Infosys Limited Price & Performance (INFY)

Subsequent to which the call will be opened up for questions. Kindly note that anything we say which refers to our outlook for the future is a forward looking statement. That must be read in conjunction with the rest that the company faces. A full statement and explanation of these risks is available in our filings with the SEC. Can be found on www.sec.gov. I'd now like to pass on the call to Salil.

Thanks, Sandeep. Good evening and good morning to all of you. Thank you for joining us on this call. Had an excellent year and financial year 2025. Our revenues grew at 4.2% in constant currency terms Our operating margin was 21.1%. We generated $4,100,000,000 in free cash flow. And we had $11,600,000,000 in dollars in large deals. In Q4, we had year on year growth of 4.8% and operating margin of 21%. We are seeing growing demand from clients to partner with them on AI They're moving from a use case based approach to an AI led transformational approach with AI agents playing a critical role. We're working on AI projects by bringing Infosys Topaz, a generative and AI and agent AI powered services and solutions for their benefit.

AI works spans a wide spectrum of priority areas like process improvement, engineering, customer service, cybersecurity, and employee productivity. We're helping a large U. S. Financial services company navigate the AI transformation to deliver hyper personalized conversational AI powered customer experience with accuracy of over 80% We're working with a Europe based company to create master solution driving multiple AI first transformation projects. That is automating 70% of the process landscape. We continue with our strategic expansion with acquisitions, one in energy consulting space in The U. S, one in cybersecurity in Australia, and with a new strategic partner joining our joint venture in Japan. All of these are areas of interest and strategic focus for the company. We have a set of capabilities that support our clients in their growth areas related to AI, cloud and digital. And in their efficiency areas related to automation, cost reduction lean and consolidation. Based on what we are seeing in the environment today, building on our large deal wins in the past quarters, our guidance for growth financial year 2026 is 03% in constant currency terms. The environment is uncertain, and we will execute our plans with agility while keeping a close watch on events as they unfold.

Our margin guidance for financial year 2026 is 20% to 22%. With that, let me pass it on to Jayesh for his views.

Thank you, Salil. Good morning, good evening, everyone.

And thank you for joining the call today. We entered financial year 2025 with significant uncertainties relating to interest rates, elections in large geos and geopolitical situations. Over the course of the year, reduction in uncertainties, our strong market position reflecting robust deal wins and improvement in discretionary spend in financial services led to better growth than our initial projections. A year ago, when I started my journey as a CFO of Infosys, with a vision to increase our market share, strengthen collaboration with business, drive Project Maximus to expand operation margins operating margins, and improve cash flow. I'm very glad that we have been able to achieve in each of these parameters. Me start by talking about the key highlights for the quarter and the year. We closed the year with revenues at $19,300,000,000 a growth of 4.2% in currency terms. And 3.9% in reported terms Acquisitions contributed 80 basis points to the growth financial year 2025. Financial Services, 50 basis points over FY24 to twenty one point one. After absorbing multiple headwinds. This has been a key focus area over the last year, and I will elaborate over this. Later. Sequentially, revenue declined by 3.5% in constant currency terms due to reduction in third party costs and seasonal weakness.

Approximately two third of the sequential revenue drop was due to reduction in third party with the decline being higher than our expectation. Barron's one third drop was due to volume decline and lower calendar and work day driven by Q4 seasonality.

Revenue increased by 4.8% on a year on year basis in constant currency terms in Q4. Europe grew 3x of the company rate at 15% in constant currency terms, driven by our focused approach of client mining, ramp up of large deals and acquisitions. Europe now accounts for 30% of our revenues. Financial Services and Manufacturing grew double digit year on year at 12.614% respectively in constant currency terms. Rupee term, revenue growth FY 'twenty five was 6.1%. Revenue growth accompanied by operating margin expansion led to 8.3% growth in EPS terms on normalized basis adjusting for interest on tax refunds for FY 2024 and 2025. We closed 24 large deals in Q4 with a TCV of $2,600,000,000 63% of this was net new. For the full year, we closed 96 deals with TCV of 11.656% net new. DSO reduced by five days to 69% sequentially Further, the DSO including unbilled net of unearned reduced by three days to eighty three. Free cash flow for FY 'twenty five was highest ever at 4,200,000,000.0 one hundred twenty nine percent of net profit. Adjusted for tax refund, it stood at 3,500,000,000.0 hundred and 12 percent of net profit. Headcount at the end of the year was 323,578, an increase of 6,000 year on year on year.

