Q2 2026 Infosys Ltd Earnings Call
Ladies and gentlemen.
Good day and welcome to enforcers limited Q2 fee 26 earnings conference call.
as a reminder all participant lines will be in the lesson only mode and there will be an option for you to ask questions after the presentation concludes
Please note that this conference is being recorded.
And now, hand the conference over to Mr. Sunday Mahindra. Thank you, and over to you, Mr. Mahindra.
hello everyone, and welcome to Infosys earnings. Call for Q2 fee 26, joining us on this call. Is CN MD Mr. Sal
rajka.
CD Mr. Satsai along with other members of the leadership team.
We start the call with some remarks from the performance of the company. Subsequent to which, we will open up the call for questions. Kindly note that anything we say? Which refers to our future outlook with the forward-looking statement that must be read in conjunction with the rest of the companies faces?
A full statement and explanation of the address is available in our filings with the SEC, which can be found on www.acc.org.
And now like to pass on the call to sell it.
Thanks, good evening, and good morning to all of you on the call. We had a strong performance in Q2 with increased market share gains.
Our revenues for the quarter group, 2.2% sequentially and 2.9% year on year in constant currency terms.
4 of our large 5 industry, verticals and 3 of our 4 geographies grew year on year, in constant currency terms operating margins expanded by 20 basis points sequentially
We had an excellent outcome in cash generations.
With free cash flow of $1.1 billion.
A large deals were a 3.1 billion with 67%. Net new in addition we announced a mega deal worth 1.6 billion dollars after the close of the quarter. But before today before results announcement.
We added 8,000 employees during the quarter.
A client interaction shows a strong focus on deploying AI.
Across the enterprise for growth and on cost efficiency programs.
In doing this, we continue to scale our team of forward-deployed engineers.
as a result and pipeline of deals. Reflect the trust, our clients have in our ability to help them bring AI to their Enterprises,
For example, we are partnering with an apparel company using generative AI and AI Ops technologies to help them modernize their core operations, simplify their IT, and unlock greater value from their data.
For a telecom client. We are infusing advanced intelligence across the operations to accelerate the pace of innovation and help them to deliver compelling digital experiences for their customers.
As a result of our investments, we've emerged as the leading enterprise AI services and solutions provider.
We would like to take this opportunity and give you an update on how our investments in AI have positioned us as the preferred Services partner for large scale. Enterprise AI transformation program today,
Satish achieved the delivery officer position. I will share this update later in the call with all of you.
We continue our strategic approach to acquisitions with a joint venture announcement of Versent in Australia.
With a strong performance. In Q2, we change our Revenue growth guidance for the financial year. The new guidance is 2% to 3% growth in constant currency terms.
Our operating margin guidance for the financial year Remains the Same at 20% to 22% with that. Let me hand it over to Jes.
Thank you, Salil. Good morning. Good evening, everyone, and thank you for joining the call today.
I'm pleased to report that we had another quarter of robust all-around performance, despite an uncertain environment. We continue to
Continued our strong growth momentum for the second consecutive quarter accompanied by higher margins. Led by focus on client, relevance and trigger on execution.
We are making necessary investments in technology, people, and in our sales engine to future-proof our business.
Let me cover key. Key aspects of our results.
Quarterly revenues crossed $5 billion in Q2 2026 and $10 billion for the half year. Revenue grew 2.2% sequentially in Q2, including $20 million from acquisition in constant currency terms.
Growth in Q2 was on back of the 2.6%. Sequential growth in q1 H1 revenues, therefore grew at 3.3%.
Volumes continue to remain soft with bulk of the revenues growth coming from driven by realization increase.
Amongst large verticals, financial services, and Manufacturing grew about 5% year on year. In constant currency, both in Q2 and H1 Europe, also grew greater than 5% in a year on year in constant currency.
Brazilian at 30.8% flat year on year after absorbing compensation, headwinds reflecting the progress of project Maximus.
Operating margin expanded by 30 basis points sequentially to 21%. H1 margins were 20.9%, versus 21.1% in H1 2025.
We continue to invest in sales and marketing which is reflected in 12.8 growth in SNM cost H1 over H1.
Utilization excluding trainees remains stable at 85%, which is within our comfort rate. Onsite mix reduced by 40 basis points for the quarter and 60 basis points for the half-year.
We continue to invest in talent and have hired over 12,000 freshers in the last 6 months. Total employee headcount was at 332,000, an increase of over 8,000. Attrition remains low at 14.3%.
DSO is down 2 days to 71 days and DSO, including net. And Bill is down by 5 days to 87 on a year-on-year basis.
