Ladies and gentlemen, good day, and welcome to Infosys Limited Q4 FY '25 Earnings Conference Call. As a reminder all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to Mr. Mahindroo..

Hello, everyone, and welcome to Infosys Earnings Call for Q4 and FY '25. Joining us on this earnings call is CEO and MD, Mr. Salil Parekh; CFO, Mr. Jayesh Sanghrajka and other members of the leadership team. We'll start the call with some remarks on the performance of the company, subsequent to which the call will be opened up for questions.

Kindly note that anything we say which refers to our outlook for the future is a forward-looking statement that must be read in conjunction with the risk that the company faces. A full statement explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I'd now like to pass on the call to Salil..

Thanks, Sandeep. Good evening and good morning to all of you. Thank you for joining us on this call. We had an excellent year and financial year 2025. Our revenues grew at 4.2% in constant currency terms, operating margin was 21.1%. We generated $4.1 billion in free cash flow, and we had $11.6 billion in large deals.

In Q4, we had year-on-year growth of 4.8% and operating margin of 21%. We are seeing growing demand from clients to partner with them on AI, they are moving from a use case-based approach to an AI-led transformational approach with AI agents playing a critical role.

We're working on AI projects by bringing Infosys Topaz, a generative and agent AI-powered services and solutions for their benefit. Our AI work spans a wide spectrum of priority areas like process improvement, engineering, customer service, cybersecurity and employee productivity. We are helping a large U.S.

financial services company navigate the AI transformation to deliver hyperpersonalized conversation AI-powered customer experience with accuracy of over 80%. We are working with a Europe-based company to create master solution driving multiple AI-first transformation projects that is automating 70% of the process landscape.

We continue with our strategic expansion with acquisitions, one in energy consulting space in the U.S., one in cybersecurity in Australia and with a new strategic partner joining our joint venture in Japan. All of these are areas of interest and strategic focus for the company.

We have a set of capabilities that support our clients in their growth areas related to AI, cloud and digital and in their efficiency areas related to automation, cost reduction, lean and consolidation.

Based on what we are seeing in the environment today and building on a large deal wins in the past quarters, our guidance for growth for financial year '26 is 0% to 3% in constant currency terms. The environment is uncertain, and we will execute our plans with agility, while keeping a close watch on events as they unfold.

Our margin guidance for financial year 2026 is 20% to 22%. With that, let me pass it on to Jayesh for his views..

headwind of 140 basis points from compensation-related costs, 40 basis points impact from acquisition, mainly on account of amortization of intangibles, partly offset by a tailwind of 80 basis points from lower postpaid customer support, 30 basis points from Maximus, 20 basis points from currency movement and 20 basis points from lower third-party costs.

Higher travel and visa costs were offset by lower other costs leading to a decline of 30 basis points sequentially. Utilization, excluding trainees stands at 84.9%. On-site mix further reduced to 23.6%. We hired 15,000 freshers this year and expect to hire over 20,000 freshers in FY '26.

EPS increased by 1.8% in financial year '25, in rupee terms on reported basis and 8.3% adjusted for interest on tax refund. The increase in margins by 50 basis points over FY '24 was achieved despite multiple headwinds from salary increases, higher variable pay, impact from large deal ramp-ups and acquisition-related amortization.

These headwinds were more than offset through combined benefits from various tracks under project Maximus, especially value-based selling, lean and automation, improvement in critical portfolio improvement in utilization, et cetera. We have been able to institutionalize these initiatives and make a structural shift in our approach.

We expect project Maximus to further aid in margin improvements from current levels. Consolidated cash and cash equivalents stood at $5.56 billion at the end of the year. Yield on cash balance was 7.13% in Q4 and ROE stood at 29%. Coming to cash flows. FY '25 free cash flows are highest ever at $4.1 billion, increase of 42% year-on-year.

Free cash flow as a percentage of net profit for the financial year was 129%. And we expect FY '26 free cash flows to be above 100% of net profit. Excluding income tax refunds, our free cash flows for the year were at $3.5 billion, up 21% year-on-year. Free cash flow as a percentage of net profit were at 112%.

We expect effective tax rate for financial year '26 to be in the range of 29% to 30%. The Board has proposed a final dividend of INR22 for financial year '25, including the interim dividend, the total payout for FY '25 will be INR43, an increase of 13.2% once the final dividend is approved by the shareholders.

