Infosys clocks weakest Q1 in six years, picks Dash for CEO
Bengaluru-based Infosys marked a slow start to the fiscal year, even though it met analysts' expectations and outperformed three of its four large rivals. The company clocked $5.08 billion in revenue in the June quarter,
Infosys has bet on a tried-and-tested veteran to steer the company through turbulent times, even as it reported its weakest June quarter in six years. India's second-largest IT services firm on Thursday named Ashiss Kumar Dash as CEO-designate, effective 1 April 2027, at a time when automation is sweeping across India's $300 billion IT industry.
Bengaluru-based Infosys marked a slow start to the fiscal year, even though it met analysts' expectations and outperformed three of its four large rivals. The company clocked $5.08 billion in revenue in the June quarter, up 0.83% sequentially and 2.8% on a yearly basis.
At a post-earnings press conference, Infosys chairman Nandan Nilekani was effusive in his praise of Dash. "He has worked in every part of Infosys, be it in delivery, be it in sales, be it in account management, starting a new data centre in Bhubaneshwar, everything, and he's someone who I think everybody likes, respects. He's an uncomplicated guy, focused on what needs to be done,” Nilekani said in his first opening address in almost three years.
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Infosys reported $5.08 billion in revenue, marking a 0.83% increase sequentially and 2.8% year-on-year. Net profit was $819 million, down 11% from the previous quarter, but up 1.3% compared to the same quarter last year.
Infosys attributed the lowered growth forecast of 1.5% to 3% to softer technology spending by global clients amid high interest rates and ongoing geopolitical tensions.
Ashiss Kumar Dash has been with Infosys for over three decades, having joined the company in May 1995.
Chairman Nandan Nilekani emphasized Dash's combination of strong business performance, technical expertise, and his ability to drive bold transformation while preserving the company's values and customer trust.
The decrease in headcount to 328,062 employees and improvements in attrition rates may raise concerns about workforce stability, but it reflects the company's strategy to align with shifting client demands towards AI and efficiency.
Dash, currently executive vice-president and global head of energy, resources and services based in California, becomes Infosys's seventh chief executive, taking charge after Infosys added over $10 billion in business under Salil Parekh, who had joined in January 2018.
Nilekani said Dash steps into the shoes of Parekh, under whom the industry and the company have evolved.
Cautious guidance
In the June quarter, Infosys outperformed three of its peers—Tata Consultancy Services Ltd (TCS) that posted flat revenue growth, and HCL Technologies Ltd and Wipro Ltd with sequential declines of 0.9% and 1.4%. Among IT's Big Five, only Tech Mahindra fared better, with revenue growth of 2.2%.
"Overall, we continue to see the macro environment remaining uncertain,” Parekh said at the earnings call. Shareholders were disappointed, with Infosys shares on the New York Stock Exchange falling 5%. The earnings were reported post Indian market hours.
The demand outlook echoed its larger rival TCS, which too sees no sign of the environment changing. For now, the fifth-largest firm TechM is the sole Big Five company to sound optimistic.
The caution was reflected in the Infosys's guidance. The company guided for 1.5-3.0% full-year growth in constant currency terms, its weakest guidance in the last four quarters. Constant currency does not account for currency fluctuations.
Parekh acknowledged that the business was now lumpy.
The company got $417 million in revenue from advanced artificial intelligence during the June quarter. “On the AI revenue, I think it's moving so quickly that it is a bit up and down on a quarter-by-quarter basis,” said Parekh, adding that the AI business was growing in double digits. The company had first announced an AI revenue of $280 million in February.
While AI revenue increased, the company’s headcount was 532 lower from the preceding quarter to 328,062.
Times of transformation
An uncertain demand environment is forcing many clients to defer tech spending and divert those spends into their core business. Much of this is a result of the ongoing Gulf war that has disrupted supply chains. Dash will be taking over at a time of turmoil in the tech world, but the company is betting on his skills in AI and transformation.
Nilekani said Parekh had stepped into the top role during unstable times and he brought a sense of calm. “Salil has been CEO of Infosys for almost 10 years. He came (when) I don't know how many of you were there 10 years back, but he came at a time when things were slightly unstable, and he brought in calmness... He completely did the transformation for the digital era and started the AI differentiation and transformation,” said Nilekani.
Dash has been with Infosys for more than three decades. He joined the company in May 1995 as a senior engagement manager. He is based in California and is expected to be based in Bengaluru when he takes charge. Dash is expected to have a five-year term till 31 March, 2032.
Dash's appointment marks the first time that Infosys and Wipro both have engineering graduates at the helm. While Dash is from IIT-Kharagpur, Wipro CEO Srini Pallia is from the Indian Institute of Science, Bengaluru.
Margin gain
Net profit fell 11% sequentially but rose 1.3% on a yearly basis to $819 million. Operating margins rose 20 basis points from the preceding quarter to 21.1%. The management attributed this to getting business at higher prices and utilizing its existing bench strength. The margins of HCLTech and Tech Mahindra rose by 40 bps and 60 bps, respectively.
“Management’s statements on slow volume expansion and competitiveness in pricing show how the overall environment is changing. There will be pricing pressure and Infosys pulling down the upper end of its guidance in a historically strong quarter is proof of the AI impact on growth,” said Shubham Dalia, lead IT analyst at Nirmal Bang Institutional Equities.
HCLTech too gave its weakest July guidance in at least four years, maintaining its April view of 1-4% revenue growth in FY27. On the other hand, the fourth-largest firm Wipro expects a sequential revenue decline of 1.5% at worst and a revenue increase of 0.5% at best. TCS and Tech Mahindra do not give quarterly or full-year guidance.
About the Author
Jas Bardia
Jas Bardia is a Bengaluru-based business journalist covering India’s information technology (IT) services sector and Global Capability Centres (GCCs). Known for his investigative depth and attention to detail, Jas has a knack for breaking stories on leadership shifts, high-stakes deals, and evolving industry trends long before they hit the mainstream. If the news is anything IT-related, chances are this author has broken it. Before joining Mint in November 2023, Jas honed his financial reporting skills at Bloomberg News in Mumbai, where he covered bonds and currencies following his graduation from the Asian College of Journalism. When he isn’t chasing his next exclusive, Jas is likely scouting the city’s newest culinary spots, cool events, or is immersed in the electric atmosphere of a Bengaluru FC match at the Sree Kanteerava Stadium. Jas has an eye for detail, an ear for history, and a weakness for a great cologne, and values a good conversation as much as a good lead. If you want to talk about your favourite war movie, funny drunk stories, or a supposed “scam”/wrongdoing in a company, get in touch with him at jas.bardia@livemint.com.
Source: Livemint — Companies