Attrition remained contained at 14.1%. Operating margin for Q4 was at 21%, a decline of 30 basis points sequentially bringing the financial year margins at 21.1%, increase of 50 basis points from FY24 level. The major components of sequential margin change for the quarter are as follows: headwind of 140 basis points from compensation related costs 40 basis points impact from acquisition mainly on account of amortization of intangibles, partly offset by a tailwind of 80 basis points from lower postpaid customer support 30 basis points from Maximus, 20 basis points from currency movement and 20 basis points from lower third party cost. Higher travel and visa costs were offset by lower other costs leading to a decline of 30 basis points sequentially. Utilization, excluding trainees, stands at 84.9 On-site mix further reduced to 23.6 We hired 15,000 freshers this year and expect to hire over 20,000 freshers in FY 2026. EPS increased by 1.8% in financial year 2025 in rupee terms on reported basis and 8.3% adjusted for interest on tax refunds. The increase in margins by 50 basis points over FY24 was achieved despite multiple headwinds from salary increases, higher variable pay impact from large deal ramp ups and acquisition related amortization.

These headwinds were more than offset through combined benefit from various tracks under Project Maximus, especially value based selling, lean and automation improvement in critical portfolio, improvement in utilization, etcetera. Have been able to institutionalize these initiatives and make a structural shift in our approach. We expect Project Maximus to further aid in margin improvements from current levels. Consolidated cash and cash equivalents stood at $5,560,000,000 at the end of the year, Yield on cash balance was 7.13 in Q4 and ROE stood at 29%. Coming to cash flows. FY 'twenty five free cash flows are highest ever at 4,100,000,000.0 increase of 42% year on year. Free cash flow as a percentage of net profit for financial year was 129%. And we expect FY 'twenty six free cash flows to be above 100% of net profit. Excluding income tax refunds, our free cash flows for the year were at $3,500,000,000 up 20% year on year. Free cash flows as a percentage of net profit were at 112 We expect effective tax rate for financial year '26 to be in the range of 29% to 30%. The Board has proposed a final dividend of INR22 for financial year 2025. Including the interim dividend, the total payout for FY 'twenty five will be INR 43, an increase of 13.2% once the final dividend is approved by the shareholders.

We closed 24 deals in Q4 with a TCV of $2,000,000,000 63% of this net new Vertical wise, we signed seven deals in financial services, five in AURS, four in manufacturing, three in communication, two each in high-tech and life sciences and one in retail. Region wise, we signed 12 large deals, each in America and Europe. Coming to verticals. In Financial Services, budgets are flat to slightly higher in AI regulatory compliance and cost management. We anticipate steady growth in capital markets and cards and payments in large global banks in U. S. In large global banks and U. S. Regional banks. Mortgage sector sees that will see an uptick if spend in interest rates reduce going forward. Our investment in AI related propositions regulatory compliances, risk mitigation and cost management is expected create growth opportunities. We have been selected as an AI partner for many of our clients. Manufacturing sector has grown double digits over the last few years for CY25 budgets are lower for auto and industrial manufacturing and flat for aero. Recent challenges in terms of tariffs, market uncertainties and trade barriers are likely to lead to a subdued spend and delayed decision making. Weakness in auto, especially in Europe continues are helping clients in aerospace resolve bottleneck in their supply chain.

Pipelines remains healthy with focus on cost takeouts, opportunities in infrastructure transformation and consolidation and some traction in ERP modernization program. Retail sector has been impacted by economic uncertainty resulting in lower consumer spending in core markets. Due to recent tariff announcements, clients budgets are expected to be tightened and there is increased caution. Decision cycles are getting stretched for discretionary spend and larger deals. Across JEOD, there is increased focus on AI cloud, estate modernization, cost takeout investing in core tech. Tech capabilities. Energy, utility, resources and services sector continues to grow, and we see a strong pipeline of opportunities both from existing and potential clients. Energy prices remain volatile. However, new markets in midstream and downstream energy are opening in The U. S. Regions. There is an increased M and A and tax related work with services clients focusing on cloud migration and vendor consolidation. Utilization is prioritizing AI driven enterprise transformation and services and is seeing traction in software services and IPD. Acquisition that we announced today will strengthen our vertical expertise and open new buying centers in energy trading and risk management area. Communication sector continues to remain soft, Discretionary finance is under pressure with clients focusing on cutting costs, restructuring restructuring and consolidation deed, Our growth will be led by recent deals and deal wins and opportunities in areas like cost reduction, AI and database solutions and cybersecurity.

Lower interest rates could improve the profitability of telco OEMs, which in turn can help increase IT by budgets. In high-tech, most clients remain cautious due to the macroeconomic headwinds, and tariff announcements with discretionary spend still remaining under pressure. There is increased margin pressure on account of committed spend on data centers.