We closed 24 deals in Q4 with a TCV of $2.6 billion, 63% of this net new. Vertical-wise, we signed seven deal in financial services, 5 in EURS, 4 manufacturing, 3 in communication, 2 each in high-tech and Life Sciences and 1 in retail. Region-wise, we signed 12 large deals each in America and Europe. Coming to verticals.

In Financial Services, budgets are flat to slightly higher in AI-regulatory compliance and cost management. We anticipate steady growth in Capital Markets and Cards & Payments in large global banks in the U.S. in large global banks and U.S. regional banks. Mortgage sector sees -- we'll see an uptick in spend in interest rates reduce going forward.

Our investment in AI-related propositions, regulatory compliances, risk mitigation and cost management is expected to create growth opportunities. We have seen selected -- we have been selected as a AI-partner for many of our clients.

Manufacturing sector has grown double digits over the last few years for CY '25 budgets are lower for Auto and Industrial Manufacturing and flat for Aero. Recent challenges in terms of tariffs, market uncertainties and trade buyers are likely to lead to a subdued spend and delayed decision-making. Weakness in Auto, especially in Europe continues.

We are helping clients in Aerospace resolve bottleneck in the supply chain. Pipeline remains healthy with focus on cost takeouts, opportunities in infra transformation and consolidation and some traction in ERP modernization programs.

Retail sector has been impacted by economic uncertainty resulting in lower consumer spending in core markets due to recent tariff announcements, client budgets are expected to be tightened and there is increased caution. Decision cycles are getting stretched for discretionary spend and larger deals.

Across geos, there is increased focus on AI cloud, asset modernization, cost takeout and investing in core tech capabilities. Energy utility resources and services sector continues to grow, and we see a strong pipeline to grow -- and we see a strong pipeline of opportunities, both from existing and potential clients. Energy prices remain volatile.

However, new markets in midstream and downstream energy are opening in the U.S. region. There is an increased M&A and tax-related work with services clients, focusing on cloud migration and vendor consolidation. Utilization is prioritizing AI-driven enterprise transformation and services and is seen traction in software services and IPD.

The acquisition that we announced today will strengthen our vertical expertise and open new buying centers in energy trading and risk management areas. Communications sector continues to remain soft, discretionary fund is under pressure with clients focusing on cutting costs, restructuring and consolidation deal.

Our growth will be led by recent deal wins and opportunities in areas like cost reduction, AI and database solutions and cybersecurity. Lower interest rates could improve the profitability of telco OEMs, which in turn can help increase IT budgets.

In high-tech, most clients remain cautious due to the macroeconomic headwind and tariff announcement with discretionary spend still remaining under pressure. There is increased margin pressure on account of committed spend on data centers.

Exiting FY '25, global uncertainties relating to tariffs and impact of debt on client sentiments and spend are taking center stage, basis our assessment of the current macroeconomic environment and the visibility that we have today, we expect FY '26 growth to be 0% to 3% in constant currency terms.

This excludes the acquisition that we announced today. And this assumes a reduction in third-party revenues versus FY '25 based on existing deals and the new deals in pipeline that we have today. Our operating margin guidance for the year is 20% to 22%.

We will continue to keep a close watch and economic environment and its impact on our client budgets and reassess our guidance as we progress during the year. With that, we can open the floor for questions..

[Operator Instructions] The first question is from the line of Ankur Rudra from JPMorgan. Please go ahead..

Thank you. On the fourth quarter, can you talk a bit about the linearity..

Ankur, sorry to interrupt you. Your audio is not clear.

Can I request you to come in a better reception area, please?.

Okay.

Is it better now?.

No sorry, network is not clear at your end..

Ankur, this better go ahead. Ankur go ahead, we can hear you now..

All right. Thanks. Okay.

So question was in terms of the fourth quarter, can you talk a bit about linearity? Did the softness or the relative miss to guidance pay out only in March? Or was there something you saw over the course of the quarter?.

Ankur, as I said earlier, two-third of our decline was on account of third-party costs and the revenue related to that. Some of the deals that we had in the pipeline had slipped. So this decline was higher than what we anticipated. And the balance was the usual Q4 seasonality and the volume decline that we saw.

So -- but two-third of our 3.5% decline was on the back of third-party cost and revenue..

I appreciate it totally. I was curious if that [pay-out] (ph) more in March or if that pay-out over the course of the entire quarter..

Yes. So generally, these deals happen towards the end of the quarter, and that's where it slipped from there..

Okay. Understood. If I talk a bit about the guidance, it seems to imply something like 0.8% to 1.9% as it relates for the rest of the year.

Could you highlight that this will be a normal seasonality? Or is it going to be different given the heightened uncertainty you might be seeing right now?.

