Ashish Kumar Dash, that is who the board has proposed and approved as the next CEO of Infosys. Let's go across to Reema now. She's standing by. Reema, of course, we'll take stock of the earnings, but this is a surprise. Salil still has till 2027, but Infosys clearly putting a succession plan well in place. Ashish Kumar Das, the chief executive officer designate of the company until the 31st of March 2027.
Well indeed, this is very very big news coming out of Infosys. Salil Parekh has already served two terms as the Infosys CEO. He took charge in I think 2017 or 2018. So after two terms, there is a succession plan announced and Ashish Kumar Das or Dash, we're just reading the website. He is an Infosys veteran, three decades at the company. He's held multiple leadership roles across delivery, operations, consulting, transformation, and I think most recently he serves as the executive vice president and global head of services, utilities, resources, energy and enterprise sustainability. So he's led a portfolio which spans more than 12 industry verticals and I think what also stands out, you know, he's done a lot of work on AI/ML transformation. So he has been driving Infosys strategy around AI adoption, innovation, future of works. So, you know, there was a lot of speculation in the market on whether Salil Parekh will get a third term or they will look at someone with, you know, a fresh approach to leading the company in this Infosys era and Salil after two terms will no longer be the CEO and this is big, big management change coming through. Ashish Kumar Dash and he is going to be an Infosys veteran, so no outsider, it is going to be an internal person who will be taking charge as Infosys. We are also awaiting the numbers. Okay. The other important headline is that Infosys FY27 guidance has been revised lower at the upper end. The current guidance is 1 and a half to 3 and a half%. The company's new guidance stands at 1.5 to 3%. Which means the upper end of the FY27 guidance has been lowered. This will not come as a surprise. Many believed that given the fact that the company has lost out on the Dabler contract to competitors. So the manufacturing sector has been under pressure, it was difficult for the company to achieve the upper end. So two big headlines as of now coming through. One, new CEO announced, he only takes charge once Salil's term comes to an end officially from 1st of April 2027. That's his picture up there on your screen. And two, with respect to numbers, the FY27 guidance at the upper end has been lowered. The new guidance stands at 1.5 to 3%. I think margins have come in line with expectation, approximately 21%.
Just trying to get some more numbers if you have on the revenue. On the whole, it's expected to be a decent quarter for Infosys. The street expectation was for a 1 and a half to 2% constant currency revenue growth. But this is not purely organic. The company had done two acquisitions, Stratus and Optimum. There would be a two-month contribution on account of those acquisitions. So, big breaking news coming through. Okay, we've got the top line. The dollar revenue growth at $5.82 billion has come in lower than expectations. So, it's missed our expectations by nearly 404 million. So, the top line has come in disappointing. EBIT margins remain unchanged in the absence of a wage hike. Margins remain anchored around the 21% pad in the middle of the company's guided band of 20 to 22%. The EBIT is now at 1,163. But as I said, margins have come largely in line. What I'm awaiting is the constant currency revenue growth which will give us an indication on why the company has lowered the upper end of the guidance. Rupee revenues are about 200 crore short of expectations. Rupee numbers for most companies are looking better on the back of the rupee depreciation. Rupee appreciation has been to the tune of about 8-10%. The bottom line at 779.
So these are the numbers that we have. If we could just quickly also read out the statement coming in from the new CEO. I'm honored by the confidence that the board has placed in me. Excited about the opportunity to lead Infosys into the next chapter. I would like to thank Salil for his mentorship, guidance and the countless opportunities for growth. I look forward to collaborating with him for a seamless transition. You know, Infosys begins the next phase from a position of enormous strength with a clearly articulated AI strategy, talent, deep client relationships. Right, you know, I just wanted to, you know, get our viewers up to speed on Ashish Kumar Dash and what we know about him. As you were pointing out, he is a long-term Infosysian. He's been with the company for a while now. What have been some of the previous responsibilities, you know, to take over from Salil especially in the AI era, how much AI related experience does he have?
Well, you know, I'm also trying to, you know, find out. I'm just reading from the website that I can see. But and this is what the website says. Drawing from 30 years of diverse roles and responsibility, Das Dash amalgamates various skills into straddling delivery, operational, and financial excellence. In addition to driving revenue growth, he's also focused on institutionalizing innovation, AI/ML, re-imagination, and the future of work within the teams. So I think, you know, I mean I don't know too much about him. I've not interacted with him, Shireen, but I guess the sense is that, you know, it's just a fresh pair of eyes and hands to lead the companies. It is a challenging era. It is a disruptive era and Nandan Nilkani, if you remember, had articulated that there is a services opportunity. The application layer is still in a very nascent stage and he spoke about a number of, I think 300 to 400 billion by 2030 in the next 5 years. So there is an opportunity and I think now the responsibility rests with Ashish for Infosys to capture that. It's been a difficult, you know, last couple of years for the entire IT industry.
