Infosys INFY 2026Q2 Earnings Preview Downside Risk Amid AI Demand Wave

Forward-Looking Analysis
Analysts expect Infosys to report an EPS of $0.20 for Q2 2026, in line with the consensus forecast. However, market sentiment remains cautious due to macroeconomic uncertainties, including tariff pressures and geopolitical tensions affecting client spending. In Q1 2026, Infosys raised its FY26 revenue guidance to 1%-3% in constant currency, maintaining an operating margin target of 20%-22%. While the company secured $3.8 billion in large deals and deployed 300 AI agents, it also faced attrition pressures and margin compression. The revised guidance underscores a tempered outlook as the firm waits for broader AI demand to materialize.

Historical Performance Review
In Q1 2026, Infosys reported revenue of $4.94 billion, net income of $809 million, EPS of $0.20, and gross profit of $1.52 billion. The company demonstrated strong sequential and year-on-year growth, with operating margins at 20.8%. Free cash flow exceeded net profit, and Europe outperformed with 12.3% year-on-year growth. Despite these positives, macroeconomic caution and margin pressures remained key concerns.

Additional News
Infosys has been actively positioning itself as a leader in enterprise AI, having deployed 300 AI agents and been recognized in Gartner’s generative AI quadrant. The company reported a 4.3% revenue increase in a prior Q2, which led to an upgraded FY25 forecast. However, recent quarters have shown mixed results, with Q4 2025 reporting a 12% drop in net profit. The Q1 2026 earnings call highlighted continued client spending caution and ongoing global uncertainties, despite deal wins and AI advancements.

Summary & Outlook
Infosys remains in a mixed financial position, with strong revenue and cash flow performance contrasting with margin pressures and macroeconomic headwinds. The firm's leadership in AI and large deal wins signal long-term potential, but near-term uncertainties persist. With a revised revenue outlook of 1%-3%, the company’s ability to maintain operating margins and convert AI investments into measurable demand will be critical. While the EPS forecast aligns with expectations, the upside is limited until broader AI adoption and client spending improve. The outlook remains cautiously neutral, with risk skewed to the downside.