I'm sorry, can you repeat the question? I wasn't very clear..

The guidance, does it imply a normal seasonality for the year?.

Yes. So as we said earlier, we do see a heightened uncertainty in the environment, and that's the reason we have given a 3-point guidance. So depending on which end of the guidance you are looking at the seasonality will also change, uncertainty will also change. But outside of that, we are expecting normal seasonality..

Okay. Understood. Just the last question. In terms of -- you spoke a lot about the AI-led transformation that clients are expecting from you.

Are you infusing AI into existing projects that might lead to any kind of revenue deflation which you have to overcome?.

Hi, Ankur. This is Salil. So first, AI is part of all the discussions on the new deals. We are using AI in many of our existing programs. But here, we are seeing benefits which relate to how we can now use AI with clients in different areas.

So as a composite, what we saw last year 4%, 4.2% growth we feel pretty confident that we will see benefits from it even as we see some productivity improvement. So we don't see anything in terms of the revenue on that..

Okay. Appreciate it. Thanks and best of luck..

Thank you. Next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead..

Hi, good evening. And thank you for taking my question. My first question was you spoke about that the third-party slip towards the end of the quarter.

So how has the volume trend during the quarter? And does that imply that as they come back in the next quarter in the guidance you are expecting the third-party contribution to be higher in FY '26?.

If you look at what I said through the quarter, which we had a softer start at the beginning of the quarter from a volume perspective, but we did see some recovery there in terms of volumes.

But on the third-party we are expecting for FY '26, third party to be lower than FY '25, considering the deals that we have signed and the deals that we have in the pipeline. So that is baked in..

And volume trend during the quarter?.

Yes. The volume trend during the quarter, we had a softer start January, generally, the soft month and then the volumes start stacking up. And we saw a similar trend this quarter as well..

Okay. My second question was from a longer-term perspective over the last 2, 3 years, we have seen all the fraud which was created in many of the deals with very low ROIs being signed. They were reassessed by the clients. And many of them were ramped down, and we saw the impact of that in terms of revenue growth.

Do you see there is still some scope left if clients start reassessing the projects again if the macroeconomic uncertainty continues for a little longer, there is more of reassessment of the projects, which may again start happening the way we have seen over the last year or two?.

Hi. What -- First, the changes that we have seen in the economic environment impact has happened very recently and over a short span. Having said that, the discussions we've had, specifically on some of the deals we have signed in the recent quarters. We have not seen a change in that, like the trajectory that we were anticipating at this stage.

However, we'll keep a look out on that as we develop it..

Thanks for that Salil. Just a clarification. So my question was more around that ROI is now that we are offering in terms of the lease which we are doing for the client.

Now has it on a portfolio level, has it improved so that we are no longer in a risk if such a reassessment happens? Or do you still see that there are some of the projects, which is at risk, which could be reassessed?.

What we saw in the past was more of Sorry -- Gopal, what we saw in the past was more of the discretionary spend where the clients had put a stop or there were ramp downs there. If the environment deteriorate significantly from where we are, yes, the clients will relook at some of that.

At this point in time, we are not looking -- we are not seeing any of that happening significantly for us..

Great. Thank you..

Next question is from the line of Abhishek Pathak from Motilal Oswal. Please go ahead..

Yeah. Thanks for the opportunity. So my first question was, could you please just expand a bit on the underlying assumptions and the top end of our guidance? Do we assume an acceleration in deal wins for this to be achieved? Or do you think a better than expected ramp-ups could probably take us to 2%, 3%? That's one.

And the second question was, which I think is probably partly answered. But considering a few of your peers have called out some deferrals or at least some uncertainty in decision-making.

How does the next immediate quarter look in terms of, let's say deferrals or ramp-downs? And do you see any significant risk in the extreme short-term? And lastly, do the current events kind of push down the recovery in short cycle deals a bit more? And do you feel short cycle deals are again, something that will struggle to take off? Thank you..

Yes. So leading up to guidance, we always run multiple models that leads us to the top end, bottom-end or the middle end of the guidance. We -- that's the same process that we have followed even at this point in time. The reason that we gave a three-point guidance was because there is an uncertainty.

So at the lower end of the guidance, we have baked in some further deterioration in the environment. And at the top end of the guidance, we have baked in steady to marginally improving environment. So that's how the guidance has been spanned out from the environment perspective.

