Infosys Set to Outpace Its Own Growth Forecasts
Infosys Limited appears ready to exceed its growth targets for the current fiscal year. The company recently upgraded its guidance to 3-3.5% for FY26, but this projection notably excludes potential revenue from its pending acquisition of Australian IT firm Versent.
The Versent Factor
In August, Infosys invested $150 million to secure a 75% stake in Versent, a company owned by Telstra. Versent reported $138 million in revenue for the year ending June 2025. Infosys management confirmed that their current growth guidance does not incorporate any revenue from this acquisition, which still awaits regulatory approvals.
Chief Executive Salil Parekh stated during Wednesday's earnings call that strong year-to-date performance and robust deal wins prompted the guidance revision. He emphasized that the 3-3.5% growth projection excludes revenues from the Telstra joint venture.
Analysts See Upside Potential
Financial analysts believe Infosys could grow faster than its stated targets. Amit Chandra, Vice-President at HDFC Securities, noted that Infosys has historically been conservative with guidance and often exceeds it. He expects at least 0.2% incremental revenue in FY26 from the Telstra acquisition.
"Infosys has always been conservative in its guidance and gone on to exceed it," Chandra said. Historical data supports this view - the company has grown more than its full-year guidance in nine of the last fifteen years.
Karan Uppal, lead analyst for IT services at Phillip Capital, provided specific estimates. He suggested that if the Versent acquisition closes in January, Infosys might gain $20-30 million in incremental revenue, representing a 0.1% to 0.2% boost.
Industry Context and Challenges
The positive outlook comes despite some challenges. A Mint analysis reveals that Infosys has reported sequential revenue declines exceeding 2% in the fourth quarter for three consecutive years. The company ended January-March 2025 with $4.73 billion, marking a 4.23% sequential revenue decline.
Profitability across major IT firms has also faced pressure from the New Labour Code, which increased statutory payouts like provident funds and gratuities. This affected TCS, Infosys, and HCL Technologies during the last quarter.
Peer Comparisons
HCL Technologies expects to grow between 4% and 4.5% in constant currency terms, though like Infosys, its guidance excludes pending acquisitions. HCL's purchases of Telco Solutions Business from HPE, Jaspersoft, and Wobby are expected to close in the next fiscal year or after April 1.
Uppal commented on HCL's timeline, saying, "We don't expect HCL's HPE acquisition to close by March this year. Most likely it will be completed by June 2026." These acquisitions are expected to significantly contribute to revenue in FY27.
Recent Performance and Outlook
TCS, Infosys, and HCL Technologies all reported better-than-expected growth in their recent quarterly results. TCS ended with $7.51 billion, Infosys with $5.1 billion, and HCLTech with $3.79 billion, showing sequential dollar revenue growth of 0.6%, 0.5%, and 4.1% respectively.
HCLTech's CEO C. Vijayakumar emphasized a proactive approach during Monday's earnings conference. "I believe there is little value in waiting for either historical or anticipated discretionary spending to resume," he said. The company is focusing on opportunities in data centers, robotics, physical AI, semiconductors, and silicon for edge inference.
TCS CEO K. Krithivasan noted improving demand trends, stating that the environment continues to strengthen quarter over quarter. The company maintains its aspiration for international business to grow faster than in FY25.
Key Takeaways
- Infosys's 3-3.5% guidance likely represents a minimum threshold, with the Versent acquisition potentially adding 10-20 basis points
- The company has exceeded its own guidance in 9 of the last 15 years
- The New Labour Code presents profitability challenges across major IT firms
- HCLTech is aggressively pursuing new technology areas while TCS has adopted a more cautious stance
- Both Infosys and HCLTech have significant acquisition revenue pending for late FY26 or early FY27
The coming months will reveal whether Infosys can indeed surpass its growth targets as analysts predict. The closure of the Versent acquisition and continued strong performance will be critical factors determining the company's fiscal year outcome.