Cash flow generation remains strong free cash flows. Good at 1.1 billion, which is 131% of the net profit and is well above 100% for the 6th consecutive quarter bolstered by tax refunds.
H1 cash flow conversion is at 120%. Largely, TCB for Q2 was at $3.2 billion, which is 63% net new.
H1 deal wins at $6.9 billion with net new at 60 plus.
This does not include the mega deal announcement this week with the NHS.
Q2 Epps in rupee, terms grew by 13% year-on-year, to 17.6 rupees.
Operating margin for Q2 was at 12.21%, an increase of 20 basis points sequentially. The major components of sequential margin change for the quarter were.
Tailwind of 60 basis point from currency movement, 30 basis points from Project maximum emanating from RPP, increase from value based selling. And lean and automation, partly offset by increase in subcon and lower downside utilization.
Offset by 70 basis points of impact from higher post-sales customer support on a sequential basis and other expenses.
Consolidated cash and Investments were at 6.2 billion at the end of quarter yield on cash, balance was at 6.98 and row, step showed at 29.1%.
We have taken several strategic steps in the past few years, to reduce our dependence on work visa. Especially in h1bs in the US, this includes reduction in on-site. Mix increased focus on Nearshore near Shoring increased, local hiring University Partnerships and certain creation of local, hubs
We currently have several delivery centers across the US to serve clients and leverage local sales.
These hubs focus on emerging technologies such as artificial intelligence, machine learning, cloud computing, big data, and user experience design.
In line with our Capital location policy during the quarter. We announced rupees 18,000 crores buyback. Through tender route at rupees 1800 per share. Buyback, is expected to be completed in Q3 subject to shareholder approval. The board approves rupees 23 in Rim dividend, Which is 9.5% higher than the fi25 interim dividend.
We signed 23 large deals during the quarter: 6 in Financial Services, 4 each in Manufacturing, Communication, and Retail, 3 in URS, and 1 each in High-Tech and Others.
Region-wise, we signed 14 deals in America, 7 in Europe, and 1 each in the Rest of the World and India.
Coming to verticals in financial services, clients are actively planning modernization and AI-driven initiatives with a clear focus on cost efficiency, enhanced customer experience, and strategic business transformation.
We see strong momentum in mortgages, Capital markets, Commercial Banking and Wealth Management areas, while macro uncertainty and volatility is impacting spends. There is some acceleration in Market sector with recent reduction, in interest rates overall Pipeline and signing remains strong, which is visible in 6, large deals, signing this quarter.
Banks have spent significant, uh, significantly to build AI infrastructure.
Many initiatives are progressing from proof of Concepts to full scale projects with notable Traction in agent. AI
The manufacturing segment continues to face trade and macro uncertainties, which is creating pressure on discretionary spending, specifically in the automotive sector. We continue to help our clients with digital initiatives and rationalizing the applications and infrastructure for food brands.
We are at the forefront of leveraging AI and automation to increase productivity and offset pricing and deflation.
In a row, we've seen opportunities to help clients navigate headwinds by helping them resolve bottlenecks in their supply chain.
Use new technologies and products.
Over 90% of large deal DCV for Q2 was net new, which should help drive growth going forward.
Clients in the U.S. have a strong focus on cost reductions, operational efficiency, and cash preservation, which has helped open the door for vendor consolidation.
Large scale development and deployment are limited. Agentic adoption is growing in tech operations and is being utilized to reduce costs.
With the rapid construction of data centers, utility companies are looking for partners to meet the accelerating electricity demand. This creates opportunities in areas like renewable integration, grid modernization, and AI-driven optimization.
Year-on-year growth was impacted due to significantly higher third-party revenues in Q2 2026.
Retail clients continue to remain cautious on account of ongoing tariff-related uncertainties. There is an increased focus on AI cloud estimates, state modernization, de-risking, and cost takeout. Additionally, there is a growing sense of urgency to improve the productivity of operating models to offset inflationary pressure.
Steel pipeline remains strong, but decision cycles remain elongated. We continue to leverage our topas and AI Next platform capabilities, showcasing our enhanced customer and employee experience through digital marketing, predictive analytics, and real-time insights.
Communication continued to face growth headwinds, coupled with high Copic pressures. Discretionary spending remains subdued, with investment prioritization in AI automation and consumer experience. This is becoming key buying centers, and opportunities are emerging for IT companies to support their transition.
While lower interest rates, cautious optimism, geopolitical tensions, and tariff risk are at 2,173.
In high-tech, there has been significant focus on cost reductions, leading to budget cuts and program closures. However, there are opportunities emerging in areas like semiconductor, with a strong focus on leveraging De.