Having said that, on the ramp downs, we have not really seen any major ramp downs at this point in time or major closures of the deals. We do see clients being cautious that decision making is delayed in pockets. But as I said, what we see today has been baked in in the lower-end of the guidance from the uncertainty perspective..

Got it. I think just the last thing on short cycle deals, if you could just clarify that..

Abhishek, do you have any follow-up questions?.

Yes, sorry.

No, just the last bit on the wage hike impact for Q1 and how do we just model that in time?.

Yes. So Abhishek, most of our employees got the wage hikes in January and the middle level to senior level employees will get a wage hike effective first of April. The impact of that has been baked in -- in the guidance range that we have given. As you could see, for the financial year '25, we have improved our margins by 50 basis points.

We are now at 21.1%, despite all the headwinds, whether it was wage hike, whether it was higher variable pay, the large deal ramp-ups, acquisition-related costs and our endeavor going forward is to improve from where we are in the current environment..

Understood. Thanks. Thanks a lot..

Thank you. Next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead..

Hi, thanks for taking my question. My first question is on small --..

Gaurav, sorry to interrupt you.

Can I request you to speak a little louder, please?.

I am I audible now?.

Yes, go ahead..

Hi. My first question is on small deal environment.

Have you seen any change compared to a few months back? And is it fair to believe that the midpoint of guide assumes a stability in the environment on the small deal front?.

So Gaurav as I said, there are various models that lead to multiple ends of the guidance. At the lower end, I repeat, we have assumed a deteriorating environment. And at the upper end, we have assumed a steady to marginally improving environment. So in the middle is anywhere between the two..

Okay. Got it. Second question is on margins for FY '26. Normally, what we have always been hearing is that when growth improves, it creates an operating leverage and provides a cushion to improve margins. But if I take the midpoint of your guide it is kind of slowing compared to FY '25.

So is it fair to believe that kind of creates some operating deleverage and create some pressure on margin? So what would be the levers to offset that and still be stay within the band within FY '25 range? Thank you..

So, Gaurav, if you look at the last year also, we had a large comp impact coming into the year because we had the previous comp was rolled out in November. So full year impact of that came into this year, and then we had additional comp that we rolled out in January. So there was a comp impact.

There was an impact of the large deals that we signed in the previous year. 20 bps of impact from the acquisition that we did and so on. And despite all of those headwinds, we have been able to improve margins by 50 basis points by paying -- rewarding our employees better through a higher variable pay through the year.

So we are confident at this point in time that there are opportunities where we can double down and improve margins. So at this point in time, we endeavor to improve margins from where we are for FY '26..

Thank you..

Thank you. Next question is from the line of Jonathan Lee from Guggenheim. Please go ahead..

Great. Thank you for taking our questions.

First question, can you clarify what the inorganic contribution is that's contemplating your outlook for fiscal '26?.

So Jonathan, the guidance does not include the acquisition that we announced today. We haven't closed them yet. The Board has approved the acquisition. We still have to go through the closing formalities, that will take a few weeks to maybe a month or so. So depending on the closure, we will figure out in the next cycle on the guidance.

But at this point in time, to clarify the guidance does not include the acquisition that we announced today..

Thanks for that clarification.

Second, how would you characterize the pricing environment through the quarter? And how does that compare to what you've seen since the beginning of this fiscal year?.

We continue seeing stable pricing even through the quarter generally at the overall business levels. everything that has changed in the environment has been very recent. So we've not really seen any significant impact coming from them on the pricing environment.

Having said that, one of the key pillar on our cost optimization or the margin improvement program is the value-based selling.

That's not only pricing that is everything around pricing, including getting the chain requests for the scope creep, rotating our employees, long tenured employees, across projects so that we get better pricing on them, having a differentiated pricing models for different services.

So all of that has helped in the last year and that endeavor continues in this year as well..

Appreciate the color. Thank you..

Thank you. Next question is from the line of Keith from BMO Capital Markets. Please go ahead..

Hi, thank you very much for taking the call. I wanted to return to AI on the delivery side? Or -- and really, I wanted to go back to the first question, which I wasn't sure I understood your answer.

But how is AI changing the nature of pricing discussions and/or structure as of late? And how do you think that's going to unfold in FY 2026? In other words, does it -- does the deflationary nature of AI? Is that impacting our performance-based contracts or any structure that you're putting in the contract? And is it leading to any different price discussions? And if you could also call out, is there an area whether it's BPO or deployment or ADM, that's being -- that you see using AI more in the delivery? Or is it all the different areas? Is there any one area specifically within your portfolio or solution portfolio that you think will be impacted more by delivery? Thank you very much..

