Infosys Lifts Sales Forecast in Sign of Revival in Tech Spending

Infosys Ltd. raised its annual sales forecast, signaling that a protracted slump in corporate information technology spending is starting to ease. Revenue is now expected to grow 3% to 3.5% in the fiscal year through March 2026 on a constant currency basis. Previously, the guidance range was 2% to 3%, while analysts on average expect a 3.13% sales increase.

The update comes as Indian IT firms, including Infosys, navigate a challenging landscape. Demand in key markets like the US and Europe has been muted due to geopolitical tensions, elevated interest rates, and inflation. As a result, Infosys and its peers are increasingly turning to areas like artificial intelligence and cloud computing to drive sales.

The company reported quarterly revenue of 454.79 billion rupees, up 8.9% year on year. However, net income fell 2.3% to 66.54 billion rupees, below analyst expectations of 73.9 billion rupees.

Why Did This Happen?

The easing demand for IT services is a positive sign for the broader industry. Infosys cited an increase in tech demand from financial services clients as a key factor in its improved performance. The company's ability to adapt to shifting market conditions is evident in its updated guidance, which reflects confidence in future demand.

Indian IT companies have been hit by a number of headwinds, including India's new labor codes and uncertainty over the H-1B visa regime under the new US administration. These factors have contributed to a broader slowdown in the sector, prompting companies like Infosys to refocus on AI and cloud computing.

How Did Markets React?

Shares of Infosys fell 14% in 2025, underperforming the broader Nifty index, which gained 10.5%. Its larger rival, Tata Consultancy Services, also saw its shares drop by 22% during the same period. Despite the recent sales forecast lift, the stock remains under pressure amid broader market concerns about the IT industry's growth outlook.

The market reaction highlights the cautious sentiment among investors. While Infosys has beaten revenue estimates in recent quarters, the stock is still grappling with long-term uncertainty surrounding the sector.

What Are Analysts Watching Next?

Analysts are closely watching how Indian IT firms pivot to AI-driven services. Tata Consultancy Services, for instance, is expanding into AI data centers and aims to generate $1.8 billion in annualized sales from its AI services. Infosys is also investing heavily in AI, including a partnership with AWS to boost enterprise generative AI adoption.

The shift to AI is not without risks. The market for generative AI is still evolving, and companies must balance innovation with client adoption. Additionally, regulatory changes, such as potential reforms to the H-1B visa program, could have a material impact on the Indian IT sector.

Investors are also paying attention to broader macroeconomic indicators, including global inflation trends and interest rate policy. These factors could either accelerate or delay the recovery in IT spending, influencing the long-term trajectory of firms like Infosys.

As the industry continues to evolve, the ability of companies like Infosys to adapt and innovate will be critical to sustaining growth and regaining investor confidence.