No, it certainly has, but back to the numbers, Reema, you know, and just to look at the internals that we already have with us. Of course you were talking about the guidance but outside of that, what's noteworthy in the numbers?
Well, I don't have the deal wins but let me just quickly recap the numbers that I have. Dollar revenue growth has come in slightly softer than street expectations. The company's topline dollar revenues have gone up by 8%, lower than consensus expectations. Margins at 21% I think have come in line with expectations while the profits for the company I think have slightly come in lower on a quarter-on-quarter basis. So these are the numbers, margins in line, revenue slightly soft and on account of that the company has reduced the upper end of the guided range. It now stands at 1.5 to 3%. Just if you could give me two minutes I will just try and, you know, get some more numbers in from the company. Salil also reads, I have enjoyed leading the company from a $10 billion in revenue to a $20 billion revenue in his two terms. He has established Infosys as a leader in digital transformation. You know, and he looks forward to ensure a seamless transition. Okay. We've got the constant currency revenue growth. Yeah. Go ahead.
And the large deal total contract value at 3.6 billion. AI firms 8.2% of the total revenue. AI, the AI revenue is about 8.2% of the total revenue. And of course, Nandan Nilkani, the chairman, is also going to be addressing the press conference along with Salil Parekh briefly and I would imagine that we may even hear or at least see Ashish Kumar Dash, the Infosys CEO designate, but the press conference is expected to start shortly. 8.2%, 2%, that is the percentage of revenue from AI specifically, Reema.
Well, and it's the first time I think Infosys has articulated or, you know, informed us about the contribution of AI.
Is speaking, Reema.
Okay, so Shireen, as I was saying, for the first time Infosys, like its peers, is talking about the contribution of AI as a percentage of the overall revenues. Broadly for the entire industry it still stands in high single, mid to high single digits but I think the press has begun.
Company from 10 billion to 20 billion, completely did the transformation for the digital era and has started the AI differentiation and transformation but Salil's term comes to an end on March 31st 2027 and Infosys has been looking at his succession and today I'm delighted to tell you that the board has appointed his successor, a new CEO who will take over on April 1st, 2027. He's from Infosys. He's been somebody who is a true blue Infosysian. He has worked in Infosys for 31 years. He's worked in every part of Infosys be it in delivery be it in sales be it in account management starting a new DC in Bhubaneswar, everything and he's someone who I think everybody likes, respects, he's an uncomplicated guy who focuses on what needs to be done. His name is Ashish Dash.
[applause]
So Ashish is based out of LA. He's been there for some time. He will move back to India and he will, in the next 2-3 months, he will get some CEO coaching or whatever and then from October 1st Salil will take him on as his mentee and prepare him for the role so that he can take on this role of managing a complex 20 billion company in a very, you know, transformational time. So I just wanted to let you know that Ashish will be the new CEO and I'd now like to request Salil to say a few words about Ashish.
Thanks Nandan. So first, welcome everyone. This is an incredible time for us as Nandan shared. I've known Dash for a very long time working closely with him. A huge congratulations to him and in making sure everything he does works well into the future. He's had an amazing portfolio the way he's built it, the way he's crafted it in terms of the clients he's worked with, in terms of the people he's worked with and there's a tremendous set of opportunities from that onto the overall company, the learnings from that as we apply to the overall company. Ashish Dash also a very collaborative individual working well with all of the various components within Infosys and having been here for a long time has made sure he's learned everything and also understood how all different parts of the company work. So huge, huge congratulations to him and looking forward to working with him as we do the transition over the next few months.
[applause]
I now invite Jes to join Salil on stage to commence the quarter updates. As always for this section I will request one question from each media house. But with that let me invite Salil for his remarks. Over to you, Salil.
