Infosys has lowered its fiscal 2027 revenue growth forecast to 1-2%, citing challenges in deal pricing and organic growth. The IT major’s September quarter profit of Rs 7,800 crore missed analyst expectations. Investors are now watching whether pricing pressure from AI-led automation will continue to impact profit margins in the coming quarters.
Infosys has revised its fiscal 2027 revenue growth guidance downward to a range of 1-2%, moving away from its previous forecast of 1.5-3.0%. This adjustment reflects a challenging macroeconomic environment where competitive intensity and changing client demands are limiting the company's ability to increase prices.
In its September quarter results, Infosys reported revenue of $5.1 billion, reflecting a 1.2% quarter-on-quarter increase. This growth figure fell short of expectations, and the company's profit after tax of Rs 7,800 crore also trailed the anticipated Rs 8,100 crore. While the company maintained its adjusted EBIT margin guidance within the 20-22% range, the performance highlights the difficulty of balancing operational costs with slowing demand.
Strategic Shifts and Operational Costs
A notable factor contributing to the guidance revision is the company's decision to exit a large manufacturing contract in Europe. Strategic moves like this, while aimed at long-term efficiency, have an immediate impact on top-line growth. Additionally, the company is dealing with the standard pressure of wage hikes and the amortization costs associated with recent acquisitions, which continue to weigh on the financial results.
AI and Pricing Pressure
Investors are closely monitoring how artificial intelligence is impacting the IT services industry. While AI is a tool for productivity, it is also creating a shift in how companies charge for their services. Increased automation often leads to deflationary pressure on pricing, as clients expect costs to drop when manual work is replaced by technology.
To account for this environment, analysts have trimmed their earnings per share estimates for fiscal 2027 and 2028 by roughly 1.5% to 2%. The market is particularly sensitive to these shifts because they affect the company's organic growth targets.
Looking Ahead
The central monitorable for shareholders is the company's ability to maintain pricing discipline while transitioning to newer, AI-driven service models. As the sector moves toward greater automation, the focus will be on whether Infosys can convert its pipeline into profitable growth without sacrificing its target margin range. Investors may look for management commentary on deal conversion timelines and the sustainability of margins in the second half of the fiscal year.