Exiting FY 2025, global uncertainties relating to tariff and impact of that on client sentiments and spend are taking center stage. Bases our assessment of the current macro environment macroeconomic environment and the visibility with we have today. We expect FY 2026 growth to be 0% to 3% in constant currency terms. This excludes the acquisition that we announced today. And this assumes a reduction in third party revenues versus FY 2025 based on existing deals and the new new deals in pipeline that we have today. Our operating margin guidance for the year is 20% to 22%. We will continue to keep a close watch on economic environment and its impact on our on client budgets and reassess our guidance as we progress during the year. With that, we can open the floor for questions.

Thank you very much. Will now begin with the question and answer session. The first question is from the line of Ankur Rudra JPMorgan. Please go ahead. Thank you. On the fourth quarter, can you talk a bit about the Ankur, sorry to interrupt you. Your audio is not clear. Can I request you to come in a better reception area, please? Okay. Can you hit Okay. You it better? No, sir. The network is not clear at your end. Okay. Let me come back. Come Go ahead.

Ankur, go ahead. We can hear you All right. Thanks.

Okay. So question was in terms of the fourth quarter, can you talk a bit about the linearity? Did the softness or the relative miss to guidance play out only in March or was it something you saw over the course of the quarter? Sanku, as I said earlier, two third of our decline was on account of third party costs. And and the revenue related to that. Some of the deals that we had in the pipeline had slipped, so this this decline was higher than what we anticipated.

And the balance was the usual Q4 seasonality and the volume decline that we saw. So but two third of our 3.5% decline was on the back of third party cost and revenue.

I appreciate that, Roti. I was curious if that paid out more than March exactly that over the course of the entire quarter?

Yes. So generally, these deals happen towards the end of the quarter, and that's where it slipped from there.

Okay. Understood. If I a bit about the guidance, it seems to imply something like 0.8% to 19% for the rest of the year. Could you highlight if this will be a normal seasonality or is it going to be different given the heightened uncertainty you might be seeing right now?

Ankur, sorry, can you repeat the question? I wasn't very clear.

The guidance, does it imply a normal seasonality for the year?

Yes. So, as we said earlier, we do see heightened uncertainty the environment, and that's the reason we have given a three point guidance. So depending on which end of the guidance you are looking at, the seasonality will also change or the ancillary will also change. But outside of that, we are expecting normal seasonality.

Okay, understood. Just a last question In terms of you spoke a lot about AI led transformation that clients are expecting from you. Are you infusing AI into existing projects that might lead to any kind of revenue deflation which you have to overcome?

Hi, Ankur. This is Saleel. So first, AI is part of all the discussions on the new deals. We are using AI in many of our existing programs Here, we are seeing benefits which relate to how we can now use AI with clients in different areas. So as a composite, what we saw last year, 4%, 4.2% growth We feel pretty confident that we will see benefits from it even as we see some productivity improvements. So we don't see anything in terms of the revenue on that. [indiscernible] Thank you. Next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead. Hey, hi. Good evening and thank you for taking my question. My first question was you spoke about that the third party slipped towards the end of the quarter. So A, how is the volume trend during the quarter? And does that imply that as they come back in the next quarter, in the guidance you are expecting the third party contribution to be higher in [indiscernible] If you look at what I said, through the quarter, we had a softer start at the beginning of the quarter from volumes perspective, but we did see some recovery there in terms of volumes.

But on the third party, we are expecting for FY 'twenty six third party to be lower than FY 'twenty five considering the deals that we have signed and the deals that we have in the pipeline. So that is baked in.

And volume trend during the quarter?

Yes. The volume trend during the quarter, we had a softer start January. Generally, the soft month, and then the volumes start stacking up, and we saw similar trend this quarter as well. Okay. My second question was from a longer term perspective over the last two, three years we have seen all the fraud which was created in many of the deals with very low ROIs being signed. They were reassessed by the clients and many of them were ramped down and we saw the impact of that in terms of revenue growth. Do you see there is still some scope left if clients start reassessing the project again if the macro uncertainty continues for a little longer? There is more of reassessment of the projects which may again happening the way we have seen over the last year or two. [indiscernible] What first, the changes that we have seen in the economic environment impact have happened very recently and over a short span. Having said that, the discussions we've had specifically on some of the deals we've signed in the recent quarters. We have not seen a change in that like the trajectory that we were anticipating at this stage.

However, we'll keep a lookout on that as we develop it.

Thanks for that, sir.

Just a clarification. So my question was more around that ROIs now that we are offering in terms of the deals, which we are doing for our clients. Now has it on a portfolio level, has it improved so that we are no longer in a risk if such a reassessment happens? But you still see that there are some of the projects which is at a risk which could be reassessed?

So Natin, I mean, what we saw in the past was more of sorry, Copal, what we saw in the past was more of the discretionary spend where the clients had put a stop or there were ramp downs there. If the environment deteriorates significantly from where we are, yes, clients will relook at some of that. At this point in time, we are not looking we are not seeing any of that happening significantly for us. [indiscernible] Thank you.

