Infosys Q1 results preview: Top things to watch out for
While Infosys has guided for FY27 revenue growth of 1.5% to 3.5%, market experts will closely watch the pace of its AI revenue growth relative to peers, the demand environment, and whether the company makes any changes to its stated revenue guidance.
India’s second-largest IT services and consulting company, Infosys, will announce its financial results for the first quarter of FY27 on July 23 (Thursday). In April, the Bengaluru-headquartered firm guided for year-on-year revenue growth of 1.5% to 3.5% in constant currency terms for FY27 while projecting an operating margin in the range of 20% to 22%.
Infosys had also said it expects the Financial Services and Energy, Utilities, Resources and Services (EURS) verticals to post stronger growth in FY27 compared with FY26. Additionally, the company expects growth in the first half of FY27 to be stronger than in the second half.
The company's current revenue guidance includes the contribution from the Stratus acquisition, completed in April, but excludes the Versent joint venture and Optimum Healthcare. It also factors in a 0.75% to 1% impact from the ramp-down of work for one of its large European manufacturing clients and the exit from other low-return-on-investment (RoI) engagements. Additionally, a further 0.75% to 1% reduction in the onsite mix is expected to act as a tailwind.
Given that its larger peers have indicated that the macroeconomic and geopolitical environment remains largely unchanged since March and have maintained a cautiously optimistic outlook for FY27, analysts expect Infosys to deliver stronger sequential growth in what is typically a seasonally strong quarter.
Analysts at Motilal Financial Services expect the company to post a modest sequential improvement, projecting 2.0% quarter-on-quarter revenue growth in constant currency terms (around 1.0% organic growth), supported by acquisitions, operating leverage, and cost optimisation measures. For Q1 FY27, Nomura expects Infosys to report 1.5% sequential revenue growth in constant currency, including around 80 basis points of inorganic growth. However, the research firm expects 50 basis points sequential drop to the EBIT margin.
Earlier, Infosys' management said the company continues to see large opportunities in AI services, despite sustained competitive intensity and the productivity impact of AI expected to persist in FY27. Analysts will also closely watch the company's commentary on AI demand and AI-related revenues, especially after TCS, in its latest results, disclosed that its AI-related revenue grew 13.6% quarter-on-quarter, crossing an annualised run rate of $2.6 billion.
With Infosys concluded the acquisition of US healthcare digital transformation company Optimum Healthcare IT in May, its revenue contribution will now be reflected in the company's financials. At the same time, the evolving geopolitical situation in the Middle East and rising macroeconomic volatility in the US have led to differing views among brokerages on whether Infosys will revise its FY27 growth guidance. Motilal Oswal Financial Services (MOFSL) expects Infosys to lower the upper end of its FY27 revenue growth guidance by 50 basis points. In contrast, Nomura expects the company to retain both its revenue growth and operating margin guidance for the year.
