Infosys Q2 results preview: Will the results provide oomph to surging IT stocks?

Infosys is expected to report an 11% year-on-year (YoY) rise in revenue and an 8% increase in net profit for the September quarter, according to the average of estimates from seven brokerages. However, analysts expect India's second-largest IT services company to lower its full-year revenue growth guidance amid weak discretionary spending, AI-led pricing pressure and slower client decision-making.

The Bengaluru-based IT major is likely to report revenue of around Rs 49,384 crore for the July-September quarter, compared with Rs 44,490 crore in the corresponding period last year, based on the brokerage consensus.

Consolidated net profit is expected to increase to Rs 7,965 crore from Rs 7,375 crore a year earlier.


Infosys is scheduled to announce its second-quarter results on Friday, October 23. Investors will closely watch the company's commentary on client spending, large deal wins and the impact of artificial intelligence on its traditional IT services business.

The earnings come at a time when Indian IT companies are facing pressure from subdued technology spending and growing concerns that AI-powered automation could affect conventional outsourcing contracts.

While the September quarter is expected to show sequential improvement in revenue and operating margins, analysts believe underlying demand remains modest.

Infosys FY27 revenue guidance cut likely

The biggest factor to watch in Friday's earnings announcement will be whether Infosys further reduces its revenue growth forecast for FY27. The company had already lowered the upper end of its constant-currency revenue guidance to 3% from 3.5% while announcing its June-quarter results, retaining the lower end at 1.5%.

Brokerages now expect another downward revision. Emkay Global expects Infosys to narrow its FY27 revenue growth guidance to 1.5-2.5% in constant currency terms, while retaining its operating margin guidance of 20-22%.

Kotak Institutional Equities also sees the company to cut its revenue outlook to 1.5-2.5%, reflecting weak underlying demand and potential delays in project ramp-ups.

Jefferies has a more conservative estimate, expecting Infosys to lower its revenue growth forecast to 0.5-2%, a reduction of 100 basis points at both ends of the current range. The brokerage expects the company to retain its operating margin guidance of 20-22%.

A guidance revision would provide an indication of management's confidence in demand recovery during the second half of FY27, particularly as clients reassess technology spending amid macroeconomic uncertainty.

Modest sequential revenue growth expected

Brokerages expect Infosys to deliver sequential constant-currency revenue growth of 1.1-1.3% during the September quarter, supported partly by acquisitions and the reversal of a revenue headwind from the previous quarter.

Emkay expects US dollar revenue to grow 1.5% sequentially, factoring in a 50-basis-point contribution from the Optimum acquisition and a 20-basis-point cross-currency headwind.

Jefferies estimates constant-currency revenue growth of 1.3%, including a 60-basis-point contribution from acquisitions and a 50-basis-point benefit from the reversal of the client termination impact seen in the June quarter.

JM Financial is pencilling sequential constant-currency growth of 1.2%, translating into around 1% growth in US dollar terms after accounting for currency movements.

Margins may improve

Despite modest revenue growth, analysts expect Infosys to report an improvement in operating profitability, helped by cost efficiencies and the absence of certain expenses incurred in the previous quarter. Emkay expects the EBIT margin to expand by 50 basis points sequentially.

Jefferies forecasts a 35-basis-point improvement, while JM Financial expects margins to rise by 30 basis points. JM Financial sees benefits from Project Maximus, Infosys' margin improvement programme, and the absence of higher costs associated with a client termination in the previous quarter.

Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.