Question is from the line of Abhishek Patak from Motilal Oswal. Please go ahead. Yes, hi. Thanks for the opportunity.

So my first question was, could you please just expand a bit on the underlying assumptions at the top end of our guidance? Do we assume an acceleration in deal wins for this to be achieved? Or do you think better than expected ramp ups could probably take us to 3%? That's one. And the second question was which I think is probably partly answered, but considering a few of your peers have called out some deferrals or at least some uncertainty in decision making.

How does the next immediate quarter look in terms of, let's say, deferrals or ramp downs And do you see any significant risk in the in extreme short term? And lastly, do the current events kind of push down the recovery in short cycle deals?

A bit more? Do you feel short cycle deals are again something that will struggle to take off? Thank you. Yes. So leading up to guidance, we always run multiple models that lead us to the top and bottom and or the middle middle end of the guidance. We that's the same process that we have followed even at this point in time. The reason that we gave a three point guidance was because there is an uncertainty. So at the lower end of the guidance, we have baked in some further deterioration in the environment. And at the top end of the guidance, we have baked in steady to marginally improving environment. So that's how the guidance has been panned out from the environment perspective. Having said that, on the ramp downs, we have not really seen any major ramp downs at point in time or major closures of the of the deals. We do see clients being cautious that decision making is delayed in pockets. But as I said, what we see today has been baked in the lower end of the guidance from the uncertainty perspective.

Got it. I think just the last thing on short cycle deals, you could. Just clarify that. Abhishek, do you have any follow-up question? Yes. Am I audible? Yes, we can hear you. Yes, sorry. No, just the last bit on the wage hike impact for Q1 and how do we just model that impact? [indiscernible] most of our employees got the wage hikes in in January, and the middle level to senior level employees will get wage hike effective April 1. The impact of that has been baked in the guidance range that we have given. As you could see, for the financial year '25, we have have improved our margins by 50 basis points. We are now at 21.1 Despite all the headwinds, whether it was wage hike, whether it was higher variable pay, the large deal ramp ups, acquisition related costs, And our endeavor going forward is to improve from where we are in the current environment.

Understood. Thanks a lot.

Thank you.

Next question is from the line of Gaurav Rathiriya from Morgan Stanley. Please go ahead.

Hi, thanks for taking my question. My first question is on small deals Gaurav, sorry to interrupt you.

Can I request you to speak a little louder, please?

Hi. Am I audible now?

Yes. Go ahead.

Hi. My first question is on small deal environment. Have you seen any change compared to a few months back? And is it fair to believe that the midpoint of guide assumes a stability in the environment on the small deal front? So, Gaurav, as I said, there are various models that lead to multiple ends of the guidance. At the lower end, I'll repeat, we have assumed deteriorating environment. And at the upper end, we have assumed steady to marginally improving environment. So in the middle is anywhere between the two.

Okay. Got it. Second question is on margins for FY 2026. Normally, we have always been hearing is that when growth improves, it creates an operating leverage. And provides a cushion to improve margins. But if I take this midpoint of your guidance, it's kind of slowing compared to FY 2025. So is it fair to believe that kind of creates some operating deleverage and creates some pressure on margin? So what would be levers to offset that and still be stay within the band [indiscernible] FY 2025 range. Thank you.

So Gaurav, if you look at the last year also, we had a large comp impact coming into the year because we had the previous comp was rolled out in numbers. So full year impact of that came into this year. And then we had additional comp that we rolled out in January. So there was a comp impact. There was an impact of the large deal that we signed in the previous year. 20 bps of impact from the acquisition that we did and so on. And despite all of those headwinds, we have been able to improve margins by 50 basis points while paying rewarding our employees better through a higher variable rate through the year. So we are confident at this point in time that there are opportunities where we can double down and improve margins. This point in time, we endeavor to improve margins from where we are for FY twenty 'six.

Thank you.

Thank you. Next question is from the line of Jonathan Lee from Buckingham. Please go ahead.

Great. Thanks for taking our questions. First question, can you clarify what the inorganic contribution is that's contemplated in your outlook outlook for fiscal twenty twenty six?

Jonathan, the guidance does not include the acquisition that we announced today. We haven't closed them yet. The Board has approved the acquisition. We have to go through the closing formalities That will take few weeks to maybe a month or so. So depending on the closure, we will figure out in the next cycle on the guidance. But at this point in time, to clarify the guidance does not include the acquisition that we announced today.

Thanks for that clarification. Second, how would you characterize the pricing environment through the quarter? And how does that compare to what you've seen since the beginning of this fiscal year?