Our H1 performance reflects resilience of our business model and Agility of our execution capabilities. As we enter H2, we expect seasonal factors to impact growth, low working days follows on-site. Onset of new calendar year,
Hence, we have revised our revenue guidance to 2% to 3%. This does not include any revenues from the joint venture with Tulsa, which we expect to close later this year.
Our margin guidance remains at 20% to 22%. With that, let me hand over to Sati to talk about our AI capabilities.
Thanks, Z. Um, good day, ladies and gentlemen.
I'm pleased to share that we have emerged as the industry-leading enterprise AI services and solutions provider.
Eight industry analyst firms have ranked Infosys as a global leader.
In 20 separate AI rankings over the last 12 months.
We are delivering more than 2,500 generative AI and AI projects.
And 200-plus agentic AI projects for our clients.
Let me outline the key pillars of our strategic focus.
The first one is making, uh, Infosys AI first.
We embarked on our AI-first journey in 2023.
On the people front, we are committed to making our employees AI Amplified.
About 90% of our employees are AI aware.
Equipped to collaborate with and leverage AI tools responsibly in their daily work.
The next year is the AI Builders.
10% of our top technology talent pool are engaged in highly innovative projects and solution building with AI.
The top tier, the AI Masters, and amongst them, the forward-deployed engineers.
We are driving the AI momentum for our clients by solving the tough industry challenges.
On the process front, we are reimagining the way we work with AI.
For example, AI code assistance accelerates our development lifecycle. Our developers have produced more than 25 million lines of code using generative AI.
We have deployed AI agents across our internal operations.
A multi-agent, invoice automation solution alone, unlocked.
$50 million in incremental cash flow.
Directly improving our free cash flow conversion.
We have deployed AI to accelerate our compliance processes.
Uh, in some of the use cases, we have seen over 20x gains for specific activities and an overall end-to-end process productivity in the range of 40% to 50%.
Now, coming to our industry-leading AI offerings.
We have built capabilities in AI, applied them across our own operations, and now we deliver these innovations to clients through Infosys Topas, our holistic suite of generative and agentic AI-powered services and solutions.
We deliver value through two strategic frameworks.
AI. And so, this is AI. We build a foundation for better business services for our clients by accelerating capabilities and operations—both our own and our clients'. Our integrated services stack is a composable set of AI services and agents tailored for every client and industry. It integrates human and AI agents to reimagine IT services and operations with greater velocity, productivity, and quality.
On client AI, we focus on business transformation to deliver sustained enterprise-wide impact for our clients, such as revenue growth, efficiency, and productivity improvement. We have 22 industry blueprints and more than 400 agents tailored to specific verticals.
To accelerate value from AI-like transformation, we also use power vibing to rapidly build proofs of value and iterate business solutions and prototypes to client problems.
In terms of delivering enterprise value to surmount pilot paralysis.
The challenge of extracting value from enterprise AI investments and pilots continues to be the biggest priority for global enterprises. We have expertise in delivering that through five key levels.
with Infosys forward, deployed engineers
We have the specialized engineering talent which is deeply embedded within client businesses, delivering enterprise-scale value from AI.
For a global logistics leader of forward deployment in engineering, co-created a solution that uses real-time data streams and AI to accurately predict shipment life cycles across regions and operating companies.
This platform delivers 400 million messages daily with sub-minute latency and operates uninterrupted 24/7. It generates $1.5 million in immediate benefits, $8 million in annual savings, and a 12% reduction in customer service call volumes.
With our Infosys Topaz, we have a workbench. We have an expansive portfolio of solutions for data preparation, engineering, and governance for leading industrial manufacturers. We built a unified data fabric.
Powered by over 100 domain-driven multimodal data products centered on equipment operations, covering more than 10 megabytes of structured and unstructured data.
To power 30, plus AI companions across business functions.
Driving more than 90% boost in precision performance and productivity.
With our Infosys slm.
We are able to deliver small language models, which are key for context engineering of agentic AI solutions that are adapted for enterprises' specific needs. We have built small language models for banking IT operations, cyber security, and enterprises broadly for rapid value delivery. We also offer these models as services to help businesses securely build their own custom AI models. A good example is how our small language model is used by clients to run their banks on Emphasis Fin to launch new contextual banking experiences and innovations.
With our Infosys Responsible AI office, we have now become an industry pioneer in setting up responsible AI practices. We are amongst the first companies to be certified on ISO 42001:2023 for Management Systems implementing responsible AI projects. Our Responsible AI toolkit ensures that clients have the defense.
And the technical guardrails to address AI-related risks.
With our Infosys poly delivery, a model.
