Infosys Q3 Net Profit Slips 2% on ₹1,289 Cr Labour Code Hit; FY26 Outlook Raised

Bengaluru-based IT giant Infosys reported a 2% decline in net profit for Q3 FY26, posting ₹6,654 crore compared with ₹6,806 crore in the year-ago quarter, as the company took a ₹1,289 crore hit from the new labour code. The impact was similar to what peers such as TCS and HCLTech reported earlier this week.

"The adjustments for Labour Codes represent an increase in gratuity liability arising from past service costs and an increase in leave liability, together amounting to $143 million (₹1,289 crore), which is recognised in the Consolidated Statement of Comprehensive Income," the company said in its factsheet.

The firm’s revenues grew 8.9% year-on-year to ₹45,479 crore and 2.2% sequentially. Constant currency (CC) growth was 3.2% year-on-year, with operating margins at 16.6% reported and 21.2% adjusted.

Large deal wins totalled $4.8 billion in TCV, including $0.9 billion in net new business, while adjusted free cash flow reached $1 billion.

By business segment, financial services contributed 28.2% of revenue, followed by manufacturing at 16.7%, energy and utilities at 13.2%, retail at 12.8%, communication at 12.1%, hi-tech at 7.4%, and life sciences at 7.2%. Geographically, 55.9% of revenues came from North America, a 1% decline compared to the same quarter last year, 32.7% from Europe, 8.6% from India, and 2.8% from the rest of the world.

Despite the Q3 profit hit, Infosys raised its FY26 revenue guidance to 3.0%-3.5% and operating margin guidance to 20%-22%.

The company’s operating margins shrank during the quarter, with reported margins falling to 18.4% from 21.3% a year earlier, due to higher costs and provisions linked to the new labour code. On a comparable basis, adjusted operating margin was 21.2%.

Infosys generated free cash flow of ₹8,176 crore, while adjusted free cash flow stood at ₹8,626 crore, representing more than 113% conversion of adjusted net profit.

“Infosys delivered a strong Q3 performance, demonstrating how our differentiated value propositions in enterprise AI, through Infosys Topaz, are consistently driving higher market share. Clients increasingly view Infosys as their AI partner, recognising our expertise, innovation capabilities, and strong delivery credentials. This has helped them unlock business potential and enhance value realisation,” said Salil Parekh, CEO and MD.

Ahead of the earnings release, Infosys shares rose 0.6% to close at ₹1,608.9 on the NSE.

During the quarter, Infosys increased its overall headcount by 5,043 to 337,034. Voluntary attrition stood at 12.3%.