Infosys Ltd (INFY) 2026 Q2 法說會逐字稿

Ladies and gentlemen, good day and welcome to Infosys Limited Q2 FY26 earnings conference call. (Operator Instructions) Please note that this conference is being recorded.

I hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to Mr. Mahindroo.

Hello, everyone, and welcome to Infosys earnings call for Q2 FY26. Joining us on this call is CEO and MD, Mr. Salil Parekh; CFO, Mr. Jayesh Sanghrajka; CDO, Mr. Satish HC along with other members of the leadership team. We'll start the call with some remarks on the performance of the company, subsequent to which we'll open up the call for questions.

Kindly note that anything we say which refers to our future outlook is a forward-looking statement that must be read in conjunction with the risks that the company faces. A full statement and explanation of the risks is available in our filings with the SEC, which can be found on www.sec.gov. I'd like to pass on the call to Salil.

Thanks, Sandeep. Good evening and good morning to all of you on the call. We had a strong performance in Q2 with increased market share gains. Our revenues for the quarter grew 2.2% sequentially and 2.9% year-on-year in constant currency terms.

Four of our large five industry verticals and three of our four geographies grew year-on-year in constant currency terms. Operating margins expanded by 20 basis points sequentially. We had an excellent outcome in cash generation, with free cash flow of $1.1 billion. Our large deals were at $3.1 billion, with 67% net new. In addition, we announced a mega deal worth $1.6 billion after the close of the quarter but before -- today before results announcement.

We added 8,000 employees during the quarter. Our client interactions show strong focus on deploying AI across the enterprise for growth and on cost efficiency programs. In doing this, we continue to scale our team of forward-deployed engineers.

Our results and pipeline of deals reflect the trust our clients have in our ability to help them bring AI to their enterprises. For example, we are partnering with an apparel company with generative AI and AIOps technologies to help them modernize their core operations, simplify their IT, and unlock greater value from their data.

For a telecom client, we are infusing advanced intelligence across their operations to accelerate the pace of innovation and help them deliver compelling digital experiences for their customers. As a result of our investments, we've emerged as the leading enterprise AI services and solutions provider.

We would like to take this opportunity and give you an update on how our investments in AI have positioned us as a preferred services partner for large-scale enterprise AI transformation programs today. Satish, our Chief Delivery Officer will share this update later in the call with all of you.

We continue our strategic approach to acquisitions with a joint venture announcement of Versant in Australia. With a strong performance in Q2, we change our revenue growth guidance for the financial year. The new guidance is 2% to 3% growth in constant currency terms. Our operating margin guidance for the financial year remains the same at 20% to 22%. With that, let me hand it over to Jayesh.

Thank you, Salil. Good morning, good evening, everyone, and thank you for joining the call today. I'm pleased to report that we had another quarter of robust all-round performance despite an uncertain environment. We continued our strong growth momentum for the second consecutive quarter, accompanied by higher margins led by focus on client relevance and rigor on execution. We are making necessary investments in technology, people, and in the sales engine to future-proof our business.

Let me cover key aspects of our results. Quarterly revenues crossed $5 billion in Q2 FY26 and $10 billion for the half year. Revenue grew 2.2% sequentially in Q2, including 20 basis points from acquisitions in constant currency terms.

Growth in Q2 was on the back of the 2.6% sequential growth in Q1. H1 revenues therefore grew at 3.3%. Volumes continued to remain soft, with bulk of the revenue growth driven by realization increase. Amongst large verticals, financial services and manufacturing grew about 5% year-on-year in constant currency, both in Q2 and H1. Europe also grew greater than 5% year-on-year in constant currency.

H1 gross margin remained resilient at 30.8%, flat year-on-year after absorbing compensation headwinds, reflecting the progress of Project Maximus. Operating margin expanded by 30 bps sequentially to 21%. H1 margins were 20.9% versus 21.1% in H1 '25. We continue to invest in sales and marketing, which is reflected in 12.8% growth in S&M cost H1 over H1.

Utilization excluding trainees remained stable at 85%, which is within our comfort range. Onsite mix reduced by 40 basis points for the quarter and 60 basis points for the half year. We continue to invest in talent and have hired over 12,000 freshers in the last six months. Total employee headcount was at 332,000, an increase of over 8,000 in Q2. Attrition remains low at 14.3%.