Um, the high dependence on AI key providers is a key concern that we address.
Our hybrid of flexible poly, AI helps them avoid vendor lock-in as they scale their AI transformation.
using this model we helped a bank in Europe, establish their AI Innovation lab
To create a pipeline of AI-first business initiatives.
They are now deployed 13 Ai and agent AI Solutions. And there are several more in development. This has delivered substantial Financial gains and earned our client, the owner of being number 1 in their region.
Of an AI First Bank.
Now, building an AI ecosystem for our clients.
Nvidia, Microsoft, AWS, Intel, Meta, Google Cloud, and others to enhance their capabilities.
Infosys is among the first and largest enterprises to deploy GitHub Copilot at scale. We have over 22,000 developers on board.
Um, in collaboration with Google Cloud, we have developed more than 200. Enterprise grade AI agents, these Partnerships combined with open-source Solutions, enable Infosys to deliver flexible vendor agnostic, AI ecosystems through our Infosys Innovation Network. We engage with AI startups across AI, cyber security data management and other emerging domains to accelerate client adoption of Cutting Edge Solutions. Our academic collaborations with institutions, like Cambridge Columbia Cornell Stanford Hai and MIT fuel. Our Advanced AI research and give our Innovations practical Enterprise application.
We also contribute to shaping global AI standards, like partnering with OWASP on LLM security. We are also advising policymakers, and we are collaborating with regulators in shaping emerging standards.
To summarize, our clients value our differentiated capabilities that we have built on the success of our own AI-first journey. They trust us to navigate them with a clear, practical road map to transform their business and deliver sustained enterprise-scale value. This proven capability has translated into robust growth and notable gains in market share over the past several quarters, underscoring the impact of our strategic approach. This includes amplifying people, implementing advanced AI solutions, and co-creating AI projects.
From the ground up for success and fostering an effective ecosystem of partners, we focused on empowering our clients to conquer the pilot paralysis and achieve enterprise-scale advantage.
We can now open up the call for questions.
Thank you very much.
We will now begin with the question and answer session.
Anyone who wishes to ask a question may press star and 1 on the touchtone telephone.
If you wish to remove yourself from the question queue, you may press star and 2.
Requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the questions you assembled.
The first question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.
Hey, hi. Good evening and thank you for taking my question. Uh, so my first question was a little of medium to long term. Uh, so there's a lot of companies, um, who have announced their capex plans for...
Setting up the AI data centers, and many of these companies are our ecosystem partners. We do go to market along with them. We partner with them in many of the projects. In all these conversations of capacity expansion and potential monetization in the future, are we having any conversations with them? How can we partner with them in the future for implementation and inference work potentially in the future? Any of your conversations that are happening with them that you can share?
Uh, if I understood the question, it was
There are partners of the UH of Infosys who are building large AI capability. And are we partnering with them?
Uh, so the there. Yes, we are partnering with them, but if there's something more we, we are not. I don't, I, I don't follow that part. Meaning we are partnering with all of them. So you look at any of the large players who are building out AI capability today and it's a different levels. You know, we are looking from the chip to the infrastructure to the models to basically deployment. So there, there are different layers of that. And in each of those, we have, as Satish was just pointing out several Partnerships, which are going pretty. Well, uh, is is is that what you're asking?
So my question was that at some stage, they will start looking at monetization, enterprise implementation of inferences on those large capacities. Will we be participating in any of those conversations happening on the monetization side in the future? And how does Infosys participate in that?
Yeah, modernization is a big part of our place. So what is happening there and in fact is.
The Enterprise modernization, uh, business.
Uh, we'll get a huge benefit from AI. So, the, uh, before the AI, the enterprise modernization and legacy modernization had a certain time duration and a certain ROI, with many of the AI tools that are improving quite, uh, quite dramatically. So, once those AI tools are in good shape and stable and so on, we see modernization as a big growth opportunity.
Got it. Just to be clear, I have understood that once enterprises start using these capacities for their own modernization, there is a play for enforcers to participate with them and help them in that modernization.
Absolutely. So, there are some AI companies that are very good. With Enterprise AI, most people are focused on consumer AI. So, if you look at an Enterprise AI company, they are building solutions.
Which are focused on sales or marketing for the growth of revenue for the end client.
All cost reduction through process or customer service in those areas.
And one of those areas is this modernization. There are some others, and to make it happen, Infosys is a partner that those AI companies will use, where we have the knowledge because of the knowledge we have in the landscape of the client, which is a large, complex landscape. So, how to deploy AI into it and make it successful, those are some of the skills that we will bring to it.
