Infosys Q3 results: Steady growth even as margins hit by labour code reforms
The software behemoth is reaping benefits from its AI bets, as revenues rise 9 percent year-on-year
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Prefer us on GoogleLast Updated: Jan 14, 2026, 17:41 IST2 min
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Infosys delivered a steady performance in the third quarter of FY26, but the headline numbers mask a significant regulatory impact. The Bengaluru-based IT major reported revenues of Rs45,479 crore, an increase of 9 percent year-on-year. There was a 2 percent year-on-year decline in its consolidated net profit at Rs6,654 crore in the third quarter, compared with Rs6,806 crore in the last year quarter.
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However, margins came under pressure due to a one-time adjustment linked to India’s new Labour Codes. The Central government’s notification of consolidated Labour Codes in November introduced changes such as a uniform definition of wages and enhanced leave benefits—this has led to a massive accounting recalibration across the industry.
For Infosys, this meant recognising an additional Rs1,289 crore in gratuity and leave liabilities. This regulatory charge weighed heavily on the reported IFRS operating margin, which stood at 18.4 percent, though the adjusted margin remained healthy at 21.2 percent. The adjustment also impacted net profit and EPS, with reported EPS at Rs16.17 versus an adjusted Rs18.53. This margin compression highlights how regulatory compliance can materially affect profitability even for globally diversified IT firms.
Also Read: AI-led growth drives momentum for IT companies in slow Q3
AI-First Strategy Continues
CEO Salil Parekh emphasised the role of Infosys Topaz, the company’s generative AI platform, in driving client transformation. “Clients increasingly view Infosys as their AI partner with demonstrated expertise, innovation capabilities and strong delivery credentials. This has helped them unlock business potential and enhanced value realization,” said Parekh.Infosys deepened its Topaz AI capability with an agent services suite called ‘Topaz Fabric’, which enables clients to manage and implement AI agents across the enterprise. While addressing the press, Parekh said, “AI adoption continues to gain strong momentum across our client base. Today, we work with 90 percent of our largest 200 clients to unlock value with AI.” While the company did not reveal any AI-led revenue, Parekh did state that Infosys is currently engaged in 4,600 AI projects, having generated over 28 million lines of code using AI, and built more than 500 AI agents.
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The company clocked TCV (total contract value) of large deal wins at $4.8 billion, with net new business of 57 percent.
“One of the most significant wins this quarter was a $1.6 billion deal with the National Health Service (NHS) in the UK, which expands our work in the healthcare sector,” he announced. “Through this engagement, we will help NHS leverage AI to streamline operations and improve patient care for UK citizens.” Additionally, Infosys is also working with Metro Bank, Lufthansa Systems to embed AI deeply into enterprise workflows.
Infosys is now witnessing various value pools emerging that could unlock significant incremental opportunities—from AI engineering services and agents for operations to AI software development and AI deployed in physical devices. “We believe Infosys is uniquely positioned to capture market share across these value pools and emerge as the leading AI value creator for global enterprises,” added Parekh.
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In a signal of confidence, Infosys has revised its revenue growth guidance for FY26 to 3 percent–3.5 percent in constant currency terms, up from its previous forecasts. Operating margin guidance for the full year remains steady at 20 percent—22 percent, excluding the one-time labour code adjustment.
First Published: Jan 14, 2026, 17:51
Subscribe NowNaini Thaker is an Assistant Editor at Forbes India, where she has been reporting and writing for over seven years. Her editorial focus spans technology, startups, pharmaceuticals, and manufacturing.
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