We continue seeing stable pricing even through the quarter. Generally at overall business levels. Everything that has changed in the environment has been very recent. So we've not really seen any significant impact coming from them on the pricing environment. Having said that, one of the key pillar on our on our cost optimization or the margin improvement program is the value based selling. That's not only pricing, that is everything around pricing, including getting the chain request for the scope creep, rotating our employees, long tenured employees, across projects so that we get better pricing on them. Having a different differentiated pricing models for different services So all of that has helped in the last year and that endeavor continues in this year as well.

Appreciate that color. Thank you. Thank you.

Next question is from the line of Keith from BMO Capital Markets. Please go ahead.

Hi. Thank you very much for taking the call. I wanted to return to AI on the delivery side or the and really I wanted to go back to the first question, which I wasn't sure I understood your answer. But how is AI changing the nature of pricing discussions and or structure as of late? And how do you think that's going to unfold in 02/2026? In other words, does it does the deflationary nature of AI, is that impacting our performance based contracts? Or any structure that you're putting in the contract? And is it leading to any different price discussions? And if you could also call out is there an area, whether it's BPO or deployment, or ADM that's being that you see using AI more in the delivery? Or is it all the different areas? Is there any one area specifically within your portfolio or solution portfolio that you think will be impacted more by delivery?

So on AI and pricing what we are seeing is there are areas where we have discussions with clients and this is building up through the last year through the quarters and we anticipate seeing that going ahead as well. Where, for example, if there are large customer service programs we see that there could be benefits to the clients of 20% to 40% If there are different areas where generative AI can be applied, those discussions are very much at the forefront on clients' minds.

Sometimes the client view may be larger than what we are seeing in realization. And so we have a choice to make there. Many times, they're aligned and AI is one component of automation of lean then AI and then consolidation. All of which gives some benefits in a cumulative way to the client. So we see that ongoing. And with that, we also see AI gives us some new opportunities. One, One, there are new projects we are doing, for example, in credit risk or AI platform for a telco These These give us new areas for revenue as well. So as a cumulative, while all this was still going on last year, we still saw the 4% increase in four point two percent increase in revenue. And that's the way we see it at a composite level. On that, we superimpose the changes in the economic environment. Which is where we see some differences as Jaish was sharing earlier. In the range of that guidance. If that makes sense.

Okay. But just when and for my follow-up, when you mentioned there are some situations where AI is generating 20% to 40% efficiency gains. I think that's sort of similar to what IBM and Accenture have said. On a like for like pricing in that situation where you can deliver such meaningful efficiency gains to the client, How is that how are those efficiency gains shared with with the customer? In other words, is your do your revenues go down by 20%, 40%? Or how is that shared in terms of just on a like for like basis for a given contract? And that's it for me. Thank you.

So there, where we've seen that range has been more, for example, on customer service. We don't have a large sort of voice business We typically bid on like combination of technology and operations and part of it could be that. So typically, these are not our existing book of business that customer service is not something we have a large book of business in. Terms of sharing, there are different ways that these are shared depending on the client situation. Like there are situations where there's a consolidation activity with a client where there's a share in some part where customer service is not within our portfolio and there's consolidation which gives us some benefit. So it's not like one number which gets shared then with clients. But it is shared, Okay.

Many thanks for the answers and wish you all the best of luck. Thank you.

Next question is from the line of Sarendra Goel from Citi. Please go ahead.

Yes. Thanks a lot. Saleed, just one question. You have been calling out improvement in discretionary spending. Through the course of FY 2025. What did you see in the month of March and April so far?

Apologies if you have already answered this question before. [indiscernible] March month has been usual. I don't think we have seen a significant change either ways in the environment in terms of volumes. We did have positive volumes in March.

Understood. Thank you.

Thank you. Next question is from the line of Abhishek Kumar from JM Financial. Please go ahead.

Yes. Hi. Good evening. Thanks for taking my question.

I have a question on cost of third party item. First is, when we say some of the booking of the third party item got spilled over Does that mean that it will come back in Q1 and that will help Q1 revenue? And a related question is, is the visibility getting into Q1 similar to what we have seen maybe Q1 of last year, better, worse, any color on on that? Thank you.

Sorry, Abhishek, if you could repeat the first question on the third party, didn't get that Yes. So I mean, we said that some of the weakness in Q4 was because some third party item got spilled over. So is that just a deferral and it will come back in Q1 or that is something that we have lost? Yes. So Abhishek, at this point in time, third party costs that, as I said earlier, one two third of our decline was because of the third party lower third party costs and revenue. Some of those deals slipped It is uncertain at this point in time. If and when these deals come back. So at this point in time, they are stripped. You should read that in conjunction of the fact that I also said FY 'twenty six third party cost and revenue are going to be lower than FY five third party cost and revenue.

Okay.

