Infosys Lifts FY26 Guidance, ADRs Jump 10% on Strong Q3

Introduction

Infosys Ltd. provided a strong dose of optimism to the market on January 14, 2026, with its third-quarter financial results. Despite a sequential dip in net profit due to a one-time provision, the company's decision to raise its revenue growth guidance for fiscal year 2026 sent a clear signal of returning demand. This positive outlook immediately resonated with investors, causing Infosys's American Depository Receipts (ADRs) to surge by over 10% in overnight trading on the New York Stock Exchange, setting a positive tone for its stock ahead of the Indian market opening.

Q3 Financial Performance

For the quarter ending December 31, 2025, Infosys reported a consolidated revenue of ₹45,479 crore, marking an 8.9% year-on-year increase and a 2.2% rise from the previous quarter. This figure surpassed analyst expectations, indicating solid execution and stable client demand. However, the consolidated net profit stood at ₹6,654 crore, a 2.2% decline year-on-year and a 9.6% drop sequentially. The company clarified that this dip was primarily due to a one-time provision of ₹1,289 crore to comply with new government labour codes. Excluding this charge, the underlying profitability remained robust.

Upgraded Guidance Signals Confidence

The most significant development from the results announcement was the upward revision of the company's revenue guidance for FY26. Infosys now projects full-year revenue growth to be between 3.0% and 3.5% in constant currency terms, a notable increase from the previous forecast of 2% to 3%. This upgrade is a strong indicator of management's confidence in the demand pipeline and its ability to secure new business. Furthermore, the company maintained its operating margin guidance for the fiscal year at a healthy 20% to 22%, reinforcing its commitment to profitable growth.

Robust Deal Wins Underpin Outlook

Infosys's optimistic forecast is supported by its impressive performance in securing large deals. The company reported a Total Contract Value (TCV) of $1.8 billion for the quarter, a substantial figure that provides strong revenue visibility for the upcoming quarters. A key highlight was that 57% of this TCV came from net new business, demonstrating the company's success in winning new clients and expanding its market presence. CEO Salil Parekh attributed this success to the company's focus on enterprise artificial intelligence, particularly through its Infosys Topaz platform, which is helping clients drive transformation.

Key Financial Metrics for Q3 FY26

Analyst Commentary and Market Reaction

The market's response was overwhelmingly positive, with investors focusing on the strong forward-looking indicators rather than the headline profit decline. The more than 10% rally in Infosys ADRs to around $19.35 was a clear vote of confidence. This sentiment was echoed by several brokerage firms. Motilal Oswal Financial Services (MOFSL) reiterated its 'BUY' rating, raising its target price to ₹2,200, citing that upside risks outweigh downside risks. Similarly, Nuvama Institutional Equities maintained a 'BUY' call with a revised target of ₹1,900, noting that two consecutive quarters of solid deal wins provide high growth visibility.

Operational Stability and Workforce Trends

Beyond the financial numbers, Infosys demonstrated operational stability. The company's voluntary attrition rate on a last-twelve-months basis eased to 12.3%, a significant improvement that points to better employee retention. This is a critical factor for maintaining service quality and project continuity. The company also reported an increase in its employee headcount, a positive sign of confidence in future demand at a time when some peers have seen reductions. This stability in its workforce is essential for executing the large deals in its pipeline.

Analysis: A Forward-Looking Verdict

Investors and analysts have interpreted the Q3 results as a sign of resilience for both Infosys and the broader Indian IT sector. The market's willingness to look past the one-time impact on profit underscores a belief in the company's long-term growth story. The upgraded guidance, combined with a strong deal pipeline heavily influenced by AI-led services, suggests that client spending on digital transformation is recovering. Infosys's strategic investments in platforms like Topaz appear to be paying off, positioning it as a key partner for enterprises navigating technological shifts.

Conclusion

Infosys's third-quarter performance effectively balanced a short-term, one-off financial impact with a strong, optimistic long-term outlook. The company's ability to secure significant new deals and its confident revenue forecast have set a positive precedent for the sector. For investors, the key takeaway is the underlying strength of the business, reflected in the upgraded guidance and robust operational metrics. As the Indian markets prepare to open on Friday, January 16, the focus will be on whether the domestic stock price can mirror the strong performance of its ADRs.