DSO is down two days to 71 days, and DSO including net and bill is down by 5 days to 87 on a year-on-year basis. Cash flow generation remains strong. Free cash flow stood at $1.1 billion, which is 131% of the net profit and is well above 100% for the sixth consecutive quarter, bolstered by tax refund.

H1 free cash flow, conversion is at 120%. Large deal TCV for Q2 was at $3.2 billion, which is 67% net new. H1 deal wins stood at $6.9 billion, with net new at 60%-plus. This does not include the mega deal announcement this week with NHS.

Q2 EPS in rupee terms grew by 13% year-on-year to ₹17.6. Operating margins for Q2 was at 21%, increase of 20 basis points sequentially. The major components of sequential margin change for the quarter were tailwinds of 60 basis points from currency movement, 30 basis points from Project Maximus emanating from increase from value-based selling and lean and automation, partly offset by increase in subcon and lower onsite utilization, offset by 70 basis points of impact from higher post-sale customer support on a sequential basis and other expenses. Consolidated cash and investments were at $6.2 billion at the end of the quarter. Yield on cash balance was at 6.98%, and ROE stood at 29.1%.

We have taken several strategic steps in the past few years to reduce our dependence on work visa, especially H-1Bs in the US. This includes reduction in onsite mix, increased focus on nearshore. Nearshoring increased local hiring, university partnerships, and certain creation of local hubs.

We currently have several delivery centers across the US to serve clients and leverage local talent. These hubs focus on emerging technologies such as artificial intelligence, machine learning, cloud computing, big data, and user experience design.

In line with our capital allocation policy, during the quarter we announced INR18,000 crore buyback through tender route at INR1,800 per share. Buyback is expected to be completed in Q3, subject to shareholder approval. The Board approved an INR 23 interim dividend, which is 9.5% higher than the FY25 interim dividend.

We signed 23 large deals during the quarter: six in financial services; four each in manufacturing, communication, and retail; three in EURS, and one each in high-tech and others. Region-wise, we signed 14 deals in America, 7 in Europe, and 1 each in ROW and India.

Coming to vertical. In financial services, clients are actively planning modernization and AI-driven initiatives with a clear focus on cost efficiency, enhance customer experience and strategic business transformation. We see strong momentum in mortgages, capital markets commercial banking and wealth management areas.

While macro uncertainty and volatility is impacting spend, there is some acceleration in market sector with recent reduction in interest rates. Overall pipeline and signing remains strong, which is visible in six large deals signing this quarter.

Banks have spent significantly to build AI infrastructure. Many initiatives are progressing from proof of concepts to full-scale projects with notable traction in agentic AI. Manufacturing segment continues to face trade and macro uncertainties, which is creating pressure on discretionary spend, specifically in automotive sector.

We continue to help our clients in digital initiatives and rationalizing the applications and infrastructure footprint. We are at the forefront of leveraging AI and automation to increase productivity and offset pricing and deflation.

In Aero, we have seen opportunities to help clients navigate headwinds by helping them resolve bottlenecks in the supply chain, use new technologies and products. Over 90% of large deal TCV for Q2 was net new, which should help drive growth going forward.

Clients in EURS have strong focus on cost reduction, operational efficiency, and cash preservation, which helps opened door for vendor consolidation. In resources with large-scale gen AI deployment are limited, agentic AI adoption is growing in tech operations to reduce cost.

With rapid construction of data centers, utility companies are looking for partners to meet the accelerating electricity demand, creating opportunities in areas like renewable integration, grid modernization, AI and optimization, et cetera. Year-on-year growth was impacted due to significantly higher third-party revenues in Q2.

Retail plans continue to remain cautious on account of ongoing tariff-related uncertainties. Across geos, there is an increased focus on AI, cloud, estimate, estate modernization, derisking, and cost takeout. There is a growing sense of urgency to improve the productivity of operating models to offset inflationary pressures. Steel pipeline remains strong, but decision cycles remains elongated. We continue to leverage our Topaz and AI Next platform capabilities, focusing our enhanced customer and employee experience through digital marketing and corrective analytics and real-time insights.

Communications continued to face growth headwinds coupled with high CapEx pressures, discretionary spending remains subdued with investment prioritization in AI, automation, and consumer experience. GCCs are becoming key buying centers and opportunities are emerging for IT companies to support their transition, while lower interest rates offer cautious optimism, geopolitical tensions and tariff risk at one synergy.

