Yes. Good evening. Thanks for taking my question. I have a question on vendor consolidation. This has been going on for last at least a couple of years now. Do you think there has been a shift in the vendors we are competing with? Maybe earlier, it wa s the longer tail of small vendors, which these enterprises had added post-COVID. And you think now it has shifted to more larger, like, peers, and therefore, the fight to hold on to your turf and add more becomes a bit more challenging and kind of puts pressure on our margins?
Hi. this is Salil. I think first on vendor consolidation, what we are seeing is, there is a range of options that clients have. And in that sense, it is something that is been ongoing for some time even beyond the last two or three years. But now, what we ar e seeing is Infosys is benefiting from this from a perspective of the type of work we are bringing to clients and especially what we have done in the last couple of years in enterprise AI and the consistent delivery that we have shown across all of our other offerings over that time frame. That, in the past, we have talked about. We also have today Automation and Lean. All of those elements come together, and that is where we see clients selecting us. And these are with respect to some large other companies and some midsized, small other companies as well. In terms of pricing, we see that there is usual approach, which is focused on productivity. So it is not any different when there is a consolidation or wher e there is something new. But over time, there is an expectation of productivity improvement, and we are in that discussion quite mindful of what are the benefits we can provide through Automation, Lean and all the enterprise AI work we are doing.
My second question is on your seasonality. You are probably the only company who is saying that H2 will be weaker than H1. Most of the others are hopeful of a rebound in second half. So is it just seasonality that is driving this kind of a view? Or do you think some of the large deals, which are helping us in sectors like Communication, they kind of get into steady state and therefore, the visibility, given the large deals last year were weak er than the year before, the visibility from deals ramping up in the second half is lower?
So Abhishek, it is also a factor of what you deliver in H1. So if your H1 is relatively in line with what you are expecting, then the usual seasonality will come in. If you have seen a higher pressure on H1, then your hope on H2 is better. So, I think you will have to see all of those commentary in line of the performance of H1 and H2. I think our Q1 has been strong. If you look at compared to all the results in the market, I think we have delivered st rong performance. And that makes us believe that we would have a usual seasonality in the model.
Okay. And then as it relates to the smaller deal s, in the past, you have commented on small deal activity. Can you just give some comments on how that progressed during the quarter?
We do not comment on small deals on a regular basis. There was one quarter where we saw a heightened activity in the small deals. That is why we did call that out because we thought it was relevant information from an investor perspective. At this point in time, our overall pipeline continues to remain strong. Within that, the large deal pipeline is also strong. We have delivered $3.8 bn, which is 44% increase on a sequential basis, 55% net new. So , I think all of those are positive aspects of the deals and pipeline.
Yeah. No, so I understand that, but it is a lowering that I am talking of. Like how did you kind of arrive at that conclusion? What did you see which tells you that the environment is not improving? I am just trying to understand the data points behind that.
Yeah. So same thing, right? The client behaviour in terms of decision-ma king, the discretionary spends that is happening on the various accounts. So all of those are anecdote data points that we get when we do a ground-up model in terms of where we stand.
Yeah. Thanks for the opportunity and congratulati ons on a very solid quarter. Salil, wanted to understand the commentary about vendor consolidation deals, it has been bullish, not by just you or others. And it seems that INFY is winning higher share versus some of the peers. So, considering that, and this may continue going forward, one can assume that TCV can continue to remain healthier in the coming quarter as well because vendor consolidation deals are larger in size?
Hi. This is Salil. I think typically, we do not give a comment on the large deals value in the future quarters. As Jayesh was sharing earlier, the pipeline for large deals is in a good place. We see that we are benefiting from, as you were describing, on consolidation and then some of the other areas on AI, enterprise AI. So, we do not have like a view on what that value will be for the next three quarters, by quarter. But overall, we feel good in where the pipeline is. We see mega deals in that pipeline. But that is where we would leave it.
Okay. Fair enough. What will change for clients to start spending on discretionary apart from improving macro? Any discussion with the clients implies or gives you any hope for green shoots possible on the discretionary side, may not be near term, but maybe by the fag end of FY26?