So on AI and pricing, what we are seeing is -- there are areas where we have discussions with clients, and this was building up through the last year through the quarters, and we anticipate seeing that going ahead as well.

Where, for example if there are large customer service programs, we see that there could be benefits to the clients of 20% to 40%. If there are different areas where generative-AI can be applied. Those discussions are very much at the forefront on clients' minds. Sometimes, the client view are maybe larger than what we are seeing in realization.

And so we have a choice to make there. Many times, they are aligned and AI is one component of automation of lean then AI and then consolidation, all of which gives some benefits in a cumulative way, to the client. So we see that ongoing. And with that, we also see AI gives us some new opportunities.

And there are new projects we are doing, for example, in credit risk or AI-platform for a telco. These give us new areas for revenue as well. So as a cumulative, while all this was still going on last year, we saw a 4% increase in -- 4.2% increase in revenue. And that's the way we see it at a composite level.

On that we superimpose the changes in the economic environment, which is where we see some differences, as Jayesh was sharing earlier in the range of the guidance if that makes sense..

Okay. But just when -- and for my follow-up, when you mentioned there are some situations where AI is generating 20% to 40% efficiency gains.

And I think that's sort of similar to what IBM and Accenture have said, on a like-for-like pricing in that situation where you can deliver such meaningful efficiency gains to the client, how is that -- how are those efficiency gains shared with the customer? In other words, is your revenues go down by 20%, 40%? Or how is that shared in terms of just on a like-for-like basis for a given contract? And that's it for me.

Thank you..

So there, where we've seen that range has been more, for example, on customer service. We don't have a large sort of voice business, we typically bid on like a combination of technology and operations. And part of it could be that.

So typically, these are not our existing book of business, that customer service is not something we have a large book of business in. In terms of sharing, there are different ways.

These are shared depending on the client situation, like there are situations where there's a consolidation activity with the client where there is a share in some part where customer service is not within our portfolio, and there's consolidation which gives us some benefits. So it is not like one number, which gets shared then with clients.

But it is shared, yes..

Okay, many thanks for the answers. And wish you all the best of luck..

Next question is from the line of Surendra Goyal from Citi. Please go ahead..

Yeah, thanks a lot. Salil, Jay, just one question. You have been calling out improvement in discretionary spending through the course of FY '25. What did you see in the month of March and April so far? And apologies if you have already answered this question before..

So Surendra, the March month has been usual. I don't think we have seen a significant change either way in the environment in terms of volumes. We did have positive volumes in March..

Understood. Thank you..

Thank you. Next question is from the line of Abhishek Kumar from JM Financial. Please go ahead..

Hi, good evening. Thanks for taking my question. I have a question on cost of third-party items. First is, when we say, some of the booking of the third-party item got spilled over.

Does that mean that it will come back in Q1 and that will help Q1 revenue? And a related question is, is the visibility getting into Q1, similar to what we have seen maybe Q1 of last year, better, worse, any color on that? Thank you..

Sorry, Abhishek, if you could repeat the first question on the third party, I didn't get that well..

Yes. So I mean we said that some of the weakness in Q4 was because some third-party item got spilled over.

So is that just a deferral and it will come back in Q1? Or that is something that we have lost?.

Yes. So Abhishek, at this point in time the third-party costs that, as I said earlier, two-third of our decline was because of the third party -- lower third-party costs and revenue, some of those deals slipped. It is uncertain at this point in time if and when these deals come back. So at this point in time, they are slipped.

You should read that in conjunction of the fact that I also said FY '26 third-party cost and revenue are going to be lower than FY '25 third-party cost and revenue..

Okay.

And maybe in that context, visibility overall for Q1, given we are in the midst of the uncertain macro, how are we looking at Q1 compared to previous years?.

Yes. So I think both the years have had unique factors that led to an uncertainty. I don't know if you can put in a quantifiable terms, whether it is similar or not -- we started the year last time there were uncertainties around interest rates, geopolitical tensions how the world was going through elections. So there were uncertainties around that.

And today, we have uncertainties around tariffs. We don't know to the extent -- the rates to the extent to which countries will get impacted, how those countries will retaliate the timing of that and the downstream impact of that.

So I think, all of that is uncertain as we speak, Abhishek, but the guidance that we have provided at this point in time is what we see today. Our philosophy on guidance has been to reduce asymmetry of information between us and our investors, and we are guiding what we see today..

So one quick question on margin. Two-third of 3.5% decline coming from third-party, but the margin uplift because of that has been very limited, right around 30 basis points. So I was just trying to reconcile why the margin uplift is so low? Thank you..

