Infosys Lifts FY26 Guidance, ADRs Surge Nearly 10%

Introduction

Infosys Ltd.’s American Depositary Receipts (ADRs) surged nearly 10% in New York trading on Wednesday, January 14, providing a strong positive signal for the Indian IT sector. The rally to approximately $19.20 on the NYSE was fueled by the company's decision to raise its revenue growth guidance for the fiscal year 2026, indicating renewed confidence in the demand environment after several quarters of cautious client spending.

Upgraded Guidance Signals Optimism

The primary catalyst for the investor enthusiasm was the upward revision of Infosys's full-year revenue growth forecast. The company lifted its guidance to a range of 3.0% to 3.5% in constant currency terms, a notable increase from the earlier band of 2% to 3%. This move suggests that management anticipates a recovery in client decision-making and technology spending, a positive sign for the broader global IT services industry.

Quarterly Performance Breakdown

For the third quarter ended December 31, 2025, Infosys reported a sequential constant-currency revenue growth of 0.6%, outperforming analyst expectations of flat growth. Consolidated revenue for the quarter stood at ₹45,479 crore, a 2.2% increase from the previous quarter. However, consolidated net profit saw a sequential decline of 9.7%, falling to ₹6,654 crore. This dip was primarily attributed to a one-time provision of ₹1,289 crore made to comply with new government labour codes, rather than a weakness in core operations.

Financial Health and Margins

Despite the one-time impact on profit, the company's operational efficiency remained stable. The EBIT margin for the quarter was 20.8%, a slight dip from 21% in the preceding quarter. Crucially, Infosys reiterated its full-year operating margin guidance of 20% to 22%. This reaffirmation signals management's confidence in maintaining profitability and suggests that downside risks to margins are limited in the near term.

A Surge in Deal Momentum

A significant highlight of the quarter was the sharp rebound in large deal wins. Infosys secured deals with a total contract value (TCV) of $1.8 billion, a substantial jump from the $1.1 billion reported in the previous quarter. The quality of these deals was also strong, with 57% of the TCV coming from net new contracts. A major contributor to this success was a large-scale engagement with the UK's National Health Service, underscoring the company's ability to win significant public sector contracts.

Key Financial Metrics (Q3 FY26, Consolidated, QoQ)

Management Commentary on AI and Growth

CEO and MD Salil Parekh attributed the strong performance to the company's differentiated offerings, particularly in enterprise AI through its Infosys Topaz platform. He stated, "Clients increasingly view Infosys as their AI partner with demonstrated expertise, innovation capabilities and strong delivery credentials. This has helped them unlock business potential and enhanced value realization." This focus on AI is central to the company's strategy for capturing higher market share and driving future growth.

Hiring and Workforce Stability

Infosys also showed positive trends in its workforce management. The company's headcount increased for the second consecutive quarter, reaching an 11-quarter high. Simultaneously, the employee attrition rate eased to 12.3%, indicating improved employee retention and a more stable workforce. This stability is crucial for ensuring consistent project delivery and client satisfaction.

Market Reaction and Investor Sentiment

The market's reaction was overwhelmingly positive. The nearly 10% surge in Infosys's ADRs reflected strong investor confidence in the revised guidance and robust deal pipeline. In India, the company's shares had closed 0.75% higher on the BSE ahead of the results announcement, suggesting that domestic investors were also optimistic about the company's prospects.

Conclusion

Infosys's third-quarter performance and upgraded FY26 forecast provide a compelling narrative of resilience and returning momentum. While the headline net profit was affected by a one-time charge, the underlying operational strength, highlighted by strong revenue growth, massive deal wins, and stable margins, painted a positive picture. For investors, the key takeaway is the company's optimistic outlook, which could serve as a leading indicator for a broader recovery in the IT services sector. The focus now shifts to Infosys's ability to convert its strong deal pipeline and leverage its AI capabilities to meet its enhanced growth targets.