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Informist, Wednesday, Jul. 23, 2025

By Anjana Therese Antony

MUMBAI – The impact of wage hikes rolled out in April was seen in Infosys Ltd.'s operating margin for the June quarter, the company's management said in a post-earnings press conference. "The impact of that (wage hikes) is already baked in the margin of this quarter," the management said. "We had 100 basis points impact on account of wage hike as well as the higher variable pay that we paid our employees this quarter." Infosys had implemented the first part of its wage hikes in January and the second in April.

For the reporting quarter, the company's operating margin shrank to 20.8% from 21% for the March quarter. The management said the margin suffered an additional impact of 30 bps because of currency-related challenges. However, the impact of these challenges was offset by a benefit of 70 bps from the company's pricing and margin efficiency programme titled Project Maximus. "(Benefit of) 40 basis points came because of the acquisition-related impairment that we did in the last quarter," the management said.

The company said it saw a positive impact of 20 bps from a fall in third-party costs. Project Maximus was a margin expansion programme that Infosys had announced in 2023 to absorb headwinds from the fall in staff utilisation. The Bengaluru-based company retained its operating margin guidance of 20-22% for the financial year 2025-26 (Apr-Mar). This is the 10th consecutive quarter the company has retained this guidance.

It, however, revised the FY26 guidance for revenue growth in constant currency terms to 1-3% from 0-3% earlier. The June quarter performance and deal wins give the management "better confidence", which was indicated through the upward revision of the lower end of the revenue growth guidance. However, the upper end of the guidance was kept unchanged as the company "still sees possible uncertainty on the back of tariffs".

Infosys reported higher-than-expected profit and revenue for the June quarter. Its consolidated net profit fell almost 2% on quarter to INR 69.21 billion but managed to beat the Street's expectation of INR 67.85 billion. Its consolidated revenue grew just a little over 3% to INR 422.79 billion, also beating the projection of INR 418.32 billion.

The company said it had started FY26 on a strong note and recorded broad-based revenue growth in the June quarter. Most of its business segments as well as geographical regions reported positive revenue growth in constant currency terms. Infosys is among the few information technology companies to post sequential growth in revenue in constant currency terms, up 2.6% in the reporting quarter.

Infosys said it has started to gain more traction in its core financial services segment. The company's revenue from this vertical rose 5.6% on year in constant currency terms and accounts for nearly 28% of its overall revenue. 

The management further said it is seeing good demand for artificial intelligence agents. "We have built 300 agents across business, operations, and IT areas, and they are now deployed within our clients," it said. The company is also experiencing productivity benefits from AI. Clients are focused on enterprise AI and a lot of attention is being given to cost-efficiency projects, too, the management said.

HUMAN RESOURCES
The management said the company's employee utilisation is at a peak at 85% and it will continue hiring. Infosys's employee utilisation, excluding trainees, was 85.2% in the June quarter. Including trainees, the metric was 82.7%. In the previous quarter, the IT giant had said it was on track to hire over 20,000 freshers in FY26. It expects to continue hiring in line with what it had said at the beginning of the year.

"...we have a rigorous process for hiring college graduates. They then go through a very focused foundational training at the campus," the management said. Those who join the company get three shots to meeting its assessment standards. "After the third attempt, if they don't meet (the standards), they don't continue with the company," the management said. "This is a process that has been in use for the last 20 years."

The company said it is still to decide when to give the next wage hikes. The company had given salary increments to some of its employees in January and to the rest in April, the impact of which was seen in its margins.

Infosys released its quarterly results after market hours Wednesday. Its shares closed slightly higher at INR 1,574.50 on the National Stock Exchange after falling for two days. The stock has fallen 2% in the past seven days and almost 16% in 180 days.  End

US$1 = INR 86.40

Edited by Rajeev Pai

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