So there, again, we have not, in that sense, have a view on where or when that would happen. What we do see is clients are quite comfortable in work ing with us on enterprise AI programs, on cloud, on data analytics, on enterprise applications, and what we have discussed a little bit in more depth, on the consolidation programs. There is still quite a lot of attention on cost and efficiency. So we will see how and when the clients change their thinking on some of the other points you mentioned.
Thanks for taking my question and congrats again for a solid growth in this quarter. So Salil, my question was on basically the outlook that you pr ovided, that we have not seen much things improving, and that is why the guidance stands where it is. Now, in your conversation with the clients, what is the deduction that we have that, look, the tariff was probably one of the most important reasons that we had in the guidance when we gave at the end of Q4? But July 9 deadline has come and passed, now we are looking at the August 1 deadline. We have a trade deal with Japan. Do you think that over the next few months or quarters, maybe if these trade deals get finalized, the client spending could come back quickly, and basically, they might look at restarting the discretionary spend also or do you think it is more structural in nature? It will also be weighed down upon how the U.S. ec onomy growth picks up, how basically clients are looking to spend on all the other factors? Is it a mix of all? Or do you th ink an improvement in the tariff scenario could restart the spend that have been put on hold?
I think those are sort of important questions. What we see is, there is an interest with clients across industries to essentially leverage massively the new enterprise AI technology. A lot of that for productivity, a lot of that for new ways of doing bus iness, which will spur their own growth and spur and expand revenue for us. The foundation of that is much more attention to be on the cloud, much more attention to have a strong sort of data infrastructure, and then much more attention to have even enterprise apps onto the cloud environments. So all that, like interest is there. And then there is also the view of various GDP growth and economic activity go. And so our view is to make sure that there is an interest in cost and efficiency. We see some benefits of consolidation. We play that as an activity because we have strength there in addition to enterprise AI and the other areas. And we try to make sure that we are well positioned for that. The other points in terms of timelines, we look at it for this year based on what we see. And at the end of next quarter and so on, every quarter as we s ee things which are different or the same. So we then update what we are looking at in terms of the overall activity.
Got it. Just one last one bit from my side since you touched upon the interest in AI. Is the current AI cycle very similar in nature to the digital adoptio n cycle that we saw in 2015-16? Do you think the level of interest of clients is pretty much the same? The trajectory that the industry took at that point of time, in the sense that initially, the industry's IMS and other revenues were cannibalized by the cl oud adoption, and then gradually, it picked up momentum. Do you think the AI cycle could also play out in a similar manner? Any thoughts on that would be really helpful.
So there, my view is, every big technology shift has a way for enterprise clients making decisions in different ways. So, whether it is that cycle or t he one before that, with everything on the internet or the one before that, each tech cycle has had a way of playing out. So one of the factors we see, because large enterprises have alr eady a landscape of different technologies. So for anything to make a big impact, it needs the technology to be distin ctive, which we think enterprise AI is. And it has to then work with the ecosystem and then make an impact there. So I do not have a view on, will that be looking like th e one in the past or how similar or different it is. But what we do have a view on is we see a tremendous interest in enterprise AI from clients. We see foundational capabilities that they need, which we are good at, cloud, data, etc., which we think will help. And we are also pretty good in enterprise AI. So we are more prepared as that plays out. Now like the timeline of that and the scale, at the end, the enterprise tech, let us say, landscape is much larger today than it was in 10 year ago peri od. So there is a lot more things, which need a change. So generally speaking, that gives me a good sort of feeling about the future. But to try to put that as it is similar or different is more difficult for me.
All right. And if I still want to understand the AI-rela ted productivity - the impact that you are facing already. Is there any geo or vertical specific trend that you see here, perhaps more maybe on North America and Hi-Tech? Is there any such trend across geographies and verticals?
On the AI, we see good adoption in many places. So there is not like one thing which will stand out. But one of the sort of comments we shared earlier was in Financial Services. If you look at our largest clients, half of them now, we have become the AI strategic partner. It is a key, I would say, positional advantage that I think Infosys has.
