Infosys Ltd., India's second-largest IT services company, reported mixed third-quarter results for the period ending December 2025. The company saw a 2% year-on-year decline in consolidated net profit, which fell to ₹6,654 crore from ₹6,806 crore a year earlier. This figure missed analyst estimates of ₹7,390 crore. The profit decline was largely attributed to an exceptional item of ₹1,289 crore related to the impact of India's new labour codes.
Operating profit for the quarter fell 6% year-on-year and 10.7% sequentially to ₹8,355 crore. The operating margin narrowed sharply to 18.4%, down from 21.3% in the year-ago quarter and 21% in the September quarter. This margin contraction reflected the combined effect of labour code-related costs, higher sales expenses, and continued investments. Global brokerage Jefferies warned that labour code implementation could erode IT company profits by 10–20%, a trend also seen at peers Tata Consultancy Services and HCL Tech.
Despite these pressures, Infosys posted resilient top-line growth. Revenue from operations rose 9% year-on-year to ₹45,479 crore. In constant currency terms, revenue increased 1.7% year-on-year and 0.6% quarter-on-quarter. Reflecting improving demand conditions, the company raised its revenue growth guidance for FY26 to 3–3.5% in constant currency terms, up from the earlier range of 2–3%.
The company reported strong deal momentum, with large deal wins totalling $4.8 billion during the quarter, and net new deals accounting for 57% of the total contract value. Free cash flow generation stood at $915 million, while adjusted free cash flow reached $965 million, representing 112.8% of adjusted net profit.
CEO Salil Parekh highlighted the role of AI, stating, "Infosys delivered a strong Q3 performance demonstrating how our differentiated value propositions in enterprise AI, through Infosys Topaz, are consistently driving higher market share." The company is advancing its AI-first offerings and announced major partnerships with Metro Bank, Lufthansa Systems, NHS Business Services Authority, and Telenor Shared Services.
Following the results, Infosys Limited (INFY) shares advanced sharply, rising 8.30% to $18.98, as the market reacted positively to the improved guidance, strong cash flow, and AI-led growth narrative.