Abhishek, the margin uplift on that is around 20 basis points. If you look at the reduction in third-party cost is $100 million, obviously we make some margins on those deals as well. So you will only get the benefit to the extent of the delta margin of the company versus those third-party deals, and that is where the margins impacted..

Sure. Thank you. That’s helpful. And all the best..

Thank you. Next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead..

Yeah. Thanks for the opportunity. Salil, just wanted to understand in this uncertain macro environment, if discretionary spend is difficult to predict whether -- but at the same time, clients may not postpone their AI-related investment.

So is it fair to assume client may start in terms of going -- doubling down on the outsourcing cost takeout kind of deals? Whether same is coming into your discussion? And is it fair to assume that the deal pipeline could improve on the cost takeout and the mega deals could be a part of the deal wins entering FY '26 as well?.

So the first, the changes in the economic environment are recent and also in a short period. So not everything is understood about that. Having said that, learning from the past, we typically see that this sort of an environment will provide more cost takeout opportunities. Consolidation, automation, lead.

We have also pivoted our sales activities into focusing and building more proactive pitches to clients on that area. We will now see how that executes and what's the dynamic of the economic environment. But in general, our portfolio has got that ability, which is also on AI cloud and also on cost takeout.

So now we're emphasizing much more on the cost takeout..

Okay.

And Jayesh or Salil, whoever can answer this, whether it's fair to assume the seasonality of 1H better than 2H may continue even in FY '26? What are your guidance assumptions for the same?.

So I mean, typically, our 2H is softer because you have furloughs, you have lower working in calendar days, et cetera, et cetera. So that kind of -- that part of the seasonality will remain. As we see today, I don't see -- I don't expect that seasonality to change.

But beyond that, in an uncertain environment like this, it's very difficult to predict how the quarters will look like. As I said earlier, at the bottom and the higher end of the guidance, we have guidance, we have factored in various scenarios and depending on how that will play out, we'll see how the quarters progress.

But Overall we don't see a significant change in seasonality beyond the uncertainty..

Okay. And just last bookkeeping question. In terms of your margin work, you have said the M&A related cost being 40 bps, as a headwind to the margin.

Is it one-off and may not reoccur in the first quarter of the coming financial year? And if I assume both acquisition being closed at the end of 1Q and maybe consolidated for nine months, is it fair to assume it will add 40, 50 bps to the revenue growth?.

So that's right. The 40 bps of charge that we took on -- related to the acquisition is one-off in a way. If you recall, we had said earlier this year that the Automobile sector, especially in the German or European markets has been seeing software.

And that is why we have reassessed our customer intangibles -- the value of customer intangibles and we had to take a charge on that. So from that perspective, it's a one-off.

Coming to the second question, what was the second question?.

The M&A..

Yes, the acquisition -- the impact of the acquisitions, the if we close in the Q1, the impact would -- I mean the benefit that we would get would be 40 to 50 basis points for the full year, which is not baked in the guidance..

Okay, thanks and all the best..

Thank you. Next question is from the line of Vibhor Singhal from Nuvama Institutional Equities. Please go ahead..

Hi, thanks for taking my question. Just two quick questions from my side. One is traditionally, especially over the last few years, we have seen an [indiscernible] editing for us in terms of growth and the second half gets smart by the industry seasonality, this year, and auto seasonality In Q4.

This year, do you see -- I mean I know the – talked a bit – on earlier question. But in this year, I think one of our peers have called out uncertainty in the past quarter, which also led to one of the key design to over the week’s quarter to Q1 [indiscernible].

Do you see that impacting the entry growth rate of products this year, which would probably lead to at least slightly lower growth or, let's say, upstream trajectory of the growth that we have seen over the past two years?.

Vibhor, sorry, again, your voice wasn't very clear. It was getting muffled in between.

Can you summarize the question again, please?.

Sure, significantly..

Sorry, did we lose everybody..

The line for the participant dropped. We move to the next participant. The next question is from the line of Nitin Padmanabhan from Investec India. Please go ahead..

Yeah, hi. Good evening. The JV that we signed with Mitsubishi, how is that different from the one that TCS has signed in the early part of the last decade.

If you could just give some context there?.

So Nitin, this is not a JV that we have signed. We have inducted Mitsubishi in the existing JV, and we have diluted our share by 2%. So it is an existing JV where we have just inducted a partner, a strategic partner in the JV. It's endeavor to build a long-term relationship with a large giant in Japan..