In Hitech, there has been significant focus on cost reduction leading to budget cuts and program closures. However, there are opportunities emerging in areas like semiconductor with a strong focus on leveraging Gen AI.

Our H1 performance reflects resilience of our business model and agility of our execution capabilities. As we enter H2, we expect seasonal factors to impact growth, lower working days, furloughs onset of new calendar year. Hence, we have revised our revenue guidance to 2% to 3%. This does not include any revenues from the joint venture with Telstra, which we expect to close -- expect to close later this year. Our margin guidance remains at 20% to 22%. With that, let me hand over to Satish to talk about our AI capabilities.

Thanks, Jayesh. Good day, ladies and gentlemen. I'm pleased to share, we have emerged as the industry-leading enterprise AI services and solutions provider. Eight industry analyst firms have ranked Infosys as a global leader in 20 separate AI rankings over the last 12 months. We are delivering more than 2,500 generative AI and AI projects and 200-plus agentic AI projects for our clients.

Let me outline the key pillars of our strategic focus. The first one is making Infosys AI-first. We embarked on our AI-first journey in 2023. On the people front, we are committed to making our employees AI-amplified. About 90% of our employees are AI-aware, equipped to collaborate with and leverage AI tools responsibly in their daily work.

The next pillar is the AI builders. 10% of our top technology talent pool are engaged in highly innovative projects and solution building with AI. The top tier, the AI masters, and amongst them, the forward-deployed engineers are driving the AI momentum for our clients by solving the tough industry challenges.

On the process front, we are reimagining the way we work with AI. For example, AI core assistance accelerate our development life cycle. Our developers have produced more than 25 million lines of code using generative AI.

We have deployed AI agents across our internal operations, a multi-agent invoice automation solution alone unlocked incremental cash flow, directly improving our free cash flow conversion. We have deployed AI to accelerate our compliance processes. In some of the use cases, we have seen over 20x gains for specific activities and an overall end-to-end process productivity in the range of 40% to 50%.

Now coming to our industry-leading AI offerings. We have built capabilities in AI, applied them across our own operations, and now we deliver these innovations to clients through Infosys Topaz, a holistic suite of generative and agentic AI powered services and solutions. We deliver value through two strategic frameworks, Services.AI and Client.AI.

In Services.AI, we built a foundation for better business services for our clients by accelerating IT capabilities and operations, both our own and our clients. Our integrated services stack, a composable set of AI services and agents contextualized for every client and industry integrates human and AI agents to reimagine IT services and operations with greater velocity, productivity, and quality.

On Client.AI, we focus on business transformation to deliver sustained enterprise-wide impact for our clients like revenue growth, efficiency, and productivity improvements. We have 22 industry blueprints and more than 400 agents, tailored to specific verticals to accelerate value from AI-led transformation.

We also use Power Vibing to rapidly build proofs of value and iterate business solution prototypes to client problems. In terms of delivering enterprise value to surmount pilot paralysis, the challenge of extracting value from enterprise AI investments and pilots continues to be the biggest priority for global enterprises. We have expertise in delivering that through five key levers.

With Infosys forward deployed engineers, we have specialized engineering talent deeply embedded within client businesses, delivering enterprise-scale value from AI. For a global logistics leader, forward deployed engineers co-created a solution that uses real-time data streams and AI to accurately predict shipment life cycles across regions and operating companies. This platform delivers 400 million messages daily with sub-minute latency and operates uninterrupted 24/7, resulting in $1.5 million in immediate benefits, $8 million in annual savings, and a 12% reduction in customer service call volumes.

With our Infosys Topax data Workbench, we have an expansive portfolio of solutions for data preparation, engineering, and governance. For leading industrial manufacturers, we built a unified data fabric powered by 100-plus domain-driven multimodal data products centered on equipment operations, covering more than 10 petabytes of structured and unstructured data to power 30-plus AI companions across business functions, driving more than 90% boost in precision, performance, and productivity.

With our Infosys SLM, we are able to deliver small language models which are key for context engineering of agentic AI solutions, which are adapted for enterprise-specific needs. We have built four small language models for banking, IT operations, cyber, and enterprises, broadly for rapid value delivery, we also offer these models as services to help businesses securely build their own custom AI models.