Okay great. Thanks. My second question was more of a near term. So over the last 2 quarters we have seen the large DTC we have picked up and then you have been reporting above 3 billion of large dtcs and you have also spoken about vendor consolidation being 1 of the trends which is driving the deal signings. Uh, looking at these large deals, which you have 1, how comfortable you are of their margin, as they ramp up and start contributing into your Revenue.
Um, large deals, uh, we don't disclose the margins separately, as you know. But what we are clear on is that we have a fairly disciplined approach as we take them on.
In many ways uh we we what Satish was sharing with you we have achieved delivery officer DH they are both involved actively at the very start of many of all of the last deals to make sure that before we go into it we understand what the issues are as best as possible and maintain that margin profile uh, at the start and through the program itself. So we are comfortable. We don't disclose the management but we don't see some um,
Unusual margin impact because of that. Also,
Okay, thanks a lot.
Thank you.
Next question is from Brian Bergin from TD Cowen. Please go ahead.
Hi. Good evening, thank you. I wanted to ask on on Deal activity and and kind of average sizes. Can you comment on on what you're seeing in some of the smaller deal? Activity any changes there versus the prior quarter? And then it's just on the signing. So the TTV has been helping out for for 2 quarters. Can you comment on just how ACV levels in new work that your booking may be trying to
So on the smaller deals, no real change similar to what we've been seeing so far, uh, on the large deals. I mean the the vast uh, vast majority of them uh is focused on cost reduction, vendor consolidation uh using AI for productivity. Uh, those lean automation, those sort of areas on ACV know again. No real comment we don't see a change uh, that this quarter's last deal. Had a different type of ACV than last college, essentially, a similar type of structure, but again, we don't uh, share the ACV numbers separately.
Okay. Okay. Okay. And then my follow-up.
The numbers, you know, Subcon mix picked up here in the quarter while your offshore mix also rose. So I'm curious if you think those two trends will continue and where do you think the potential ceilings of those are as it relates to offshore mix and Subcon usage.
so on the subcon I don't I mean it's it's not uh
I don't think that's a long-term lever in terms of how we will change the mix. There'll be ups and downs as we go through the next few phases of this. The approach we are taking is.
We built, over the years, what we call localization in all of our geographies outside, uh, India, and especially in the US. That comprises building local technology, up to local recruiting, uh, nearshore centers, which are ones around, uh, for example, Canada, Mexico, and other places in South America, and then offshore.
Now it'll be a combination of these that we are using, or we will use further in the future to make sure that, essentially, our overall delivery approach remains consistent for the clients. We don't have a view on where the offshore ratio will end, but we do see.
From some early client discussions, that there will be an increase over time in what they want to Offshore.
Okay, I understood. Thank you.
Thank you.
Next question is from Land of Jonathan Lee from Gogh Partners. Please go ahead.
Great. Good evening, and thanks for taking our questions. Uh, can you help us unpack the step down in utilization despite the Step Up of subcontractor usage? Where are the potential skill gaps or pyramid gaps that you're looking to fill by using your subcontractors?
Hi. So if if you look at, you know, a subcon,
Couple of quarters back. It was in the range of 11%, it has come down now to 7 and a half 8%, you know, which are quarter you look at. Uh, so there is been a consistent, uh, you know, effort to bring it down on a long-term basis. Uh, having said that, you know, in a quarter to quarter basis, there could be ups and downs, depending on, uh, the demand that we have the skills that we have, um, and which location the skills are. And, you know, you would dip into subcon or you would, uh, wind down some kind accordingly. So, that's, that's how the subconscious typically are there.
Typically, the subconscious are used to bridge the gap, the skill gaps, you know, across the project that we uh that we deliver for the clients.
Uh, we don't expect at this point in time the subconscious to increase significantly from the current levels.
I appreciate that color. And secondly, you know, this may be the first time we’ve heard you mention Deployed Engineers. Can you unpack how they compare relative to the teams of four Deployed Engineers at software companies? As these companies are scaling, potentially, how are those pools of talent competing? And whether there are higher costs associated with your Deployed Engineers versus your traditional engineers?
So there, uh, Sati should also add a little bit. Let me start off. Uh, we we've been using the the capability of the power deploy Engineers across AI landscape. For some time. Uh, we want to make sure that that is something we share externally. Uh, we are not commenting on the uh, cost or or, uh, uh, nature of those. But they are different groups within the company in the path as well. For example, we have other groups, called power programmers, and so on, which have different costs within our delivery structure. Uh, and so we will use the appropriate
Level of cost, depending on which market those engineers are operating in to fulfill that work for our clients.
Satish is going to.
