AI Now Makes Up 8% of Infosys’ Revenue. But Is That Enough?

As Infosys announced its June-quarter results on July 23, it wanted investors to look beyond the guidance cut and slowing demand. Artificial intelligence, the company noted, has stopped being a slide in an investor deck and started becoming an important line in the income statement.

Revenue from AI-related work now makes up 8.2% of its total business, the company said, up from 5.5% when it unveiled its AI strategy in February, with the segment growing in double digits every quarter since.

It is, by some distance, the number Infosys’ leadership wanted the market to remember from a quarter otherwise defined by a guidance cut, slowing demand and a planned leadership transition.

The company reported a 12.2% year-on-year rise in consolidated net profit to ₹7,769 crore for the quarter. However, the net profit fell 9.3% sequentially.

Revenue from operations came in at ₹48,211 crore, up 14% YoY and only 3.9% quarter-on-quarter.

Gaurav Vasu, Founder of research firm UnearthInsight, says the 8.2% figure is a genuine milestone in one sense: it shows AI has moved past being a pilot or a capability slide and become “a meaningful business” in its own right. 

But it also reveals the limits of the current moment for the industry.

In Vasu’s assessment, AI is helping Infosys and its peers sustain growth, protect margins and improve productivity. It is not yet delivering the kind of high single-digit or double-digit incremental growth that could offset the softness showing up in the traditional services business.

“AI is helping sustain growth, improve productivity and protect margins, but it is not yet driving the kind of high single-digit or double-digit growth that can offset weakness in the traditional IT services business,” says Vasu.

Starting with the guidance cut, Infosys trimmed its FY27 revenue growth outlook to a range of 1.5-3% in constant currency, down from the 1.5-3.5% band it had set just three months ago, in April.

Salil Parekh, in his last set of full-year guidance as Chief Executive, framed the reduction almost entirely in macro terms: an uneven global environment and cautious client spending.


According to Parekh, the higher end of Infosys’ earlier guidance was based on expectations of a stronger recovery in the macro environment. Since the company now expects a more modest recovery, it has revised the guidance accordingly.

“But we have a tremendous view that this is a good place for Infosys to operate, with AI, the way it’s looking,” he added.

Chief Financial Officer Jayesh Sanghrajka said, “Whatever happens in Q1, typically has a cascading impact on the whole year. While we will see benefit coming out of the acquisition that we completed in Q1, the one-off impact that we had in Q1 and the softer than expected volume and price that we got in Q1 will have a cascading effect on the rest of the year in terms of guidance.”

Also, a meaningful part of the shortfall traces back to a single European manufacturing client that Infosys chose to walk away from because continuing to bid for the work did not make commercial sense, Sanghrajka pointed out.

A Battle to Fight

Every large Indian IT services company is currently fighting the same battle of convincing investors that AI is a growth engine rather than a threat to the per-hour billing model the entire industry was built on. 

Rivals have acknowledged the pressure. This earnings season, several IT companies spoke of aggressive, even irrational, pricing as clients used AI-driven productivity gains to push for steeper discounts.

Parekh acknowledged that AI revenue remains uneven from quarter to quarter, saying the double-digit growth he referred to reflects the trend over the past several quarters rather than any single reporting period.

His comments echo those of TCS CEO K Krithivasan earlier this month, who described AI revenue as lumpy as enterprises scale deployments at different speeds.

“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… Looking over the last several quarters, we see a double digit type of growth quarter and quarter. And we will see, sometimes it could be a little bit faster, but it’s growing nonetheless,” he said.

According to Praveen Bhadada, MD and CEO of NEOVAY Global, AI deals today are lumpy because clients are still consolidating vendors, running proofs of value and demanding productivity pass-throughs on legacy contracts. 

“AI is simultaneously cannibalising traditional T&M revenue through pricing pressure and seeding the next growth cycle. The inflection point, in our view, is at least 12-18 months out and will come when AI moves into full-stack transformation programmes with multi-year commitments,” Bhadada adds.

Data Centre Not in the Cards

An AI-adjacent decision clarified by Parekh was more concrete, and more revealin g on the company’s near-term growth strategy. He confirmed the company had reviewed, and explicitly decided against, following HCLTech and TCS into AI infrastructure and data-centre investment, at least for now.

The decision suggests Infosys wants to be seen as an AI services and consulting company, monetising client transformations, rather than a capital-intensive infrastructure player competing for the compute build-out itself, a lower-risk, lower-capex stance that also happens to preserve the free cash flow generation—$955 million this quarter—that the company has leaned on to fund shareholder returns.

According to Vasu, the economics of AI infrastructure are simply different from the economics of IT services. Large global enterprises continue to rely on hyperscalers like Google, Microsoft and Amazon for core AI and data-centre needs, and that is unlikely to change anytime soon. 

He believes TCS and HCLTech’s rationale stems from a different place altogether. Both have relatively larger India domestic businesses, where owning data-centre infrastructure can complement local demand and sovereign-cloud requirements in a way that doesn’t apply to Infosys’ more globally weighted client base. 

“For Infosys, avoiding capital-intensive infrastructure investments is a pragmatic allocation decision. Its strengths lie in building AI solutions, integrating enterprise systems and executing large-scale transformations, not in competing with hyperscalers on infrastructure,” Vasu notes.

All of this is playing out just as Infosys given its own leadership transition a long runway.

Ashiss Kumar Dash, a three-decade company veteran who currently runs a diversified vertical portfolio, will take over as CEO only from April 1 next year, after Parekh completes his second term.

The eight-month transition gives Infosys continuity at a time when its AI strategy is still taking shape. With clients only beginning to scale AI deployments and the industry's economics continuing to evolve, stability at the top may prove as valuable as any quarterly financial metric. 

Phil Fersht, Founder and CEO of HFS Research, believes the timing coincides with a far more difficult phase for the industry.

“...while Salil has successfully navigated Infosys to the end of Phase 1 of AI, which was all about creating the basic building blocks, Ashiss comes in at the start of AI Phase 2, which is where the real discomfort hits the services industry,” he wrote in a LinkedIn post.