A good example is how our SLM is used by clients to run their banks on Infosys FinEcon to launch new contextual banking experiences and innovations.

With our Infosys Responsible AI Office, we have now become an industry pioneer in setting up a responsible AI office. We are among the first companies to be certified on ISO 42001:2023 for management systems, implementing responsible AI projects. Our Responsible AI toolkit ensures that clients have the defense and technical guardrails to address AI-related risks.

With our Infosys Poly Delivery AI Model, the high dependence on AI key providers is a key concern that we address. Our hybrid or flexible Poly AI helps clients avoid vendor lock-in as they scale their AI transformation. Using this model, we helped a bank in Europe establish their AI innovation lab to create a pipeline of AI-first business initiatives. They have now deployed 13 AI and agentic AI solutions, and several more are in development. This has delivered substantial financial gains and earned our client the honor of being number one in the region as an AI-first bank.

Now, building an AI ecosystem for our clients, we have established strategic alliances with Nvidia, Microsoft, AWS, Intel, Meta, Google Cloud, and others to enhance their capabilities. Infosys is among the first and largest enterprises to deploy GitHub Copilot at scale. We have over 22,000 developers onboard.

In collaboration with Google Cloud, we have developed more than 200 enterprise great AI agents. These partnerships, combined with open source solutions enable Infosys to deliver flexible vendor-agnostic AI ecosystems.

Through our Infosys Innovation Network, we engage with AI start-ups across AI, cybersecurity, data management, and other emerging domains to accelerate client adoption of cutting-edge solutions. Our academic collaborations with institutions like Cambridge, Colombia, Cornell, Stanford, HAI and MIT fuel our advanced AI research and give our innovations practical enterprise application.

We also contribute to shaping global AI standards like partnering with OWASP on LLM security. We are also advising policymakers, and we are also collaborating with regulators in shaping emerging standards.

To summarize, our clients value our differentiated capabilities that we have built on the success of our own AI-first journey. They trust us to navigate them with a clear practical road map to transform their business and deliver sustained enterprise scale value.

This proven capability has translated into robust growth and notable gains in market share over the past several quarters, underscoring the impact of our strategic approach. This includes amplifying people, implementing advanced AI solutions, co-creating AI projects from the ground up for success and fostering an effective ecosystem of partners. We are focused on empowering our clients to conquer the pilot paralysis and achieve enterprise scale advantage.

We can now open up the call for questions.

(Operator Instructions) Kumar Rakesh, BNP Paribas.

Hey, hi, good evening, and thank you for taking my question. Salil, my first question was a little of medium to long term. So there's a lot of companies who have announced their CapEx plans for setting up the AI data centers. And many of these companies are our ecosystem partners, we do go to go-to-market, along with them. We partner with them in many of the projects.

In all these conversations of these capacity expansion and potential monetization in the future, are we having any conversation with them how Infosys can partner with them in the future for implementation and inference work potentially in the future? Any of your conversation, which is happening with them that you can share.

If I understood that, the question was there are partners of Infosys who are building large AI capability and are we partnering with them? So there, yes, we are partnering with them, but if there's something more. We are not -- I don't follow that part, meaning we are partnering with all of them. So you look at any of the large players who are building out AI capability today. And it's at different levels.

We are looking from the chip to the infrastructure to the models to basically deployment. So there are different layers of that. And in each of those, we have, as Satish was just pointing out, several partnerships which are going pretty well. Is that what you're asking?

So my question was that at some stage, they will start looking at monetization, enterprise implementation of inferences on those large capacities. Will we be participating in any of those -- any of the conversations happening on the monetization side in the future and Infosys participation in that?

So on the enterprise side, we will participate. But the monetization, meaning --

Modernization.

Modernization? Yeah, modernization is a big part of our play. So what is happening there in fact is the enterprise modernization business, we'll get a huge benefit from AI. So the -- before the AI, the enterprise modernization, legacy modernization had a certain time duration and a certain ROI with many of the AI tools that is improving quite dramatically. So once those AI tools are in good shape and stable and so on, we see modernization as a big growth opportunity.

Got it. Just to be clear that I've got it right, once enterprises start using these capacities for their own modernization, there is a play for Infosys to participate with them and help them in that modernization.