Hi, thank you. So I mean, clearly, good to see a refreshing revenue print here. Key question is on your organic growth momentum. On a year-over-year basis for the quarter, it is quite strong, probably 3.5%, 3.4%. Overall growth was about 5% last quarter. So the question is, why are you still guiding for like 2% at the midpoint? What is it that you are seeing that makes you feel that the year-over-year growth trajectory on constant currency will weaken, given the solid signings you have had? Or asked another way, why you dropped the upper end of the guide here?
Hi Ankur, this is Jayesh here. As we had said at the beginning of the year, at the lower end of the guidance, we had baked in heightened uncertainty. At the higher end of the guidance, we had baked in steady to improving environment. While Q1 was strong, if you look at the environment, underlying has not really changed. Q2, we are not really seeing signs of significant environment changes. Tariff situation still remains escalated. The geopolitical si tuation has not really changed. And this is the part of the year, Q1 and Q2 put together, is t he strongest part of our year seasonally, right? So looking into all of that, our current guidance at the bottom end expects continuing or elevated uncertainty, and the upper end bakes in a steady environment at this point in time. This is based on what we see today.
Maybe a couple of questions on AI. Are there any kind of margin or pricing trade-offs you see when you engage with clients on renewals or maybe even out of turn where the expectation is some of the benefits of AI is baked into their contracts? Are you also proactively taking this to clients? That is part number one. Part number two is, there seems to be a lot of significant increase in vendor consolidation, and I think AI is part of those contracts as well. Do you think that is potentially increasing the replaceability of vendors such as yourselves because of more use of Generative AI?
Hi, Ankur. This is Salil. I think on the first part, what we see with enterprise AI now is, there are areas where there is good productivity benefits and espec ially as we are deploying agents or setting up whole enterprise AI platforms for clients using foundation models. And then there are some areas where we are seeing new opportunities for revenue. So on the first part, typically, there are productivity gains, and those are shared between clients and ourselves. In many cases, those are situations where either the clients are seeking it themselves or we are bringing it to clients in a view to make things more efficient. And in doing so, we typically get an ability because I think our enterprise AI work is quite solid to do other things, both in enterprise AI, but in other areas with the clients. So that is how we are seeing that piece of the work going on.
Hi, good evening and thank you for taking my question. Before I get to the question, just a clarification on the guidance part, which you spoke about, Jayesh , just now. So your revision of guidance, especially the top end of the organic growth, it is just a reflection of change in the macroeconomic environment assumptions and not necessarily how you look at the deals ramping up or the impact of third party or any of the operational related issues, right?
Yes. I mean, see, at the beginning of the year, we had already called out lower third party. So that factor does not change. As we had also called out, at the top end of the guidance, we expect steady to marginally improving environment. Now we have not seen the environm ent improving in Q1. Almost one month of Q2 is gone. The challenges with respect to tariffs, the cha llenges with respect to geopolitical environment continue. Clients still remain on a wait and watch with respect to discretionary spend or whether it comes through deal signing, the cycles remain elongated. So I think from all of that perspective, what we are seeing now is at the upper end of the guidance, we are expecting a steady environment, and that is what is baked in the guidance. Having said that, just to clarify, if you look at Q1 and YoY on Q1, the third-party cost on a YoY basis was flattish. So when you compare a YoY growth and then extrapolate that for the full year, there would be a headwind from that perspective when you look at a full-year basis growth on the third-party part.
Got it. Thanks. And just the first question around t he revenue piece. So in this quarter, you spoke about that there has been pricing and productivity benefit of about 70 bps in the first quarter. Can you just give some details around that? Where are we getting that? And through the year, you spoke about that the third party will come down on a full-yea r basis further. But from first quarter level, will it further come down from these levels?