Yeah, thanks a little so um I guess the opportunity with AI is that we are developing a, a new breed of uh, you know, Services stack or software stack for our clients, uh, which is never done before. Um, so this is reimagining of
Proceeds to Enterprise scale adoption. We see that there will be a lot more need for forward, deployed Engineers to work with our clients to drive this uh co-creation of uh the new breed of uh uh software stack.
Thanks for our detail.
Thank you.
Next question is from Lana. Vore, single from Noama. Please go ahead.
Yeah. Hi.
Uh, uh, so just a question on the, uh, overall uncertainty that we are facing in the environment specially uh, in the light of the recent, uh, H1B Visa hike. So just wanted to pick your brain as to uh, first of all, I mean, uh uh, in the near term, let's say in the last uh, couple of weeks or few weeks that that event stays right. Uh, did we see a heightened level of uncertainty which maybe would might have led to some of the deals being pushed off and some of the concerns dropping off from the clients and for a longer term point of view. I know, uh, we and many of most of the industry experts have, uh, basically explained that they should not be a, a, a big data event in terms of our business model. But how do you see this change changing the business model? I mean, uh, do we believe that there is a possibility of higher offshore results that can be done? Now with this, uh, when the companies will try to avoid the higher H1B visa fee and uh clients would also be available to that.
Could that be, uh, let's say, an unintended benefit that we could actually, uh, trickle by because of, uh, this event that took place.
So, on the short term, I'm not sure. I followed everything, but basically we've not seen any, uh, change. Literally, if that was the question on the short term. On the medium to long term...
the model uh will change as we were discussing uh earlier which is essentially we have been working on localization for quite some years in most of our markets outside India. So us also so they'll be more uh work in our technology hubs and centers there with local uh employees they'll be more near shore work, they'll be more offshore work and that's the approach that we will put in place. Essentially ensuring that the client delivery remains in a good good place. Uh, so that that's that's what we've seen. We don't have
If you're looking at like, let's say some percentages and so on we don't have that sort of a view but that's the general approach to the model change that we see coming here.
Got it, got it a bit far-fetched. Maybe. But let's say if we, in if we try to do more of more of nearshoring and offshoring, uh, do you think clients would be okay with this? Because let's, let's be honest. I mean I I mean I'm assuming that at this point of time before, let's say the announcement. We were operating at a specific onsite to Offshore ratio
Which we would have tried to optimize by ourselves. So if there was a specific onsite presence and it would have been maybe a requirement of the client, maybe a requirement of the regulator, or our own requirements, would it be easy to get this through to move that business? Uh, there will be some part, as you rightly said, that you will have local hires. But the part that we are planning to move to nearshore and offshore, how easy or difficult will it be for clients to accept that?
So, what we'll do is, you know, this is a broad approach. We'll work jointly with each client to define, specifically, how it will work for the client. It's a little bit... If you go back to...
the time when there was the co,
you know, everyone was working remotely for so much time and we just figured it out. Uh, we were quite Adept at it at that time. So now, there is a model that we have built. We are working with the clients.
what we do feel is,
Quite comfortable that we will not have any uh constraints in client delivery through different levers in the model. It's not that 1 lever. Some client may have a different lever and some may have another type of a lever, but we feel comfortable in that.
Got it, got it. I just asked a question for my face. Yeah, sorry, if I could just add, if you look at pre-preco, we were at close to 30% onshore and 70% offshore, right? And every year the needle used to move by 20 to 30 basis points.
Post it. It it changed significantly by you know 3 to 4% or even more in a in a year's time, right? And that's that's what I think. Salah is referring to when the constraint and the constraint comes in, you know, both we and client work together and we've been able to reach, you know, a model that works and I'm sure we will be able to do that this time as well.
I know it might sound too optimistic. Could it actually lead to an unintended benefit that we do more of nearshoring and offshoring? And that could possibly be a margin lever for us or for the industry.
Uh, difficult to say at this point in time, but I mean, mathematically, if you do more near sharing and more off sharing, it should mean more margin. But, you know, it depends on, you know, to what extent you are able to do the sharing and to what extent, uh, we'll end up doing, uh, more local hiring. So, uh, I think it will be, you know, balanced out there.
Got it, got it. Thanks for taking my questions. Uh, and wish you all the best? I'll come back in the queue. Have anything more to ask?
Thank you.
Next question is from Land of James Freedman. From s International, please, go ahead.
Hi. Uh, good evening. Thank you for the opportunity, JS. In your prepared remarks, you called out a 70 basis point impact from higher post-sale customer support. I'm just reading from the transcript.
Is, is that a normal thing? Or is that something different? What's that about?