Absolutely. So there are some AI companies, which are very good with enterprise AI. Most people are focused on consumer AI. So if you look at an enterprise AI company, they are building solutions which are focused in sales or marketing for growth of revenue of the end client or cost reduction through process or customer service in those areas.

And one of those areas is this modernization. There are some others. And to make it happen, Infosys is a partner that those company -- AI companies will use where we have the knowledge because of the knowledge we have in the landscape of the client, which is a large, complex landscape. So how to deploy AI into it and make it successful, those are some of the skills that we will bring to it.

Great. My second question was more of a near term. So over the last two quarters, we have seen the large DTC has picked up and you have been reporting above $3 billion of large DTCs. And you have also spoken about vendor consolidation being one of the trends, which is driving the deal signings. Looking at these large deals, which you have and how comfortable you are of their margin as they ramp up and start contributing into your revenue?

Large deals, we don't disclose the margins separately, as you know. But what we are clear on is that we have a fairly disciplined approach as we take them on. And there, in many ways, we -- what Satish was sharing with you, we have a Chief Delivery Officer, Dinesh. They are both involved actively at the very start of many -- of all of the large deals to make sure that before we go into it, we understand what the issues are as best as possible and maintain that margin profile at the start and through the program itself.

So we are comfortable. We don't disclose the margins separately, but we don't see some unusual margin impact because of that also.

Great. Thanks a lot.

Bryan Bergin, TD Cowen.

Hi, good evening. Thank you. I wanted to ask on deal activity and kind of average sizes. Can you comment on what you're seeing in some of the smaller deal activity? Any changes there versus the prior quarter? And then just on the signing, so the TCV has been healthy now for two quarters. Can you comment on just how ACV levels in new work that you're booking may be trending?

So on the smaller deals, no real change similar to what we've been seeing so far. On the large deals, I mean, the vast majority of them is focused on cost reduction, vendor consolidation using AI for productivity, those lean automation, those sort of areas.

On ACV, again, no real comment. We don't see a change that this quarter's large deal had a different type of ACV than last quarter, essentially a similar type of structure. But again, we don't share the ACV number separately.

Okay. And then my follow-up on the delivery and the operating model. I'm curious how you may see the delivery mix changing beyond fiscal '26 when you consider navigating the visa changes next year. Just understanding you have a majority of your employee base in the US that are not on visas.

But as we look at the numbers, subcon mix ticked up here in the quarter, while your offshore mix also rose. I'm curious if you think those two trends will continue. And where do you think the potential ceilings of those are as it relates to offshore mix and subcon usage?

So on the subcon, I don't -- I mean it's not I don't think that's a long-term lever in terms of how we will change the mix. There will be ups and downs as we go through the next few phases of this. The approach we are taking is -- we built over the years, what we call localization in all of our geographies outside India and especially in the US, and that comprises of building local technology apps, so local recruiting.

Nearshore centers, which are ones around, for example, Canada, Mexico, other places in South America and then offshore. Now it will be a combination of these that we are using or we will use further in the future to make sure that essentially our overall delivery approach remains consistent for the clients. We don't have a view on where the offshore ratio will end, but we do see from some early client discussions that there will be an increase over time in what they want to offshore.

Okay, understood. Thank.

Jonathan Lee, Guggenheim Partners.

Great. Good evening. Thanks for taking our questions. Can you help us unpack the step down in utilization despite the step-up of subcontractor usage? Where are the potential skill gaps or pyramid gaps that you're looking to fill by using your subcontractors?

So if you look at subcon, couple of quarters back, it was in the range of 11%. It has come down now to 7.5%, 8%, whichever quarter you look at. So there has been a consistent effort to bring it down on a long-term basis. Having said that, on a quarter-to-quarter basis, there could be ups and downs depending on the demand that we have, the skills that we have, at which locations the skills are and you would depend to subcon or you would wind down subcon according. So that's how the subcons typically are there.

Typically, the subcons are used to bridge the gap -- the skill gaps across the projects that we deliver for the client. We don't expect at this point in time, the subcons to increase significantly from the current levels.

Appreciate that color. And secondly, this may be the first time we've heard you mention forward deployed engineers. Can you unpack how they compare relative to the teams for deployed engineers that software companies are scaling potentially how those pools of talent are competing and whether there are higher costs associated with your four deployed engineers versus your traditional engineer?

