Infosys Falls 4% After Cutting Its Growth Forecast Again — $5.2 Billion in Deals Wasn't Enough

Infosys shares fell as much as 4% on Monday, October 26, 2026, after India's second-largest IT services company cut its fiscal 2027 revenue growth guidance for the second straight quarter — to 1%–2% in constant currency, down from 1.5%–3%. The stock touched an early low of ₹1,107 against a previous close of ₹1,153.80, more than 5 million shares changed hands in morning trade, and the Nifty IT index dropped as much as 2.5% as the guidance cut dragged the whole Indian IT sector lower.

What happened

Infosys reported its July–September quarter (Q2 FY27) after market hours on Friday, October 23, so Monday was the first chance investors had to react. The headline numbers were not weak on their own: revenue rose 10.7% year on year to ₹49,244 crore (about $5.15 billion), net profit rose 6.2% to ₹7,823 crore, and the operating margin held at 21.0%.

What markets punished was the outlook. Management lowered full-year FY27 constant-currency revenue growth guidance to 1%–2%, and Reuters reported that most analysts had expected only a trim of the top end to about 2.5% — not a cut to both ends of the range. Reuters also pointed to weakness in the company's North America business, its largest market. By 9:32 a.m. IST the stock had trimmed its loss to about 1.4% at ₹1,138, but it stayed among the Nifty 50's top losers alongside Shriram Finance.

Why it's blowing up

This was Infosys's second consecutive quarterly guidance cut, and Goldman Sachs analysts noted that the new midpoint now implies modestly negative organic revenue growth for FY27. That lands in the middle of a broader market argument about AI: investors are asking whether heavy AI spending is creating new work for IT services firms or letting clients demand the same work for less money. Systematix called it a "disappointing quarter," citing pricing pressure from competition and client productivity demands linked to AI, plus subdued spending by retail and high-tech clients. Motilal Oswal pointed to weaker volumes, smaller price increases, a shift toward offshore delivery, and Infosys's exit from a large European manufacturing contract.

The irony driving the conversation: the same quarter produced the company's strongest deal headline in a while. Large-deal wins totalled $5.2 billion in total contract value, up from $3.6 billion in the previous quarter, with 62% net new — including a mega deal worth more than $2 billion. Citibank analysts said the mega deal should ease concerns that Infosys would start FY28 at a disadvantage to peers after losing the European manufacturing client.

Key facts

Guidance: FY27 constant-currency revenue growth cut to 1%–2% from 1.5%–3%; operating margin guidance held at 20%–22%.
Stock reaction: Down as much as 4% to ₹1,107 in early trade Monday; Nifty IT fell as much as 2.53% to 31,184.70.
Q2 FY27 results: Revenue ₹49,244 crore, up 10.7% year on year (1.5% in constant currency); net profit ₹7,823 crore, up 6.2% year on year but only 0.7% sequentially; operating margin 21.0%.
Deals: Large-deal total contract value of $5.2 billion, 62% net new, including a mega deal above $2 billion; half-year deal value was about $8.8 billion, up roughly 28% year on year.
AI revenue: AI accounted for 10.5% of total revenue in the quarter, growing about 29% quarter on quarter.
Dividend: Interim dividend of ₹26 per share, with a record date of November 3, 2026.
Analyst moves: TD Cowen and Systematix cut fair-value estimates to ₹1,150 from ₹1,200; LSEG data showed an average "Buy" rating with a median target of ₹1,180.

What's next

Management flagged second-half headwinds that investors will watch closely: wage hikes in October and January, amortisation, softer seasonality, and client ramp-downs. HSBC expects second-half margins to stay under stress from those wage hikes even though the full-year margin band was maintained. The bull case now rests on execution — whether the $5.2 billion deal book, and especially the net-new mega deal that begins transitioning late in Q4, converts into reported growth for FY28. The bear case is simpler: if clients keep using AI to demand productivity discounts, guidance can be cut a third time. Infosys was the last of India's top five IT firms to report this season, after TCS and HCLTech met estimates earlier in October, so its cut sets the cautious tone for the sector heading into the December quarter.

This post reports market news and analyst reaction only. It is not financial advice and does not recommend buying, selling, or holding any security.

FAQ

Why did Infosys shares fall on October 26, 2026?

Infosys cut its FY27 constant-currency revenue growth guidance to 1%–2% from 1.5%–3% — a deeper cut than analysts expected — and reported weakness in North America, so investors sold the stock despite profit rising 6.2%.

What were Infosys's Q2 FY27 results?

Revenue was ₹49,244 crore (about $5.15 billion), up 10.7% year on year; net profit was ₹7,823 crore, up 6.2%; operating margin was 21.0%; and large-deal wins totalled $5.2 billion.

How big is AI in Infosys's business now?

Management said AI revenue reached 10.5% of total revenue in Q2 FY27 and grew about 29% from the previous quarter.

What dividend did Infosys declare?

An interim dividend of ₹26 per share, with a record date of November 3, 2026.