So James, if you if you recollect last quarter we had a benefit uh on this. So you know on a quarter on quarter basis uh it's a impact from a margin walk perspective. Uh this quarter is is at the normalized level. So last last quarter is where we had a benefit.
Okay. Now I remember, I apologize. I got it. Yeah. And then um yep. Thank you and then
um,
in terms of the yeah you're in terms of your offshore on site, what you're contemplating longer term I was just wondering, how do you think about AI delivery?
Impacting the regionalization of your head count, AI delivery and what you know, has AI impact where your people need to be. Thank you.
Uh, hi. This is Sal just uh uh addressing that point I think.
We already see projects where we have agents uh, which is with AI working alongside the, uh, people on the project. So that will also be part of this new delivery model, uh, which which will. So there's 1 change, which is based on the Visa discussion, we were having and everything with a with or without the Visa will be changed with the agents and how that that will work over time. So those are 2 different sort of Trends but they will.
Will both come together, and sort of the ratios and so on will develop as we build out the business.
Thank you s. I'll drop back in the queue.
Thank you.
Next question, is from Land of nitan. Padmanaban from investor India, please go ahead.
Due to no response.
We move on to the next participant.
Next question is from Land of Sumit. Jen from CLSA India, please go ahead.
Yeah, hi. Good evening, gentlemen, and thanks for the opportunity. Uh, firstly, I want to understand the impact of AI on your and IT services industry revenue growth profile. Do you think the deflationary impact is higher than the volume growth opportunity? And maybe, if you can give us a sense on your renewed deals, how much is compression due to AI versus incremental scope expansion?
Hi. This is she so there we see 2 types of things from AI 1.
Growth opportunities, where we see, clients are starting to look at leveraging AI, whether it's in their sales function, their marketing function, how they can drive growth from it. And the second as you point out is, uh, more productivity or efficiency for different, uh, processes and activities with within the company within their company.
Certainly see a lot of growth opportunities from what we can deliver with AI.
So, maybe do you think the IT service budgets of your clients are expanding due to AI?
So they, uh, what we see now is a lot of the companies are.
In a mode of a lot of cost control with the changes in the economic environment, it's difficult to ascertain what they will use it for in different economic environments. So today, if I look at it,
Whether it's AI or non AI, meaning, we do a lot of work on let's say, consolidation.
We do a lot of work on automation—non-AI automation.
So, there's a real interest from clients that look, you know, can you help us through these other techniques also reduce cost?
And that's the predominant way that we are looking. We are seeing some of the large deals come about. Uh, my sense is.
Has.
there are, uh,
AI approaches which are showing clients where they can impact their business on the growth side and where the economic environment supports it, we will see more and more of those opportunities.
Uh, got it. That's helpful. And maybe my second question is around, of course, this year, the micro environment is pretty weak because of tariff-related uncertainty. But if the macro improves next year due to the tariff uncertainty going away, do you think the IT services industry growth would be higher next year compared to this year? Ignoring how AI will play around.
That's a very good question. Uh, if I could answer that. Uh,
Is difficult to say for our side meaning?
We think basically that when the macro improves, the tech improves. But now we'll see how that plays out. That's typically been our experience in the past, but I don't have a view on how it would look for next year.
Got it solved. Thanks, and all the best.
Thank you.
Next question is from Investor India. Please go ahead.
Yeah, hi. Good evening. Uh, thanks for the opportunity again. Uh, so a couple of questions. So, one is, uh, you spoke about, uh, volumes being sort of flattish, where realizations being a bigger driver of growth. If you could help contextualize what's driving that? So, that's the first one. Uh, the second is, any, uh, color you can give on the Versent JV, both in terms of...
When it could sort of wake through the kind of revenue or margins there. Uh, and finally, uh, your thoughts on how do you see further this time versus last year? Or, uh, in terms of smaller deals, do you see any pick-up?
Thank you.
Let me take that. Um, if you look at, you know, we we did say that volumes were, uh, softer. And, you know, the large part of the growth came from uh, the uh, Revenue RPP expansion, part of that was because we had a higher Working Day and calendar is this quarter, which reflects in uh, you know, pricing in a way. Uh, the part of that is also a project Maximus where, uh, you know, we've been helped, we've been trying to drive, uh, getting the effective pricing increases through various, uh, levers within that. And that is where uh, it has helped, uh, in terms of, uh,
In terms of Revenue.
Uh, your second question was on uh, project version. Uh, we haven't been able to close that yet, because we are spending a few of the regulatory approvals. So, as, and when we get it, get the approvals. Uh, you know, uh, we will announce the closure at this point in time, we do not know. Uh, we expect it to be closed in this year, but we do not know the exit timelines. And therefore, it is not baked in, in the, um, in the guidance at this point in time.