And maybe in that context, visibility overall for Q1 given we are in the midst of the uncertain macro how are we looking at Q1 compared to previous years? Yes. So, I think both the years have had unique factors that led to an uncertainty. I know if you can put in the quantifiable terms whether it is similar or not. We started the year last time There were uncertainties around interest rates, geopolitical tensions, how the world was going through elections. So, were uncertainties around that. And today, have uncertainties around tariff. We don't know to the extent the rates to the extent to which countries will get impacted, how those countries will retaliate, the timing of that and that the downstream impact of that. So I think all of that is uncertain as we speak, Abhishek. But the guidance that we have provided at this point in time is what we see today. Our philosophy on guidance has been to reduce asymmetry of information between us and our investors, and we are guiding what we see today.

So one quick question on margin. Two third of 3.5% decline coming from third party But the margin uplift because of that has been very limited, right, around 30 basis points. So I was just trying to reconcile why the margin uplift is is so low?

Thank you.

Abhishek, the margin uplift on that is around 20 basis points. If you look at the reduction in third party cost is $100,000,000 obviously, we make some margin on those deals as well. So you will only get that benefit to the extent of the delta margin of the company versus those third party deals, and that is where the margins impact is.

Got it. Thank you. That's helpful and all the best.

Thank you.

Next question is from the line of Sandeep Shah from Equita Securities. Please go ahead. Yes, thanks. Thanks for the opportunity.

Salil, just wanted to understand in this uncertain macro environment, if discretionary spend is difficult to predict whether but at the same time clients may not postpone their AI related investment So is it fair to assume client may start in terms of going doubling down on the outsourcing cost takeout kind of a deals? Whether same is coming into your discussion? And is it fair to assume that the deal pipeline could improve on the cost takeout and the mega deals could be a part of the deal wins entering FY 2026 as well? [indiscernible] the changes in the economic environment are recent and also in a short period. So, not everything is understood about that. Having said that, learning from the past we typically see that this sort of an environment will provide more cost takeout opportunities. Consolidation, automation, lead. We have also pivoted our sales activities into focusing and building more proactive pitches to clients on that area. We will now see how that executes and what's the dynamic of the economic environment. But in general, our portfolio has got that ability, which is also on AI cloud and also on cost takeout. So now we are emphasizing much more on the cost takeout.

And Jaish or Salil, whoever can answer this, whether trade to assume the seasonality of 1H better than 2H may continue even in FY 2026, what are your guidance assumptions for the same? [indiscernible] I mean, typically, our 2H is softer because you have furloughs, you have lower working and calendar days, etcetera, etcetera. So that kind of that part of the seasonality will remain. As we see today, I don't see I don't expect that seasonality to change. But beyond that, in an uncertain environment like this, it's very difficult to predict the quarters will look like. As I said earlier, at the bottom and the higher end of the guidance, we have guidance have factored various scenarios that and depending on how that will play out, we'll have to see how the quarters progress. But overall, we don't see a significant change in seasonality. Beyond the uncertainty.

Okay. And just last, a bookkeeping question. In terms of your margin walk, you have said the M and A related cost being forty bps as a headwind to the margin.

Is it one off and may not reoccur in the first quarter of coming financial year? And if I assume the both acquisition being closed at the end of 1Q and be consolidated for nine months. Is it fair to assume it will add 40, 50 bps to the revenue growth? So that's right. The 40 bps of charge that we took on related to the acquisition is one off in a way. If you recall, we had said earlier this year that automobile sector, especially in the German or European markets, has been sealing softwares. That is why we have reassessed our customer intangibles, the value of customer intangibles, and we had to take a charge on that. So from that perspective, it's a one off. Coming to the second question, what was the [indiscernible] The M and A. Yes, the acquisition. The impact of the acquisitions, yes, if we close in the Q1, the impact would I mean, the benefit that we would get would be forty to 50 basis points for the full year, which is not baked in the guidance.

Okay.

Thanks and all the best.

Thank you.

Thank you.

Next question is from the line of Ibohar Sengal from Nuama Institutional Equities. Please go ahead.

Hi. Thanks for taking my question.

Just two quick questions from my side. So one is traditionally especially over the last four years, we have seen 1H dosing heavy lifting for us.

In terms of growth and the second half gets marked by the industry seasonality in Q4. This year, do you see I mean, I know this is part of it talking about question. But in this year, think a lot of our peers have called out themselves, maybe in the past quarter. Which also led to one of the peers going through a very weak quarter in Q1. Yesterday itself. Do you see that impacting the entry growth rate of products in this year? Which would probably lead to recycling lower growth or let's say a few trajectory of the growth that we have seen over the past thirty years.

We're both sorry again. Your voice wasn't very clear. It was getting muffled in between. Can you summarize the question again please? Sure. [indiscernible] Sorry, did we lose everybody?

