(Bloomberg) -- Infosys Ltd. cut the upper end of its sales growth outlook as global clients slow down technology spending at a time of elevated interest rates and geopolitical conflicts.
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India's second-largest outsourcer said revenue will grow 1.5% to 3% in the fiscal year through March 2027 on a constant currency basis. In April, it had guided for 1.5% to 3.5% growth. Analysts were forecasting 3.4% on average.
Infosys and larger homegrown rival Tata Consultancy Services Ltd. are slashing expenses and reducing graduate hiring as demand for legacy IT projects wanes, with clients turning their attention to artificial intelligence. The Indian IT giants are trying to grab a share of the AI spending, while also using the technology to boost their own efficiency.
Shares of Infosys and TCS have declined more than 40% since the start of last year as investors assess the impact AI will have on their long-term prospects.
The AI boom poses a major threat to India's $280 billion IT services industry that's thrived for decades on labor arbitrage and transformed the country into the world's back office. While AI tools from OpenAI and Anthropic PBC are threatening to drive clients away, Infosys says it remains a key partner to its customers' transformation projects. It already embeds AI into its offerings in a bid to curb costs and convince corporations to maintain or enhance their IT budgets.
Some IT service providers, like Mumbai-based TCS, have begun to pivot their business. The Tata Group company has partnered with OpenAI to build AI data centers and is in similar discussions with other tech giants.
On Thursday, Infosys said its net income rose 12% to 77.8 billion rupees ($806 million) for the first quarter through June 2026. Analysts estimated 78.34 billion rupees on average. Revenue surged 14% to 482 billion rupees, partly helped by a decline in the Indian rupee versus the dollar and euro.
What Bloomberg Intelligence Says
Weak enterprise demand is likely to frame Infosys' 1Q results, with discretionary IT budgets still constrained by geopolitical uncertainty, tariff risk and AI-driven reprioritization.
- Tamlin Bason and Anurag Rana, analysts
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