Infosys net profit dips 2.2%, impacted by new labour codes

Infosys, India’s second-largest IT services exporter, reported a 2.2% drop in net profit for the third quarter of the current fiscal year, impacted by new labour regulations, but remained optimistic on the future growth outlook.

Infosys' Q3 FY26 net profit stood at Rs 6,654 crore compared with Rs 6,806 crore in the same period last year. This dip was primarily due to the new labour law regulations, where the company was impacted by Rs 1,289 crore.

A statement from the company said, “The adjustments for Labour Codes represent an increase in gratuity liability arising out of past service cost and an increase in leave liability, together by Rs 1,289 crore.” The company added that there will be an impact in the future, too.

On the revenue front, the company saw an 8.9% annual rise, boosted by growing demand for artificial intelligence (AI) led services and business verticals such as financial services, energy, and utilities.

The revenue at the end of the third quarter was Rs 45,479 crore compared with Rs 41,764 crore in the same period a year ago.

Infosys CEO Salil Parekh said the demand outlook continues to remain strong, with a healthy pipeline of large deals. He expressed optimism about the demand extending beyond this fiscal.

“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 realisation,” the CEO said.

Of its 200 large clients, around 90% of them are engaged with Infosys for AI projects to drive growth or enhance productivity.

Infosys also revised its revenue growth guidance higher for FY26 to 3-3.5% from the previous projection of 2-3%.

Even on the human resources front, the company showed positive results as it added 5,043 employees during the quarter. It is on track to absorb 20,000 freshers during the fiscal year, and has already employed 18,000 of them.

The operating profit margin of Infosys stood at 18.4% during the quarter compared with 21.3% a year ago. This decline was primarily due to the new labour regulations.

Infosys CFO Jayesh Sanghrajka said, besides the impact of labour regulations, the operating profit margins actually saw a marginal improvement.

“Our performance was broad-based in Q3 with 0.6% sequential revenue growth, 0.2% adjusted operating margin expansion, stellar large deal wins at $4.8 billion, and robust adjusted free cash generation at $965 million in a seasonally weak quarter,” said Sanghrajka.