So if you look at the pricing, we have spoken about it earlier in terms of the Project Maximus, the value-based selling within Project Maximus. There are multiple tracks within Project Maximus. And I think they have helped. The 70 basis points is a combination of both the benefit on back of Project Maximus as well as some part of seasonality bec ause in this quarter, you have higher working calendar days, given some part of furlough flush back also happens. So you do get that benefit also. So partly, it is on account of seasonality. Partly, it is on account of the Project Maximus that has helped. But when you look at a full-year basis, last year, we did talk about 3.5% on terms of pricing benefit that we got. Of course, there were also lo w-hanging fruits that we captured. But in my mind, the Project Maximus is continuing contribution on this side. On the third party, I do not think we are giving quar terly color on this. All we have said is looking at the deals we have signed and the deals in the pipeline, we expect FY '26 third party to be lower than FY'25 third party.
Thanks for that. My second question was on Europe per formance. For the last four or five quarters, Europe has been constantly outperforming your overal l growth. So, what is driving that? And, how sustainable do you think this outperformance could be or just a strong growth could be?
So, I think the growth in Europe in last multiple quarters and years is on back of a few things. We are one of the first companies a few years back to call out Europe as an opportunity. We have made, on back of that hypothesis, investments in Europe. A nd that has helped us win some of the very, very large and mega deals in Europe. So that has definitely helped from the growth in Europe perspective. There are consolidation deals that we have won as well in Europe. So that has helped. And over a period of time, Europe is also opening up from out sourcing perspective. So that is also helping in growth perspective.
Hi. Thank you for taking the question. I wanted to ask on geographies. So Europe obviously, very strong, while North America was up slightly. Can you comment on North America? Do you have visibility to an improvement in growth there?
Bryan, I think North America remains an important part of our business. It is the largest geography for us. At this point in time, we are seeing opportunity in pockets, especially in the Financial Services in North America, etc. But there are pockets of geographies of Manufacturing, Retail, etc., which all remain challenging. At the same time, when you look at the large deal wins that we signed this quarter, 20 of them came from North America, 6 in Europe and 2 in ROW. We do see opportunities, both in terms of large deals, cost takeout as well as consolidation in North America.
Great. Thanks for taking our questions. Just a clarification on what you had called out earlier in terms of what is contemplated in the range of outcomes. Is it fair to assume that the midpoint of your outlook contemplates a slight deterioration in demand environment?
So Jonathan, as I said earlier, we build multiple models that lead us to multiple ends of the guidance, right? These models are not built to converge on a mi dpoint of the guidance. That is an outcome of it. At the lower end of the guidance, we have baked in higher uncertainty from where we are today. At the upper end of the guidance, we have baked in a stable environment. And there will be multiple models that will lead us to vari ous middle points of the guidance in between. And that is how the guidance band has arrived as always. The midpoint just becomes an outcome of the two ends of the guidance.
Thank you for that color. And just as a follow up, can you help decompose what you saw in terms of client demand as you progressed from April thr ough June and whether any of those trends have continued into July?
Hi. This is Salil. I think on client demand, what we see is huge interest in AI and especially what we are providing as agents and what we are able to do wi th large enterprise AI platforms, what we are doing with small language models. Those are places where there is discussions and then actual project work everywhere as part of larger programs. Then we saw more and more interest in the consolidation that we have already discussed. We have seen good attention on cost and efficiency. We have seen strong interest, for example, in the foundations of enterprise AI, on cloud and data and analytics type of areas, especially some of t he newer areas on the new SaaS data platforms. Then we have seen very good traction on enterprise application areas where there is movement to new generations of SaaS platforms on enterprise scale. So those are the things where we are seeing some interest. And then because of the economic environment, especially if you look at logistic s or consumer products or some aspects of manufacturing, auto and so on, we see some constraints that have come in, in this current environment. So, it is been a mix of those sorts of things.
Yes. Hi, Salil, Jayesh, good evening. Just one question, and sorry to kind of focus on the same point. So the slight lowering of the upper end of the organic guidance, is it due to taking a more conservative view of the environment or something that you actually saw on the busi ness ramp down, slower ramp-ups, discretionary declining faster, not picking up, something on the business, or is just taking a more cautious conservative view of the environment?
