Infosys ADR Slips 7% On NYSE After Q2 Results: Three Key Drags

Infosys American Depositary Receipts (ADRs) fell as much as 7% on the New York Stock Exchange on Friday after the IT services major reported its second-quarter results for FY27 and cut its revenue growth guidance. The stock pared some losses and was trading 4.35% lower at $12.65 at 11:21 a.m. EDT.

The sell-off followed a mixed set of results, with revenue growth broadly in line with expectations and deal wins improving, but a reduction in the full-year growth outlook and pressure on margins weighing on investor sentiment.

Infosys cut its FY27 revenue growth guidance in constant currency terms to 1%-2% from its earlier forecast of 1.5%-3%. Management also flagged softer volumes, pricing pressure and uncertainty in the macroeconomic environment.

The biggest concern for investors was Infosys' decision to lower its revenue growth guidance for FY27. The company now expects constant-currency revenue growth of 1%-2%, compared with the earlier range of 1.5%-3%.

The revised outlook reflects continued weakness in discretionary spending, particularly among retail and high-tech clients, where customers have been scaling back or slowing down projects. Management also indicated that higher offshoring through the year is affecting the overall guidance. The company had previously indicated that offshoring would have an impact of around 1%.

Chief Financial Officer Jayesh Sanghrajka flagged softer volumes and pricing pressure across client profiles, pointing to an environment in which clients remain cautious about spending.

While Infosys' large deal wins have improved, the conversion of these deals into revenue growth remains important as clients continue to scrutinise discretionary technology budgets.

Infosys reported a sequential decline in operating margin for the September quarter, adding to concerns about profitability. The company's earnings before interest and tax (EBIT) margin fell 10 basis points to 20.97% in Q2FY27 from 21.08% in the previous quarter. This was a slight miss against expectations, even as revenue and EBIT increased sequentially.

Management flagged compensation-related costs as a headwind for margins in the second half of the financial year. Pricing intensity is also expected to persist, while softer volumes could add to the pressure on profitability.

The combination of employee-related costs and pricing pressure could limit margin expansion even if deal activity remains healthy.

Weak discretionary spending among retail and high-tech clients remains another drag on Infosys' near-term growth outlook. Customers in these segments are slowing down projects, affecting the pace at which technology spending translates into revenue.

At the same time, artificial intelligence is emerging as both a growth opportunity and a source of pressure on traditional services revenue. While AI-related work is expanding, it can also compress revenue from conventional technology services as clients look for productivity gains and more efficient delivery models.