Yes, sir. The line for the participant dropped. We move on to the next participant. The next question is from the line of Nitin Padmanabhan from Investec India. Please go ahead.

Yes. Hi, good evening.

The JV that we signed with Mitsubishi, how is that different from the one that TCS signed in the early part of the last decade? You could just give some context there?

So Nitin, this is not a JV that we have signed. We have inducted Mitsubishi in the existing JV, and we have diluted our share by 2%. So it's an existing JV where we have just inducted a partner a strategic partner in the JV. It's an endeavor to build a long term relationship with a large giant in Japan.

Got it. Got it.

And then just one last question is see as we entered the last year which is as we entered fiscal twenty twenty five, we had a large order book of large deals which we had to execute which sort of helped us in the 3.4%, And in that context, our guidance the top end is almost similar. So just wanted some context in terms of how it was then and how it is now.

So, Yann, Natin, you're right. If you look at just the purely the quantum of the deals that were getting ramped up in Q4 of the previous year and compare that to quantum of deals that are getting ramped up, you will see a stark or you'll see some difference. But we should also remember that many of those deals were in larger and longer duration deals versus what we have today. Which so there's a delta between the tenure of the [indiscernible] and mega deals are generally a much longer tenure deal. You will see some of the filings with respect to the mega deals that we have done with Sabi also or stock earlier. So we should see that in that context.

So it's not that these deals have any anniversary impact at the moment or there is a continued ramp that you are sort of anticipating there? [indiscernible] No, I think we've lost them. Yes. No, sorry. If you look at most of the deals that we had talked about earlier, which was signed in FY 'twenty four, They had ramped up in the Q4 of FY 'twenty four and then we saw the benefit of them in FY 2025. So they are pretty much at a steady state at this point in time.

Got it. Got it. That's very helpful. Thank you so much and all the very best.

Thank you.

Thank you. We take the follow-up question from the line of Sibor Singhal from Nuama. Please go ahead.

Yes. Hi. Hope I'm audible this time. Sorry, I got dropped in between. Yes, sorry. So my question was basically on the growth trajectory that we're expecting. The last two years our growth has been pretty much first half heavy. And seasonality of industry and ROCs will be coming in Q3 and Q4. This time a lot of our peers have called out weakness in Q1 especially because of the uncertain macro. So do you believe that could impact the growth trajectory that we see through the year It could be more skewed towards Q2 and Q3 or maybe the second half And the first half might not be as good as we have seen. Over the past couple of years. Just some light on that would be really great.

So, Ribod, as I said earlier, from a seasonality perspective, I don't see I mean, the regular seasonality perspective, I don't see a change in seasonality The working days, calendar days impact will be similar to earlier years. The furloughs will remain. The uncertainty is the only unknown factor, and we'll have to see how that pans out in Q1, Q2 to see if and the implication of that to see whether Q1 Q2 is going to be better or worse off versus earlier year. So in short, the uncertainty remains. That's the reason why we have given a three point guidance. The bottom end of our guidance, we have seen we have expected higher uncertainty at the top end of the guidance If we end up there, then you will see a regular seasonality in H1 and H2. At the top end of the guidance. But yes, at the bottom end of the guidance, it's going to be unpredictable.

Right, right. Got it. So okay, let me just ask maybe just a follow-up on that. Are you expecting any let's say, unexpected, I mean, extra weakness in Q1 because of the uncertain macro at this point of time.

Vibhor, we don't give quarterly guidance [indiscernible] going to stick to our overall guidance, and that is what we see today.

Okay. I was just trying my luck. Lastly, on the margin front, where do we stand on the project maximum benefit? Do you believe there are still some fruits to be plucked from that? Or are we mostly done with that project?

So if you look at this year, the despite multiple headwinds, have been able to improve margins. Of 50 basis points, right? We did absorb eComm that we did in the previous year. Full year impact of that came in FY 'twenty five. We gave higher variable pay to our employees. We We have had ramp ups of many of the mega deals. Which obviously are lower margins in the beginning of the year. We had an impact from acquisition or intangibles of the acquisition So I think we have absorbed all of that and delivered 50 basis points of margin. There are multiple tracks which are still underway in under the project. Value based selling is still delivering value. Lean automation is still creating value. So I think there are opportunities that makes us believe that there is still to improve margins from where we are, and that's the end of Got it. Got it. Great. Thank you so much for taking my questions and wish you all the Thank you, Ubbe. Thank you. Next question is from the line of Manik Taneja from Axcess Capital. Please go ahead.

Hi, thanks for the opportunity. Made a remark regarding the fact that we should probably be expecting some decline in the cost of pass through or the pass through revenues in FY 2026. We've basically seen a very steady increase from this line item increasing from about 2% of revenues [indiscernible] 8% of revenues in FY 2025. Is there anything on the ground which is changing because of which you [indiscernible] a lower this number essentially being a drag?

