Infosys Q1 FY26 Results: A Snapshot of Disappointment

Infosys reported a 0.7 percent sequential decline in constant currency revenue, missing analyst expectations. Here is a quick look at the key financials:

Metric	Q1 FY26	Q4 FY25	QoQ Change
Revenue	₹38,380 crore	₹37,923 crore	+1.2 percent (YoY)
Net Profit	₹5,945 crore	₹6,134 crore	-3.1 percent
Operating Margin	20.1 percent	20.3 percent	-20 bps
Constant Currency Growth	-0.7 percent QoQ	-1.3 percent in Q4 FY25	Still in negative territory

Despite being the second-largest IT services firm in India, Infosys has now posted back-to-back quarters of weak performance, with growth stagnating and margin pressures remaining elevated.

Management Commentary: Playing It Safe Amid Uncertainty

During the earnings call, Infosys CEO Salil Parekh highlighted that demand remained muted in core markets like the US and Europe. He pointed to extended decision-making processes, prolonged sales cycles, and reduced discretionary IT spending—particularly in banking, financial services, and retail—as key reasons behind the subdued performance.

Our clients are cautious with tech investments, particularly in discretionary projects. We remain focused on strengthening large deals and digital transformation opportunities, said Parekh.

The management highlighted that despite large deal wins worth 2.5 billion dollars, the ramp-up of these deals remains delayed. Notably, the attrition rate improved to 12.1 percent – a positive signal, but not enough to offset broader worries about client confidence.

Market Reaction: Infosys ADRs Plunge Over 7 Percent

The Infosys ADRs (American Depositary Receipts) listed on the NYSE fell over 7 percent post-results, reflecting the global investor community's disappointment with the Q1 numbers. On the Indian bourses, Infosys stock dropped nearly 4 percent intraday on Friday, wiping off thousands of crores in market capitalization.

The fall in ADRs is particularly telling, as it often reflects how institutional investors in the United States perceive the long-term tech spending outlook. With Infosys deriving over 60 percent of its revenue from North America, such a reaction rings alarm bells.

Business Segments: Weak BFSI, Better ER and D, and Manufacturing

Let us break down how Infosys fared across verticals:

BFSI (Banking, Financial Services, Insurance): Declined QoQ, still struggling with budget tightening and delayed project starts.
Retail and Consumer Packaged Goods: Muted performance due to cautious client spending.
Manufacturing and Engineering Services (ER and D): Showed moderate growth, as clients continued to invest in automation and digital supply chains.
Hi-Tech: Stable, but no major acceleration.

The poor BFSI performance is a major concern, as this segment contributes nearly 30 percent of Infosys' revenue.

Fundamental Analysis

Despite short-term setbacks, Infosys remains a fundamentally sound company, but with caution.

Valuation Metrics (as of July 10, 2025):

PE Ratio (TTM): Approximately 23 times (slightly above the sector average)
Dividend Yield: Approximately 2.3 percent
Market Capitalization: ₹6.4 lakh crore
Return on Equity (ROE): 29 percent
Debt to Equity: 0.00 (debt-free)

The company remains debt-free, with a strong balance sheet and healthy cash reserves. However, elevated valuations cannot be justified if growth continues to remain underwhelming.

Large Deal Wins

Infosys signed 14 large deals in Q1 worth 2.5 billion dollars, compared to 2.1 billion dollars last quarter. This is a silver lining that indicates the company still commands trust among global clients. But deal execution and revenue conversion remain challenges.

Technical Analysis: Key Levels to Watch

Infosys is currently trading around ₹1,470 to ₹1,500. Technically, the chart shows a bearish breakdown below the 200-day Simple Moving Average. Here is a breakdown:

Support Zones: ₹1,420, followed by ₹1,370
Resistance Zones: ₹1,530 and ₹1,580
Relative Strength Index (RSI - 14): 41 (approaching oversold zone)
MACD Indicator: Showing bearish crossover

Short-Term View

On the daily chart, the stock exhibits weakness, forming a descending triangle pattern. A break below ₹1,420 could lead to a decline toward ₹1,370. Momentum indicators currently indicate a low likelihood of a short-term recovery.

Medium-Term View

Unless the stock manages to reclaim ₹1,580 with strong volume, a sideways to downward bias may persist in the medium term. Institutional outflows, especially from Foreign Institutional Investors (FIIs), will weigh on sentiment.

Investor Sentiment and Analyst Reactions

Brokerage houses like Nomura and JP Morgan have downgraded Infosys’ FY26 EPS forecast by 3 to 5 percent, citing weak revenue visibility. Some analysts have lowered the target price to ₹1,550 from earlier levels of ₹1,650 to ₹1,700.

Investor sentiment remains cautious. While retail investors may consider buying on dips, institutional investors are seeking signs of improved guidance or demand stability before taking fresh bets.

Global Headwinds: The Macro Context Matters

The global IT services landscape is undergoing a transition:

United States Federal Reserve policies are keeping corporate borrowing tight.
Europe’s economy is still recovering from recessionary pressures.
Artificial Intelligence and Cloud spending is more focused and selective.

These factors have led to tighter IT budgets, even as companies want to invest in modernization. Infosys, with its legacy services business, needs to accelerate its shift to high-margin digital offerings like AI, automation, and cybersecurity.

What is Next for Infosys?

Key Triggers to Watch in Coming Quarters:

Ramp-up of large deals and their contribution to revenue
Revival in BFSI and retail verticals
Margin protection through automation and offshore leverage
Hiring trends and commentary on client budgets
Movement of ADRs and FII interest in Indian IT

Conclusion

Infosys Q1 FY26 results have undoubtedly disappointed the street. While the company’s fundamentals remain intact, short-term headwinds around demand, weak execution, and margin pressure continue to pose a challenge. With its ADRs sliding and technical charts signaling bearishness, Infosys must swiftly convert its large deals into revenues and regain investor confidence.

Until then, Infosys may continue to trade with a cloud of caution over its otherwise stellar legacy.

Author’s Note

As someone who believes in the long-term value of Indian IT giants, Infosys’ current underperformance is more a reflection of global macroeconomic headwinds than a fundamental breakdown. However, the margin of safety for new investors has narrowed.

If you are a long-term investor, this could be a chance to accumulate gradually. But for short-term traders, caution is key until we see a decisive breakout or a change in global sentiment toward IT spending.

The Financial And Tech Literacy