Got it. Got it. And then just one last question is, see, as we entered the last year, which is as we entered fiscal '25, we had a large order book of large deals, which we had to execute, which sort of helped us in the first half of last year.

As we enter this year, how would you contrast that in terms of the order backlog, relative to last year, right? I'm asking this considering that our organic growth this year is possibly around 3.4%. And in that context, our guidance at the top end is almost similar.

So just wanted some context in terms of how it was then and how it is now?.

So Nitin, you're right. If you look at just the purely the quantum of the deals that took were being ramped up in Q4 of the previous year, and compare that to quantum of deals that are getting ramped up, you will see some difference.

But we should also remember that many of those deals were in larger deals and a longer duration deals versus what we have today. Which -- so there's a delta between the tenure of the deals and mega deals are generally a much longer tenure deal.

You will see some of the filings with respect to the mega deals that we have done with SEBI also, Stock exchange also earlier. So, we should see that in that context..

So it is not that these deals have any anniversary impact at the moment? Or if there's a continued ramp that you're sort of anticipating there?.

So if you look at most of the deals that we had talked about earlier, which was signed in FY '24, they had ramped up in the Q4 of FY '24, and then we saw the benefit of them in FY '25. So they are pretty much at a steady state at this point in time..

Got it. Got it. That’s really helpful. Thank you so much, and all the very best..

Thank you. We take the follow-up question from the line of Vibhor Singhal from Nuvama. Please go ahead..

I hope I'm audible this time. Sorry, I got dropped in between. So my question was basically on the growth trajectory that we're expecting. For the last two years of our growth has been pretty much first half heavy and seasonality of industry and ROCEs is already coming in Q3 and Q4.

This time, a lot of our peers have called out weakness in Q1, especially because of the uncertain macro. So do you believe that could impact the growth trajectory that we see through the year, it could be more skewed towards Q2 and Q3 or maybe the second half, and the first half might not be as good as we have seen it over the past couple of years.

Just some light on that will be really great..

So Vibhor, I said earlier, from a seasonality perspective, I don't see -- I mean the regular seasonality perspective, I don't see a change in seasonality. The working days calendar days impact would be similar to earlier years, the furloughs will remain.

The uncertainty is the only unknown factor, and we'll have to see how that pans out in Q1, Q2 to see and the implication of that to see whether Q1 -- Q2 is going to be better or versus earlier year. So in short, the uncertainty remains. That's the reason why we have given a 3-point guidance.

At the bottom end of guidance, we have seen -- we have expected higher uncertainty at the top end of the guidance. If we end up there, then you will see a regular seasonality in H1 and H2, at the top end of the guidance. But yes, the bottom-end of our guidance, it's going to be unpredictable..

Right. Right. Got it. So okay, let me just ask maybe just a follow-up on that.

Are you expecting any, let's say, unexpected -- I mean, extra weakness in Q1 because of the uncertain macro at this point of time?.

We don't give quarterly guidance unfortunately. So we are going to stick to our overall guidance, and that is what we see today..

So, yes, I was just trying my luck.

Lastly, on the margin front, where do we stand on the project Maximus benefit? Do you believe there's still some fruits to be plucked from that? Or are we mostly done with that project?.

So, if you look at this year, despite multiple headwinds, we have been able to improve margins of 50 basis points, right? We did absorb the comp that we did in the previous year, full year impact of that came in FY '25. We gave higher variable pay to our employees.

We have had ramp-ups of many of the mega deals, which obviously are lower margins in the beginning of the year. We had an impact from acquisition or intangibles of the acquisition. So I think we have absorbed all of that and delivered 50 basis points of margin.

There are multiple tracks which are still underway under the project, value-based selling is still delivering value. Lean automation is still creating value. So I think there are opportunities that makes us believe that there is still opportunity to improve margins from where we are, and that's the end of year..

Got it. Got it. Thank you so much for taking my question, and wish you all the best..

Thank you. Next question is from the Manik Taneja from Axis Capital. Please go ahead..

Hi, thank you for the opportunity. You made a remark regarding the fact that we should probably be expecting some decline in the cost of pass-through revenues in FY '26. We basically see a very steady increase from this line item increasing from about 2% of revenues to about close to 8% of revenues in FY '25.

Is there anything on the ground which is changing because of this envisage? Or lower -- this number essentially being a drag on revenue growth? And how should we be thinking about this number playing out over the next three years, four years?.

