Infosys Ltd - ADR

CEO transition announced (surprising / strategically important): - Board will appoint Ashish Dash (internal candidate) as CEO Designate; he will take over with an internal transition plan. - Salil Parekh’s tenure ends March 31, 2027; Dash to receive coaching over ~2–3 months and then mentor under Salil for ~6 months. - Leadership messaging emphasizes AI readiness (Dash’s technical background + long Infosys operating history) and smooth continuity.

Q1 FY’27 performance: modest topline but AI momentum strong (good, with a negative one-off): - Revenue growth: +2.4% YoY and +1.0% QoQ (constant currency). - Operating margin: 21.1% (and guided range held; see below). - AI revenues: 8.2% of total revenue, growing double-digit QoQ for multiple quarters → management calls this a growth engine. - Large deals: $3.6B total with 61% net new (high confidence in demand quality), including three deals at ~$400M each. - Free cash flow: $955M (~16.5% of net profit). - Negative driver in Q1: revenue growth below expectations due to (i) ~50 bps one-time impact from a client terminating a program, (ii) softer volumes vs expectations, and (iii) weaker net pricing from competitive intensity and client productivity expectations.

Guidance cut / outlook: growth reset but margin stance maintained (bad / mixed): - Management revised revenue guidance to +1.5% to +3.0% YoY growth (constant currency). - Operating margin guidance maintained at 20%–22% despite expected headwinds. - Rationale for the reset includes: - continued soft volumes and pricing pressure (not as much as initially expected), - macro uncertainty, longer decision cycles, - client productivity/pass-through dynamics, - site mix shift guidance: on-site mix excluding acquisitions expected to fall by ~0.75%–1% for the year, - additional >1% impact from European manufacturing client reductions and selective deal avoidance where returns didn’t meet expectations.