Infosys Navigates Uncertainty with Strong Q2 FY26 Performance and AI-First Strategy

Infosys Limited, a global leader in next-generation digital services and consulting, has reported a robust performance for the second quarter of fiscal year 2026 (Q2 FY26), demonstrating resilience amidst an uncertain global economic landscape. The company delivered $5,076 million in Q2 revenues, marking a 2.9$1.1 billion, reflecting a 131.1% conversion of net profit. The total contract value (TCV) of large deal wins stood at $3.1 billion, with 67% being net new work, underscoring the company's continued market relevance and client trust.

The first half of FY26 saw Infosys's revenues grow by 3.3% year-over-year in constant currency, with the operating margin for H1 at 20.9%. Salil Parekh, CEO and MD, emphasized the company's unique market positioning and deep understanding of client priorities, particularly in leveraging AI for value creation. Jayesh Sanghrajka, CFO, highlighted the robust all-around performance and the strategic investments being made to future-proof the business, including a share buyback of ₹18,000 crores and an interim dividend of ₹23 per share, a 9.5% increase over the last fiscal year.

Segmental and Geographical Performance

The company's performance was broad-based across its key business segments. Financial services, the largest segment, contributed 27.7% of the revenue, manufacturing accounted for 16.5%, and energy, utilities, resources & services contributed 13.4%. Retail, communication, Hi-Tech, and Life Sciences made up 12.7%, 12.1%, 8.3%, and 6.4% respectively, with other segments contributing 2.9%. Notably, Financial Services and Manufacturing sectors demonstrated strong growth, both expanding above 5% year-on-year in constant currency terms in Q2 and H1. Europe also showed significant growth, exceeding 5% year-on-year in constant currency.

From a geographical perspective, North America remained the largest market, contributing 56.3% of the revenue, followed by Europe at 31.7%. The Rest of World accounted for 8.9%, and India contributed 3.1%. Europe's strong performance was attributed to strategic investments and an increased openness from European companies to adopt Infosys's services for transformation and cost efficiency.

Financial Summary (Consolidated, Q2 FY26)

Strategic Focus: AI-First and Digital Transformation

Infosys's strategic elements are deeply integrated with the global economy and market leaders. The company's vision is to be a globally respected corporation providing best-of-breed business solutions, leveraging technology delivered by best-in-class people. A core focus is on scaling its cloud business, continuing intensity in digital transformation, next-generation seeding, and advancing Generative AI and automation.

The launch of "Infosys Topaz Fabric" on November 3, 2025, exemplifies this strategy. This composable stack of AI agents, services, and models is designed to accelerate value from enterprise AI investments by unifying and enhancing IT service delivery. The platform includes over 50 purpose-built AI agents with out-of-the-box integration with nine enterprise platforms. This initiative is expected to unlock enterprise value by reimagining IT processes, building on existing IT investments, and offering AI-led capabilities without vendor lock-ins.

Another significant win was the 15-year, £1.2 billion contract with NHS Business Services Authority (NHSBSA) to deliver a new workforce management solution for the NHS in England and Wales. This solution, powered by AI and cloud capabilities, aims to modernize core operations, streamline workforce planning, and enhance the employee experience for 1.9 million NHS employees. The company also announced a joint venture with Telstra in Australia, acquiring 75% of Versent Group, to further propel AI-enabled cloud and digital solutions for enterprises.

Infosys is also committed to building an AI-first enterprise internally, with 90% of its employees being AI-aware and equipped to leverage AI tools. This has resulted in significant productivity gains, including 25 million lines of code generated by AI and $50 million in incremental cash flow from multi-agent invoice automation. The company boasts 58 "Digital Leader" ratings across its Digital Pentagon offerings, reflecting strong industry recognition.

Capital Management and Shareholder Value

Infosys maintains a strong and debt-free balance sheet, with consolidated cash and investments totaling US$6.2 billion. The company's capital allocation policy aims to return approximately 85% of free cash flow to shareholders over a five-year period through a combination of semi-annual dividends and share buybacks. The recently announced ₹18,000 crore share buyback and an interim dividend of ₹23 per share (a 9.5% increase) are in line with this commitment to shareholder value creation.

Project Maximus, an initiative to drive medium-term operating margin expansion, continues to deliver, contributing 30 basis points to margin expansion in Q2 FY26. This focus on cost efficiency and automation, alongside strategic pricing, has helped absorb headwinds and maintain profitability.

Outlook and Risk Management

For FY26, Infosys has tightened its revenue growth guidance to 2%-3% in constant currency terms, while retaining its operating margin guidance at 20%-22%. This revised guidance reflects confidence in the company's outlook despite ongoing uncertainties. Management acknowledges external factors such as macroeconomic uncertainty, geopolitical situations, and the evolving regulatory landscape, including the H-1B visa program and potential tariffs.

Infosys has proactively taken steps to mitigate risks, such as reducing dependence on work visas through localization, near-shoring, and local hiring. The company has also disclosed the McCamish cybersecurity incident and a related DOJ investigation, providing quantification of settlement amounts and outlining mitigation steps. The Board of Directors, with experienced members, is well-prepared to navigate uncertainties and ensure robust risk management.

Infosys's Q2 FY26 performance underscores its strategic clarity, sustained growth in key areas, and disciplined execution. The company's strong focus on AI and digital transformation, coupled with its robust financial health and commitment to shareholder returns, positions it well to capitalize on future opportunities and navigate industry challenges.