Infosys’s huge deal wins fail to give it an edge over peers

Infosys has once again lowered its FY27 constant-currency (CC) revenue guidance to 1-2%, down from 1.5-3% earlier and 1.5–3.5% at the start of the fiscal year. Announcing its September quarter (Q2FY27) results, the company said a shift toward offshore delivery and a deal exit could hit FY27 growth by 1.8-2%.

This signals a slower-than-expected second half, raising fears of underperformance against peers. By comparison, HCL Technologies delivered 2.3% revenue growth in Q2 and raised its overall revenue guidance to 2.5%-4% from 1%-4%. While Infosys outpaced Tata Consultancy Services’ (TCS) 0.5% growth, that provides little comfort.

“Infosys has the highest exposure to application services among tier-1 Indian IT companies, a service line structurally more vulnerable to AI-driven deflation,” said Systematix Shares and Stocks (India). The revised guidance implies limited organic growth of 0% to +0.5%, compared with the previous estimate of -0.2% to +1.3%, it added. Organic growth protects profit margins and avoids high financial and integration risks of mergers and acquisitions.

Notably, Infosys delivered modest back-to-back performances in Q1 and Q2—traditionally two of its strongest quarters. Sequential CC revenue grew 1.2% in Q2FY27, missing consensus estimates slightly, with around 40 basis points coming from acquisitions. Soft volumes, muted pricing amid intense competition, AI-led productivity deflation, and cautious discretionary spending weighed on performance. The retail and hi-tech verticals bore the brunt of lower third-party revenues and client-specific slowdowns, while financial services, energy & utilities, and manufacturing fared relatively better. Meanwhile, AI revenue expanded to 10.5% of overall revenue in Q2, up from 8.2% in Q1.

Earnings before interest and tax (Ebit) margin fell 10 bps sequentially to 21%, hurt by higher customer support costs & acquisition-related consolidation, which were partly set off by rupee depreciation and benefits from Project Maximus. While Infosys retained its FY27 Ebit margin guidance of 20-22%, it faces headwinds from the October/January wage hikes in H2.

Washout year?

Deal wins stood out. Infosys won 19 large deals in Q2FY27, driving large-deals total contract value (TCV) to $5.2 billion, up 44% sequentially and 68% year-on-year, with 62% representing net-new business. In contrast, TCS saw its deal TCV fall 4% year-on-year, while HCL and Tech Mahindra reported 27% and 25% growth in new deal wins, respectively. For LTM (formerly LTIMindtree), TCV of order inflows fell by 21% year-on-year. Infosys’s blockbuster deal wins bolster revenue growth visibility for FY28 as the mega-deal transitions are only expected to begin in the second half of Q4FY27.

Can a stronger deal pipeline guarantee faster revenue conversion? Not really. Q3 and Q4 are weak, marred by furloughs. “With H1 revenue growth at 1.9%, guidance implies minimal sequential traction in H2. FY27 looks to be turning out to be a washout year with about 1.7% growth coming from acquisitions, so organic growth is likely to be flat to negative for FY27,” said Dolat Capital.

A guidance cut despite robust deal wins and solid hiring has led to downgrades in earnings estimates. So far in 2026, the Infosys stock is down 28%, trading at FY28 price-to-earnings multiple of 14.5—a discount to TCS, HCL and Tech Mahindra, showed Bloomberg data. With pressure on revenue and margins likely in H2FY27, this gap could widen. “We estimate revenue growth of 1.1%/1.9% year-on-year CC in FY27/FY28, and expect Infosys to grow slower than HCL, TCS and Tech Mahindra in both years, based on our estimates,” said Motilal Oswal Financial Services.