Infosys cuts its FY27 growth guidance to 1%-2% as expected price rises fail to arrive and volumes soften

Infosys now expects revenue to grow 1% to 2% in constant currency in the fiscal year to next March. Constant currency strips out exchange-rate moves, and it is the basis the company guides on. It opened the year in April at 1.5% to 3.5% and trimmed that in July; the middle of the range is now a full percentage point lower than in April, calculated from the two ranges. Its operating margin guidance of 20% to 22% was left alone.

That is a turn for a company that spent the previous year moving its growth guide the other way. It opened that year with a wide range and lifted it in July, October and January. A holder who had learned to expect the opening guide to be conservative has had the opposite lesson this year.

The chief financial officer, Jayesh Sanghrajka, laid the cut on price as much as on volume. Revenue in the September 2026 quarter grew 1.5% from a year earlier in constant currency; he said volumes were softer and price increases smaller than planned, with competition intense. Pressed by an analyst, he was plainer: "that pricing expansion that we are expecting at the beginning of the year, that has not materialized". The first half grew 1.9%; by our arithmetic, reaching the top of the range needs the second half to grow about 2.1% from a year earlier if the two halves are of similar size, a little faster than the first half and faster than last quarter's 1.5%, and the company says the top assumes conditions improve.

What grew inside the quarter matters more than the total. The company said AI work was 10.5% of revenue last quarter, up more than 29% on the quarter before. Set against total sequential growth, those shares mean the AI line added about 2.4 points of the previous quarter's revenue, while the rest of the business shrank by about 1.3%, calculated from the company's rounded shares. An acquisition supplied part of the quarter's growth, so the existing non-AI work, if the acquired revenue sits there, fell a little further than that.

This is the mechanism behind the guide. Clients expect the productivity that AI tools bring to show up in their bills, and the company's answer is to sell new AI work on top. Last quarter the new work more than covered the shrinkage, yet growth from a year earlier stayed slow, and the price rises the year's plan counted on did not come.

The order book points the other way, but to a later year. Infosys signed large deals with a total contract value of $5.2 billion in the quarter, most of it new business; contract value is what a client may pay over several years, not revenue in a quarter. The largest is a new seven-year financial-services contract worth more than $2 billion, which starts its transition late in the fiscal year's final quarter and which the company expects to add more than one point to growth in FY28. Asked by an analyst why heavy bookings in earlier years had not lifted this year's growth, the chief executive, Salil Parekh, said contracts were turning into revenue at about the usual pace, and that the leak was the productivity savings passed back to clients.

Two things have held. Management's operating margin barely moved from the quarter before, and the margin guide stands even with pay rises taking effect in October and January. Measured in rupees, revenue rose 10.7% from a year earlier, several times the constant-currency rate; the gap reflects exchange rates rather than more work from clients.

That leaves this year's outcome resting on conditions the company does not control. The large new contract is an FY28 item, the AI line is growing but still a tenth of revenue, and the company says the bottom of the new range assumes the economy deteriorates further and pricing stays similar or slips slightly, while the top assumes both improve.