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Infosys shares drop after weak Q1 and guidance cut
Infosys reported sequential constant-currency revenue growth of 1% in Q1FY27, below the 2% estimate, citing a 50-basis-point drag from an EURS client program termination and softer pricing.
Infosys Ltd's Q1FY27 results triggered concerns about a weaker earnings trajectory, with the stock falling more than 2% in Friday early trade after the company posted weak revenue growth and cut guidance. According to LiveMint Markets, sequential constant-currency revenue rose only 1%, missing the Street's 2% growth estimate.
The miss reflected multiple operating drags, including a 50-basis-point impact from the termination of a program by an energy, utilities, resources and services client, softer volumes, and lower-than-expected pricing increases. The communications segment also declined sequentially, while revenue fell across most geographies except North America, where growth was partly supported by the Optimum acquisition.
LiveMint Markets added that the guidance cut has raised worries about AI-led productivity deflation, though management did not quantify the effect. AI services made up 8.2% of Q1FY27 revenue, and Motilal Oswal Financial Services noted peers have pointed to incremental 10% to 15% deflation, which could keep productivity pass-throughs pressuring growth despite deal momentum.
On deal trends, Infosys said large-deal total contract value rose 11% sequentially but fell year-on-year to $3.6 billion, while net new deal wins rose 5% to $2.2 billion and renewal deal total contract value declined 18% year-on-year. The company kept its FY27 Ebit margin guidance at 20% to 22%, with margins supported by favorable currency moves and Project Maximus-led efficiencies, despite an Ebit margin of 21.1% that was broadly in line with expectations.