Sorry, Manik, this is -- the third-party costs are typically the costs which are embedded in a large transformation deals -- a multi-year large transformation deals. And we know what the deals that we have signed in the year, and we know what are the deals in pipeline.

When we analyze that those 2 components is when we estimate what the cost is going to be. And at this point in time, looking at what we have signed and what we have in the pipeline, we expect FY '26 third-party costs to be lower than FY '25..

Do we envisage this going back to possibly where it used to be [FY '21] (ph)?.

Yes. I mean, eventually, we will have to see where we'll end up with all. Once the large many of the mega days that we have signed in the past, those starts -- those transformation finishes, we will have significant reductions as well..

Sure. Thank you and all the best for the future..

Thank you. Next question is from the line of Ashwin Mehta from Ambit Capital. Please go ahead..

Hi, thanks for the opportunity. Jayesh, one clarification, in our cost of sales line, we have almost INR145 crore negative number for consultancy and professional charges. Haven't seen a negative number ever there.

So what is driving this?.

So Ashwin, this is an insurance claim that we got with respect to the cyber event that we had last year. So this is a benefit of $20 million that we got. I didn't call it out in the margin book because there were other negatives against that like utilization, et cetera. So those kind of offset each other..

And I had a follow-up in terms of the provision for [post sale] (ph) support as well the reversal seems to be pretty high.

So is that also related to this as well?.

No. The post-sale customer support is typically -- there is a seasonality there. So typically, if you look at last few year's trend, you will see a reduction in Q4 generally on that because many of the projects are typically come to an end with the financial year-end. So that's one reason.

The second reason is, of course, there is a lot of things which we are driving under Project Maximus.

Whether it is in terms of effort optimization, whether it is in terms of change request a tighter control of many of those projects all of that reflects into lesser warranty in terms of SLAs, lesser warranty, lesser cost in future on many of those projects. So all of that reflects in [indiscernible] wholesale capacity..

Thanks a lot for the clarification..

Next question is from the line of Girish Pai from BOB Capital Markets. Please go ahead..

Yeah, thanks for the opportunity. Sir, are there any silver linings to the current macroeconomic situation around tariffs.

Are you having any conversations with clients around the supply chain solutions or anything like that?.

So there, what we see is we have a portfolio which has got both things for growth like AI, cloud, digital, but also very good solutions for cost and cost efficiency, automation, productivity from AI Lean. We are making sure that those are getting already in the short time period from the changes in the economic outlook.

We are making sure those are getting communicated, discussed with clients. And my guess is, we don't know like the impact yet, but we are going to make sure that if clients are looking for cost and efficiency will be there. On supply chain, we are working to make sure that we provide because we have a consulting business, which can give some insights.

We also have supply chain tech solutions if clients are re-routing their supply chains or if they want to optimize it, how we can support them in it. So we are positioning for it. We don't know right now like what is the potential impact benefit, but we are definitely positioning for the cost and these sort of activities..

Okay. My second and last question has to do with AI and budgets around AI.

Do you have a -- clients have a separate budget for GenAI or AI? Or is it coming from savings that you're doing on normal projects?.

Yes. I think -- I mean if I look back at the last year, the overall tech budgets are there. Now there are some cases where a client is doing large transformation, we are able to fund that transformation from, let's say, a large opportunity on consolidation or cost efficiency.

In some cases, because at the start, AI was a little bit more distributed, not so much central. There were also some sort of distributed within the company, different divisions and budgets and so on. My guess is it will become more and more one budget for the company from which there will be spend on our services for AI and so on.

We will see how that plays out. That's what we anticipated..

Okay, thank you..

Thank you. Ladies and gentlemen, I now hand the conference over to the management for closing comments..

Thanks. Thank you, everyone, and thank you for detailed set of questions. We can imagine with the changes we are all looking for insights. Conclusion from my side. First, we are delighted with the strong financial year '25 growth, margin, very good cash, large deals, net new.

What we see -- what we have built over the years is a balanced portfolio within the company with AI, cloud, digital, for growth, cost, automation, consolidation, lean for efficiency.

And we find that this environment gives us a good ability to work on both and maybe do one more than the other, depending on how the environment will unfold, we will support our clients in that ability. We've also taken care to build guidance with how Jayesh described with different ends and assuming different scenarios.

We feel we are well-positioned on the margin side with a lot of the work that's been done in our margin program. So overall, we remain quite confident to support our clients on what they want to drive and to deliver and execute on our business. Thank you, everyone, and look forward to catching up in the quarter. Thank you..

Thank you very much, members of the management. Ladies and gentlemen, on behalf of Infosys Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you..