So there, Satish should also add a little bit. Let me start off. We've been using the capability and the founder player engineers across AI landscape for some time. We want to make sure that that is something we share externally. We are not commenting on the cost or nature of those, but they are different groups within the company in the past as well.

For example, we have other groups called Power Programmers and so on, which have different costs within our delivery structure. And so we will use the appropriate level of cost depending on which market those engineers are operating in to fulfill that work for our clients. Satish is going to --

Yeah. Thanks, Salil. So I guess the opportunity with AI is that we are developing a new breed of services stack or software stack for our clients, which was never done before. So this is reimagining of either how we run business or how we even deliver services.

So given that this is a different paradigm. The onus is on co-creation with our clients, which is why I think there is a sharper pivot to the leverage of forward-deployed engineers to work very closely with our clients.

And as we move from POCs to enterprise scale adoption, we see that there will be a lot more need for forward-deployed engineers to work with our clients to drive this co-creation of the new breed of software stack.

Vibhor Singhal, Nuvama.

Sir, just a question on the overall uncertainty that we are facing in the environment, especially in the light of the recent H1B visa hike. So just wanted to pick your brain as to -- first of all, I mean, in the near term, let's say, in the last couple of weeks, a few weeks, that event is paced, right, did we see a heightened level of uncertainty, which maybe might have led to some of the deals being pushed off and some of the concerns dropping up from the clients?

And from a longer-term point of view, I know we and many -- most of the industry experts have basically explained that there should not be a big deterrent in terms of our business model. But how do you see this change changing the business model? I mean, do we believe that there is a possibility of higher offshore risk can be done now with -- when companies will try to avoid the higher H1B visa fee and clients would also be avoidable to that? Could that be, let's say, an unintended benefit that we could actually trickle by because of this event that took place?

So on the short term, I'm not sure I followed everything. But basically, we've not seen any change, literally, if that was the question on the short term. On the medium, long term, the model will change as we were discussing earlier, which is essentially, we have been working on localization for quite some years in most of our markets outside India, so US also.

So there'll be more work in our technology hubs and centers there with local employees. There'll be more nearshore work. There'll be more offshore work. And that's the approach that we will put in place, essentially ensuring that the client delivery remains in a good place.

So that's what we see. We don't have -- if you're looking at like, let's say, some percentages and so on, we don't have that sort of a view, but that's the general approach in the model change that we see coming here.

Got it. A bit far-fetched maybe, but let's say, if we -- if we try to do more of nearshoring and offshoring, do you think clients will be okay with this because let's be honest, I mean, I'm assuming that at this point of time, before, let's say, the announcement, we were operating at a specific on-site to offshore ratio, which we would have tried to optimize by ourselves.

So if there was a specific onsite presence and it would have been maybe requirement of the client, maybe requirement of regulator or own requirements. So would it be easy to get this through to move that business -- there will be some part, as you right you said that you will have local hires. But the part that we are planning to move to nearshore and offshore, how easy or difficult will it be for clients to accept that?

So there -- what we'll do is this is a broad approach. We'll work jointly with each client to define like specifically how it will work for the client. It's a little bit if you go back to the time when there was the COVID, everyone is working remotely for so much time. And we just figured it out. We were quite adept at it at that time.

So now there is a model that we have built. We are working with the clients. What we do feel is quite comfortable that we will not have any constraints in client delivery through different levers in the model. It's not that one lever, some client may have a different lever and some may have another type of a lever, but we feel comfortable in that.

Got it. And just last question from my side --

Vibhor, if I could just add, if you look at the pre-COVID, we were at close to 30% offshore, 30% of 70% offshore, right? And every year, the needle used to move by 20 to 30 bps. Post-COVID, it changed significantly by 3% to 4% or even more in a year's time, right? And that's what I think Salil is referring to when a constraint comes in, both we and client work together, and we've been able to reach a model that works. And I'm sure we will be able to do that this time as well.

Got it. And just last question on that part since you've come in. I know it might sound too optimistic. Could it actually lead to unintended benefit that we do more of near-shoring and offshoring and that would possibly a margin lever for us or for the industry?

Difficult to say at this point in time. But I mean, mathematically, if you do more near-shoring and more offshoring, it should mean more margin. But it depends on to what extent you're able to do offshoring near shoring and to what extent we'll end up doing more local hiring. So I think it may balance at there.

Got it. Great, thanks for taking my questions, and wish you all the best. I'll come back in the queue if I have anything to ask.

