26 Earnings Call — April 23, 2026
[14] StreetAccount — Q2 FY26 EPS beat (Oct 16, 2025)
[15][16] StreetAccount — Founders opt out of INR 180B buyback; INFY +4% (Oct 23, 2025)
[17] StreetAccount — US Chamber of Commerce H-1B visa lawsuit (Oct 16, 2025)
[18] StreetAccount — Q3 FY26 EPS print (Jan 14, 2026)
[19] StreetAccount — Q4 FY26 EPS INR 20.98 vs FactSet INR 18.55 (Apr 23, 2026)
[20] StreetAccount — DAM Capital downgrade to Neutral (Apr 24, 2026)
[21] StreetAccount — Infosys-OpenAI collaboration (Apr 22, 2026)
[22] StreetAccount — Optimum Healthcare IT acquisition close (May 5, 2026)

*Note on internal research: CLSA's internal research corpus on Infosys in this workspace ranges from May–June 2025 (sector reports including "India IT 4QFY25 — Expect V-shaped recovery" and "India Gen AI Access Day Summary — High amount of uncertainty"). The corpus does not extend through the full year reviewed; primary narrative drivers from Q2 FY26 onward are sourced from earnings transcripts and StreetAccount.*

## Citations

- [1] **Infosys Limited - Shareholder/Analyst Call** · external
- [2] **Infosys Ltd., Q2 2026 Earnings Call, 16-October-2025 8** · external
- [3] **Infosys Ltd., Q2 2026 Earnings Call, 16-October-2025 8** · external
- [4] **Infosys Ltd., Q3 2026 Earnings Call, 14-January-2026 7** · external
- [5] **Infosys Ltd., Q3 2026 Earnings Call, 14-January-2026 7** · external
- [6] **Infosys Ltd., Q3 2026 Earnings Call, 14-January-2026 7** · external
- [7] **Infosys Ltd., Q3 2026 Earnings Call, 14-January-2026 7** · external
- [8] **Infosys Ltd., Q4 2026 Earnings Call, 23-April-2026 8** · external
- [9] **Infosys Ltd., Q4 2026 Earnings Call, 23-April-2026 8** · external
- [10] **Infosys Ltd., Q4 2026 Earnings Call, 23-April-2026 8** · external
- [11] **Infosys Ltd., Q4 2026 Earnings Call, 23-April-2026 8** · external
- [12] **Infosys Ltd., Q4 2026 Earnings Call, 23-April-2026 8** · external
- [13] **Infosys Ltd., Q4 2026 Earnings Call, 23-April-2026 8** · external
- [14] **Infosys reports Q2 consolidated EPS INR17.74 vs StreetAccount INR17.47** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4424473&_doc_date=2025-10-16&_doc_product=SA>
- [15] **Infosys founders opt out of INR180.00B share buyback** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4431032&_doc_date=2025-10-23&_doc_product=SA>
- [16] **Trading Higher - Infosys +4.0% on non-participation by promoters in buyback** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4431039&_doc_date=2025-10-23&_doc_product=SA>
- [17] **US Chamber of Commerce files lawsuit challenging Trump administration's new fees on H-1B visas** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4425012&_doc_date=2025-10-16&_doc_product=SA>
- [18] **Infosys reports Q3 consolidated EPS INR16.14 vs year-ago INR16.39** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4519903&_doc_date=2026-01-14&_doc_product=SA>
- [19] **Infosys reports Q4 EPS INR20.98 vs FactSet INR18.55** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4637650&_doc_date=2026-04-23&_doc_product=SA>
- [20] **Infosys downgraded to neutral from buy at DAM Capital** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4639517&_doc_date=2026-04-24&_doc_product=SA>
- [21] **Infosys announces collaboration with OpenAI** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4635093&_doc_date=2026-04-22&_doc_product=SA>
- [22] **Infosys completes acquisition of Optimum Healthcare IT** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4656863&_doc_date=2026-05-05&_doc_product=SA>