The last year, uh, Revenue was uh, around 200 uh, 210 million Australian dollars. So that's all I can give you as a reference to um, to put in an estimate once it is closed.
Uh, even 1 more question.
Yeah, yeah, um, uh, any color on margin for version and the other one was other questions were on for lows versus last year and any pickup in small deals.
Yeah. So for those, at this point in time, we do not expect to be significantly different, uh, than last year. And we do not uh, disclose margins of uh, the acquisitions. Uh,
Right, perfect. Any pickup in, uh, small deals that you have seen?
I think small deals have remained similar.
As compared to last year, the pipeline continues to remain strong. Uh, there's nothing unusual to call out there.
Perfect. Thank you so much and all the best.
Thank you.
Next question is from line of Abishek Kumar from GM Financial. Please, go ahead.
Yeah. Hi. Good evening and thanks for taking my question. Um, I have a question on your second half Outlook. Now we understand the seasonal factors and probably, that's what uh, is driving, uh, decline at the midpoint of the implied guidance, uh, but I just wanted to get a sense, uh, that this year deals is in strong. Then you have closed in 1.6 billion dollar deal, uh, which is my calculation, is right, uh, is a 100 million dollar Plus
Uh, ACVD use. Um, so is it just your conservatism at this stage given Q4, uh, generally is weaker, um, or is there anything else that is, um, you know, uh, restricting you from, you know, raising the upper end of the guidance.
So we should, um, you know, like we have always said, the way we look at, guidance is to reduce the asymmetry of information between us uh, and the investor community. At this point in time, based on the various models that we run, uh, that leads us to, you know, various levels of the guidance. And that's how we arrived at the guidance. Uh, like, what we have been saying for the last couple of quarters at the lower end of the guidance, we have baked in, uh, elevated level of uncertainty at the and at the upper end of the guidance, we have baked in, uh, you know, stable environment. Having said that, as, you know, you know, we, we have a seasonal, we have a higher seasonality, or softness H2 is software from a seasonality perspective, we have, uh, lower working days, lower calendar days higher, uh, impact from Furs Etc. So, all of that impacts our H2 versus H1, and we also need to remember that. We, we've delivered a stronger H1, uh, versus many of our peers. So from that perspective,
the issue automatically gets impacted.
So maybe a quick follow up on the on the mega deal. You just announced. Um uh is it expected to start ramping up this fiscal year and what would be uh net new contribution if you can? Um call that out. Thank you so much.
So we check the deal that we have announced. Is that completely 100% net new, and will it start ramping up this year?
Okay. Uh, that's good to hear. Thank you so much and all of us.
Thank you. Thank you.
Next question is from Sha from eua Securities, please go ahead.
Yeah, thanks. Thanks for the opportunity. Most of the question being asked there. Just wanted to understand in your guidance, assumption for the second half. Are you also expecting further uh, lower part to uh, the third party item sales because in the first half it has been 7.4 versus 8.2 for the whole year last year and generally Q3 sees a seasonal strength on the third party items. So this time you believe uh it could not show the strength and it could be further down from 7.4 in the 1 what you expected into it.
Yeah, so Seib, you know, like we said at the beginning of the year this year, we expect, you know, the third party to be lower than what we had last year, and we expect the similar trend to continue. So, we do not expect unusual growth or unusual elevation in the third party in Q3.
Okay. Okay. And uh, second just the follow-up, uh, in terms of seasonal softness, which is reflective in your duet implied guidance. Uh, what was the urgency to deploy 8,000? Net addition in the employee side. Uh, uh, can you explain the high recruitment versus seasonal softness in the 2s?
So, I wish I could. It's, it's a factor of, you know, the demand and supply and advancement. We are already at 85% utilization. Uh, and we also onboarded, uh, 12,000 freshers. Uh, so that just talks about, uh, the visibility that we have in our business.
Thanks and all the best.
That will be the last question for today.
I'll now hand the conference over to the management for closing comments.
Thank you. Uh, thanks everyone, uh, for joining in. I just wanted to summarize: we had a strong Q2 with large deals, and we secured a significant mega deal after the quarter, so even better. We spent a lot of time sharing with you our leadership in Enterprise AI and forward-deployed engineering capability. We feel we have a really strong position in this area, and we continue to lead in many places. Here, we have an increase in our guidance for revenue growth, with the new guidance being 2% to 3% for the full financial year.
In the next quarter. Thank you, take care.
Thank you very much.
Members of the management.
Ladies and gentlemen, that concludes this conference. Thank you for joining us, and please now disconnect your lines.
Thank you.