No, Suren, I think it goes back to the commentary I gave in the beginning of Q1. We did say that the upper end of the guidance does bake in a slightly improving environment. Having had a benefit of one quarter gone and a stronger visibility of Q2, we do not see the environment changing significantly. And that is also visible from all other results. So all of that is baked in, in the upper end of the guidance today. Today, what we have baked in at the upper end of the guidance is a steady environment. And as I said earlier, the H1 is stronger for us than H2. So once the stronger part of the period is gone, in an uncertain environment, our ability to change the guidance in a positive manner at the upper end gets much more restrained.
Yeah, thanks for the opportunity. Two questions here. Firstly, if you look at the overall wage hike impact that has played out over the past two quarters , almost 240 basis points, it seems like it is relatively higher than where the industry has been. And of course, the growth has been fairly muted for us and for the industry as well. So I just wanted to understand the thought process behind that kind of wage hike. And is it fair to assume that with that, we would not see any other action in FY26?
So Rishi, the wage hike has been phased out, as you know, and it is as you mentioned into two phases. Large part of our organization up to middle level of the employees got a wage hike in January and the rest of the employees got the wage hike effective April 1. What I called out, 100 basis points in this quarter is a combination of wage hikes as we ll as the higher variable pay that we paid to our employees. So that is a combination of both of those factors. We have not really split that out, but that is the overall wage hike. The wage hike, as we said at the beginning of the year, are relatively similar to the wage hikes that we have done in the earlier years in terms of percentages, etc. And coming to the second part of your question, I think too early. We just have begun the year. We have had the wage hike effective this quarter. We have not really decided ‘when’ about the next wage hike at this point in time. We take multiple factors when we consider the wage hikes, including market scenario, inflation, peer practices, etc., etc. We will take a call at the appropriate time.
Fair enough. And the second question is, some of these vendor consolidation and GCC kind of deals that we have won, just wanted to understand, are these any different in nature when it comes to the kind of upfront investments that are required either on the P&L side or on the balance sheet side versus, say, some of the large deals we have done a few years ago?
See, if you look at the commentary that I gave in terms of cash flows, we are still continuing to believe that we will generate 100% plus conversion of our fr ee cash flow to net profit. We have already had five very strong quarters of cash generation, and we are still expecting to that continue for the rest of the year. So obviously, these are not impacti ng our balance sheet or cash flow from that perspective. We expect these to be the regular deals with the regular contours of the deals. So these are not significantly different from that perspective.
Okay. And the last question is, I think in the press, you also mentioned that the aspiration to improve EBIT margin in this year over last year continues to remain. With the 1Q being lower than 21.1%, which was the margin in FY25, is it fair to assume we can still aspire to improve margin QoQ in the rest of the three quarters that will take us to better margin on a YoY in FY26? So what would be the levers apart from likely decline in the third-party equipment for service delivery?
So, Sandeep, it is only one-fourth of the year which has gone behind. This is a part of the quarter or part of the year where we also have rolled out a compensation increase. So that is a large headwind that we have absorbed in the quarter as we got into the year. As we go further down, there are multiple tailwinds in terms of Project Maximus, va lue-based selling, etc. So that will help for sure. The third party as it reduces, will help on margins. At the same time, there will be headwinds from t he mega deals or the deals that will ramp up, in terms of transition activities that we will incur, where we do not get revenue, but we incur costs, etc. So these are factors that one will have to balance as we go through the year. At this point in time, as I said earlier, in the press also, our aspiration remains to improve margin from where we are.
So Salil, I am asking if the impli ed outlook for the remaining part of the year, is this more a function of macro and client tech overall spend related uncert ainty that you are referring to? Or is it more of the structural AI-related productivity pass back? You did share some numbers of 5% to 15% related benefits that are being passed in, through AI programs.
Hi. This is Jayesh here. This is more about the macro uncertainty that we are seeing. As I talked earlier, we have not really seen the environment improving from where we were at the beginning of the year. The tariff-related uncertainties still conti nue. The geopolitical uncertainty is still there. The client behaviour has not changed. Many of the clients are still in a wait and watc h mode when it comes to discretionary spending, etc. So, we have not really seen the environment changi ng, in the most strong part of the period, seasonally strong part of our business.
