Infosys AI Revenue Hits 10.5% Of Sales, Yet Growth Outlook Is Cut To 1% To 2%
CEO Salil Parekh says AI work is new business, not relabeled services, while the company trims its revenue forecast for the year.
Infosys said AI now makes up 10.5% of its revenue, up from 8.2% last quarter and growing 29% sequentially, CEO Salil Parekh said on the company's second-quarter earnings call. The same call brought a lower revenue-growth guidance of 1% to 2% in constant currency, down from 1.5% to 3%.
New work, not relabeled work
Asked by a journalist from Business World whether the AI figure simply reclassifies existing services, Parekh said AI revenue is "not something which is replacing what we have." He cited AI-led modernization of a client's systems as work Infosys was not doing before, and said only work fitting one of six defined AI areas is counted in the 10.5%.
Answering Hari Priya Suresh of Reuters, Parekh agreed AI is on a low base and said there will be "some volatility" from quarter to quarter, though he expects growth to continue. He said Infosys does not report AI margins separately. Asked about a peer's claim that AI projects earn better margins, he said he did not know about that comment.
Parekh said clients can choose among 15 models through Topaz Fabric, the company's AI platform.
Big deals, smaller forecast
Infosys signed $5.2 billion in large deals, including a net-new mega deal of over $2 billion over seven years with a large international company, plus a $1 billion renewal. Parekh said the net-new deal should add over 1% to revenue growth in the coming financial year.
CFO Jayesh Sanghrajka said the benefit starts late in the fourth quarter, so this year's contribution will be minuscule. He tied the lower guidance to softer volumes, pricing pressure from competition and clients' demands for productivity gains, plus weakness in retail and high tech. Operating margin was stable at 21%, with guidance held at 20% to 22%, and free cash flow was $922 million.
Hiring and dividend
Headcount rose by 4,000 net, and Sanghrajka said Infosys plans to hire 20,000 or more people this year. He put attrition at roughly 13%. The interim dividend rises to 26 rupees from 25, in line with a policy of returning 85% of free cash flow to shareholders over five years, he said.
Sanghrajka said the over-$2 billion deal ramps from late in the fourth quarter, so its full effect on revenue arrives next year.
Sources
- Infosys News - Infosys Announcement, Latest News on Infosys - The Economic Times — economictimes.indiatimes.com
- Infosys Q2 results: Net profit rises 6.2% to ₹7,823 cr, revenue up 10.7% | Company Results - Business Standard — business-standard.com
- Infosys Q2 Results: Profit rises 6% YoY to Rs 7,823 crore; co lowers revenue guidance - The Economic Times — economictimes.indiatimes.com
- Infosys beats Q2 estimates, lowers annual revenue forecast | Company Business News — Reuters
- Infosys cuts forecast as AI spending shift deepens North America slowdown - CNA — channelnewsasia.com