Thanks, Vibhor.

James Friedman, Susquehanna International.

Hi, good evening. Thank you for the opportunity. Jayesh, In your prepared remarks, you called out a 70 basis point impact from higher post-sale customer support and the streaming from the transcript. Is that a normal thing? Or is that something different? What's that about?

So James, if you recollect last quarter, we had a benefit on this. So on a quarter-on-quarter basis, it's an impact from a margin walk perspective. This quarter, it's at a normalized level. So last quarter is where we had a benefit.

Okay. Now I remember. I apologize. I got it. And then in terms of the -- yes, in terms of your offshore on-site what you're contemplating longer term, I was just wondering, how do you think about AI delivery impacting the regionalization of your headcount? AI delivery -- has AI impact where your people need to be?

Hi. This is Salil. Just addressing that point. I think we already see projects where we have agents, which is with AI working alongside the people on the project. So that will also be part of this new delivery model, which will -- so there's one change which is based on the visa discussion we were having. And everything with or without the visa will be changed with the agents and how that will work over time.

So those are two different sort of trends, but they will both come together and sort of the ratios and so on will develop as we build out the business.

Thank you, Selena. I'll drop back in the queue.

Sumeet Jain, CLSA India.

Yeah, hi, good evening, gentlemen, and thanks for the opportunity. Firstly, I want to understand the impact of AI on your and IT services industry revenue growth profile. Do you think the deflationary impact is higher than the volume growth opportunity? And maybe if you can give us a sense on your renewed deals, how much is compression due to AI versus incremental scope expansion?

Hi, this is Salil. So there, we see two types of things from AI, one, growth opportunities, where we see clients are starting to look at leveraging AI, whether it's in their sales function, their marketing function, how they can drive growth from it. And the second, as you point out, is more productivity or efficiency for different processes and activities within the company -- within their company.

Today, with the economic environment where it is there's a lot of interest and focus on cost reduction, and that's where we see a lot of the initial work coming in. But some of the things that we are seeing, for example, the discussion we had a little while ago on modernization. Those discussions are much more about growth because it's not something that the company a client is doing at all. It's a question of how they will do it, how it will be leveraged.

So at this stage, I don't have a view on which of these two factors will be larger or smaller, but we certainly see a lot of growth opportunities from what we can deliver with AI.

So maybe, Salil, trodding it further do you think the IT service budgets of your clients are expanding due to AI?

So there, what we see now is a lot of the companies are in a mode of a lot of cost control with the changes in the economic environment. So it's difficult to ascertain what they will use it for in different economic environments.

So today, if I look at it, whether it's AI or non-AI, meaning we do a lot of work on, let's say, consolidation. We do a lot of work on automation, non-AI automation. So there's a real interest from clients that, look, can you help us through these other techniques also reduce cost. And that's the predominant way that we are looking -- we are seeing some of the large deals come about.

My sense is as there are AI approaches, which are showing clients where they can impact the business on the growth side and where the economic environment supports it, we will see more and more of those opportunities.

Got it. That's helpful. And maybe my second question is around, of course, this year, macro is pretty weak because of tariff-related uncertainty. But if the macro improves next year due to tariff uncertainty going away, do you think the IT services industry growth would be higher next year compared to this year, ignoring how AI will play around?

That's a very good question. If I could answer that -- it's difficult to say for our site, meaning we think basically that when the macro improves, the tech improves, but it's now -- we'll see how that plays out. That's typically been our experience on the past, but I don't have a view like for next year, how it will look.

Got it, sir. Thanks and all the best.

Nitin Padmanabhan, Investec India.

Yeah, hi, good evening, thanks for the opportunity again. So a couple of questions. So one is, you spoke about volumes being sort of flattish where realizations being a bigger driver of growth, if you could help contextualize what's driving that? So that's the first one.

The second is any color you can give on the Versant JV both in terms of when it could sort of accrue the kind of revenue or margins there? And finally, your thoughts on how do you see furloughs this time versus last year and in terms of smaller deals, do you see any pickup?

So Nitin, this is Jayesh. Let me take that. So if you look at -- we did say that volumes were softer and the large part of the growth came from the revenue or RPP expansion. Part of that was because we had a higher working day in calendar this quarter, which reflects in pricing in a way. The part of that is also project maximums where we have been trying to drive -- getting the effective pricing increases through various levers within that, and that is where it has helped in terms of in terms of revenue.