On revenue growth? And how should we be thinking about this number playing out over the next three, four years?

Vibhor sorry, Manik, this is the third party costs are typically the costs which are embedded in the large transformation deals. A multiyear large transformation deal. And we know what the deals that we have signed in the year, and we know what are the deals in the pipeline. When we analyze that those two components is when we estimate what the deal what the cost going to be. And at this point in time, looking at what we have signed and what we have in the pipeline, we expect FY 'twenty six third party costs to be lower than FY 'twenty five.

Do we know this is going back to possibly where it used to be FY 2021? '21?

Yes. I mean, eventually, we will have to see where we 'll end up with Uber. But once the large many of the mega deals that we have have signed in the past, those starts those transformation finishes. We will we will have significant reductions as well.

Sure. Thank you and all the best for the future.

Thank you. Next question is from the line of Ashwin Mehta from Ambit Capital. Please go ahead. Hi. Thanks for the opportunity. Just one clarification, cost of sales line, we have almost INR145 crores negative number for consulting. Consultancy and professional charges haven't seen a negative number ever here. So what is driving this?

So Ashwin, this is an insurance claim that we got with respect to the cyber event that we had last year. So there's a benefit of $20,000,000 that we got I didn't call it out in the margin walk because there were other other negatives against that like utilization, etcetera. So those kind of offset at each other.

I have a follow-up in terms of the provision for support as well, the reversal seems to be pretty high. So is that also related to to this as well?

No. The post sale customer support is typically there is a seasonality there. So typically, if you look at last few years' time, you will see a reduction in Q4 generally on that because many of the projects typically come to an end with the financial year end. So that's one reason. The second reason is, of course, there's 's a lot of things which we are driving under Project Maximus. Whether is in terms of effort optimization, whether it is in terms of chain request, a tighter control of many of those projects all of that reflects into lesser warranty in terms of SLAs, lesser warranty, lesser costs in future on many of those projects. So all of that reflects in DSCS for us.

Wholesale conduct is a good question.

Thanks a lot for the clarification.

Thank you. Thank you. Next question is from the line of Girish Bai from BOB Capital Markets. Please go ahead.

Yes. For the opportunity. Sadil, are there any silver linings to the current macroeconomic situation around tariffs? Are you having any conversations with clients around supply chain solutions or anything like that?

VENKATAKRISHNAN:] So there, what we see is, we have a portfolio which has got both things for growth like AI, cloud, digital, but also very good solutions for cost and cost automation, productivity from AI, lean. We are making sure that those are getting already in the short time period from the changes in the economic outlook, we are making sure those are getting communicated, discussed with clients. And my guess is, we don't know the impact yet. But we are going to make sure that if clients are looking for cost and efficiency, we'll be there. On supply chain, we are working to make sure that we provide because we have a consulting business, which can give some insights. We also have supply chain tech solutions. If clients are rerouting their supply chains, they want to optimize it, how we can support them in it. So, are positioning for it. We don't know right now like what is the potential impact benefit but we are definitely positioning for the cost and these sort of activities.

Okay. My second and last question has to do with AI and budgets around AI. Do you have a the clients have a separate budget for GenAI or AI? Or is it coming from savings that you're doing on normal projects?

As things stand today? Yes. I think, I mean, if I look back at the last year, there's overall tech budgets are there. Now there are some cases where a client is doing large transformation we are able to fund that transformation from let's say, a large opportunity on consolidation or cost efficiency. In some cases, because at the start AI was a little bit more distributed, not so much central. There were also some sort of distributed within the company, divisions and budgets and so on. My guess is it will become more and more one budget for the company from which there will be spend on our services for AI and so on. We will see how that plays out That's what we anticipate.

Okay. Thank you.

Thank you.

Ladies and gentlemen, I now hand the conference over to the management for closing comments.

Thanks. Thank you, everyone, and thank you for detailed set of questions. We can imagine with the changes, we are all looking for insights. Conclusion from my side. First, we are delighted with the strong financial year 2025 growth margin very good cash, large deals, net new. What we see what we've built over the years is a balanced portfolio within the company with AI, cloud, digital for growth, cost, automation, consolidation, lean for efficiency. And we find that this environment gives us a good ability to work on both and maybe do one more than the other depending on how the environment will unfold, we will support our clients in that ability. We've also taken care to build a guidance with how Jayesh described with different ends and assuming different scenarios. We feel we are well positioned on the margin side with a lot of the work that's being done in our margin program. So overall, we remain quite confident to support our clients on what they want to drive. And to deliver and execute on our business. Thank you, everyone, and look forward to catching up in the quarter. Thank you.

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