Hi. Thanks for the opportunity. Two questions. One, Jayesh, in terms of the depreciation and amortization going down to almost 50 bps, what has been the driver of that? And the second is in terms of SG&A bump up that we have seen, which is almost 90 bps this quarter. So is it more sales addition that is driving it? Or are there any, say, one-off events which possibly led to a material bump up?
Yes. On the depreciation and amortization, if you recollect last quarter, we had a one-off on account of amortization of intangibles with respect to on e of our acquisitions that is impacted by 40 basis points. Not the reversal of it, but the lack of it this quarter-on-quarter walk, shows up as 40 bps delta. And the balance has some part of the currency impact as well. On the SG&A, it is multiple factors. Comp increase that we did in Q1 has an impact. The variable pay that we did has an impact. The hiring for the S&M mainly to improve our growth trajectory, which is what I called out as 20 basis point sales invest ment in the margin walk. So that has an impact. The investment that we have done in terms of brand building, and we had some events this quarter. So that also had an impact. So I think all of that is reflected in SG&A.
Yes, hi, team. Morning, and congrats on a good quarte r. A couple of questions. Just firstly, on the inorganic contribution. So the 40 bp s impact that you are referring to , is this entirely from the acquisitions consolidated in this quarter? Because if I were to assume some residual impact from in-tech, the full year inorganic number comes out to be sl ightly higher? So just that clarification will be helpful. And the second question is, there was a comment ary around how discretionary spends are being kind of bank rolled entirely by the sa vings made by AI. So just wondering, is this going to be sort of a structural trend where there is going to be a cannibalization going forward regardless of how the demand improves? Will the clients expect us to ju st keep self-funding the discretionary initiatives based on these gains or is there sort of a more structural demand recovery built in, let us say, post the next 12 to 18 months, where the clients do need a serious amount of investment in their data and their tech stack to basically modernize?
So Abhishek, the 40 basis points that I talked about is sequential. So 2.6% includes 40 basis points of on account of acquisitions. These are the acquisitions that we made in this quarter, the MRE and The Missing Link in Australia. So that has contributed around 40 basis points out of the 2.6%.
Right. I think I was just referring to your comment on the press conference that you said, even the full-year impact will be 40 bps and hence, the confusion.
Yes. So in-tech was pretty much 9 out of the 12 mont hs in the last year. So if you look at full-year basis, it is not significant. So that is the reason I said it is simi lar impact on a full-year basis. If you add 3.5 months of in-tech and 11 months of MRE and Missing Link.
Hi, thank you. This is Keith Bachman from Bank of Montreal. My firs t question is, your headcount was relatively flat quarter-on-quarter, includi ng software professionals. How do you think about headcount trends through the year?
So Keith, we were able to increase our utilization this quarter by 30 basis points. So that helped. Part of our growth, as I mentioned earlier, came on back of the pricing increase, including the seasonality in the business. So that has helped as well. But as we go forward, whatever volume growth will come in, considering that we are operating at a peak headcount, that would need additional head count either through subcontractors or our own employees in terms of efforts.
Okay. Perfect. And then my second question is, the reason I said headcount, I just did not know if you had been able to break the cycle a little bit on growing headcount faster than effort because AI might help you, but it sounds like in the next couple of quarter interest, no. The second question is related to your delivery m odel. How do you think about your delivery model changing over the next year or so in terms of having, A) FTE base versus B), more success base or more fixed price contracts? Do you think your delivery model may change, enabled by or may be caused by the advent of more AI capabilities?
So Keith, if you look at the delivery model, I do not think delivery model will change in a short period of a couple of quarters. Over a l onger period of time, on the back of AI, etc., we may expect some part of newer pricing models em erging. It could be outcome-based pricing model. It could be pod-based or studio-based pricing model, etc. So there are various new pricing models that are emerging as we speak, I do not think over the next year or so, the entire model is going to change. The change will happen gradually in my mind.