Your second question was on Project Versant. We haven't been able to close that yet because we are spending a few of the regulatory approvals. So as and when we get it -- get the approvals. We will announce the closure at this point in time, we do not know. We expect it to be closed in this year, but we do not know the exit time lines, and that's what it is not baked in the guidance at this point in time.

The last year's revenue was around AUD210 million. So that's all I can give you as a reference to put in an estimate once it is closed. You had one more question.

Yes. Any color on margins for Versant and the other one was -- other questions were on furloughs versus last year and any pickup in small (technical difficulty)

Yeah. So furloughs at this point in time, we do not expect to be significantly different than the last year, and we do not disclose margins of the acquisitions.

Right, perfect. And any pick up in small deals that you've seen?

These small deals have remained similar as compared to last year. The pipeline continues to remain strong. There's nothing unusual to call out there.

Perfect. Thank you so much and all the best.

Abhishek Kumar, JM Financial.

Yeah, hi, good evening and thanks for taking my question. I have a question on your second half outlook. Now we understand the seasonal factors and probably that's what is driving decline at the midpoint of the implied guidance.

But I just wanted to get a sense that this year dealing has been strong. Then you have closed $1.6 billion deal, which if my calculation is right, is the $100 million-plus ACV deals. So is it just your conservatism at this stage, given Q4 generally is weaker or there's anything else that is restricting you from raising our current of the guidance?

So Abhishek, like we've always said, the way we look at guidance is to reduce the asymmetry of information between us and the investor community. At this point in time, based on the various models that we run that leads us to various levels of the guidance, and that's how we have arrived at the guidance. Like what we have been saying for the last couple of quarters, at the lower end of the guidance, we have baked in elevated level of uncertainty and at the upper end of the guidance, we have baked in a stable environment.

Having said that, as you know, we have a seasonal -- we have a higher seasonality of -- software from a seasonality perspective, we have lower working days, lower calendar days, higher impact from furloughs, et cetera. So all of that impacts our H2 versus H1. And we also need to remember that we've delivered a stronger H1 versus many of our peers. So from that perspective, the H2 automatically gets impacted.

So maybe a quick follow-up on the mega deal you just announced. Is it expected to start ramping up this fiscal year? And what would be net new contribution, if you can call that out?

So Abhishek, the deal that we have announced is that completely 100% net new, and it will start ramping up this year.

Okay. That's good to hear. Thank you so much and all the best.

Thank you.

Sandeep Shah from Equirus Securities.

Yeah, thanks for the opportunity. Most of the question being asked. Just wanted to understand in your guidance assumption for the second half, are you also expecting further lower path to the third-party item sales because in the first half, it has been 7.4% versus 8.2% for the whole year last year. And generally, Q3 sees a seasonal strength on the third-party items. So this time, you believe it could not show the trend and it could be further down from 7.4% in the 1H versus what you expect in 2H?

Yeah. So Sandeep, like we said at the beginning of the year, this year, we expect the third party to be lower than what we had last year, and we expect a similar trend to continue. So we do not expect unusual growth or unusual -- elevation in a third party in Q3.

Okay. And second, just a follow-up. In terms of seasonal softness, which is reflective in your 2H implied guidance, what was the urgency to deploy 8,000 net addition in the employee side. Can you explain the high recruitment versus seasonal softness in the 2H?

So Abhishek, it's a factor of the demand and supply environment. We are already at 85% utilization. And we also onboarded 12,000 freshers. So that just talks about the visibility that we have in our business.

Okay. Thanks and all the best.

That will be the last question for today. I now hand the conference over to the management for closing comments.

Thank you. Thanks, everyone, for joining in. Just wanted to summarize, we had a strong Q2. Large deals very good, one mega deal after the quarter, so even better. We spent a lot of time sharing with you our leadership in enterprise AI and forward deployed engineering capability and the growth of that.

Now we feel we have a really strong position in this area, and we continue to lead in many places here. We have an increase in our guidance for revenue growth, the new guidance being 2% to 3% for the full financial year.

With all of this, we look forward to a strong Q3 and Q4 and look forward to interacting with you at the end of next quarter. Thank you. Take care.

Thank you very much, members of the management. Ladies and gentlemen, on behalf of Infosys Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.