Thanks Rishi and thanks Nandan for that. So good afternoon everyone. Thank you for being here. Our revenue growth for Q1 was at 2.4% year-on-year and 1% quarter-on-quarter in constant currency terms. We had a one-time revenue impact of a client decision during the quarter. Our AI services revenue was 8.2% of overall revenue in Q1. Our large deals 3.66 billion at 61% net new. Operating margin at 21.1%. Free cash flow at $955 million. Earnings per share were up 15% year-on-year in rupee terms. We saw strong acceleration in our AI work as I shared earlier with AI revenues at 8.2%. This is growing at double-digit quarter-on-quarter for the last several quarters. With this momentum, we see long-term relevance of our services for our clients which are all driven through AI. From our delivery team, over 80,000 employees are working on coding tools such as Claude Code or Codex or several others for our clients for our work inside.
We see strong traction across the six areas of growth. The new growth that we see in AI are hexagon for AI strategy. We see client work for example in building agents for processes, work on data modernization and using coding tools. We are building a team of frontier engineers to support our client work. Our plan is to have 6,000 frontier engineers over the next few years. We built a platform Topaz Fabric that enables our clients to get the benefits of AI while keeping the sovereignty of their own data within their company. Our clients are able to work with any foundation model, closed, open weight or on the cloud on their own servers. Our clients are able to optimize token cost which has become very critical now to make sure it's appropriate for the type of work they're doing and not out of hand.
Overall, we continue to see the macro environment remaining uncertain. With our Q1 results and a view for the rest of the financial year, we are changing our revenue growth guidance to 1.5% to 3% year-on-year growth in constant currency terms. Our operating margin guidance remains the same at 20% to 22% operating margin. Thank you and with that let's open it up for questions.
Thank you Salil. We will now open the floor for questions. The first question is from Ritu Singh from CNBC TV18.
Thank you very much. I know you've asked for one question but if I may, Salil, you've given us a big news in this quarter. You know, to begin with, you know, since you speak about how you've brought in and, you know, Mr. Nilkani spoke about how you brought in calmness at a time when, you know, the company was going through quite a bit, even now you're speaking of this global uncertainty because of which you've had to again, you know, pull down your guidance as well. Why decide to leave at a time like now instead of perhaps, you know, looking at an extension? I wanted to understand and with the new CEO coming in, any mandate for the new CEO that you could highlight for us more clearly and perhaps that's something the investors would also want to know. And then on the earnings of course, you know, the reason for this revision down, you know, if you could give us a little more color on what you're seeing in the environment, where's the weakness? Where's momentum picking up? You know, some of your competitors like TechM have been talking about irrational competitive pricing. Wipro's also, you know, spoken about that a bit. So, what are you seeing in the environment? And with a 1% kind of growth in the first quarter, do we assume the second half will be meaningfully better if you to reach that upper end of the 3% guidance you're speaking about? And just on AI if you could update us, you know, how the revenue is moving, is it proceeding as per, you know, what your expectations were, any updates you could share on that front as well as far as revenue contribution from AI is concerned.
So let me start with the first one. I think you've had that question collectively for some time now, we have the answer. As I look at it, I'm really delighted with the role I've played here. We've taken the business as Nandan said from 10 billion to 20 billion. It's working very well, the digital transformation, now the AI transformation is launched. So I'm really delighted, working well with our clients and with an incredible team that we have inside. So that's what I would like to say on the first one. On the second, I think what we are seeing is an environment where a little bit, sort of combining the third piece as well, AI services is growing extremely well. Double digit growth if you look at it like quarter-on-quarter. If you look at it over several quarters in the past, we see that those six areas that we have identified like the process, the agents, the data, the engineering, all of those are working extremely well with our clients. So we are now looking at revenue growth in each of those areas. A pipeline is even larger than the 8% which is the revenue today. So we see good traction in that. Therefore we feel there's a good long-term relevance of our services to our clients because this is going to continue to grow as we look out into the future. Now the question on the guidance, we had a one-time impact that I shared with a client decision. There are factors related to what is going on in the macro environment which we talked about. There are factors related to the volumes in the quarter. But we look at the large deal number 3.6 billion, 61% net new. So we see a lot of support in that. We see I think there are six of those deals which are consolidation deals that we have been the beneficiary in as an example. There are four deals which are just under the $500 million range. So just like a mega deal. So we see, you know, really good traction. The pipeline there is looking good. So all the when we balance, we decided to look at our guidance in a different way. The upper end of the guidance was really based on if the macro was improving. We now see the macro, it may improve but not at the level that we were thinking initially and so that's how we really constructed the guidance but we have tremendous view that this is a good place for Infosys to operate with AI the way it's looking and all of the work that we're doing on large deals gives us continued traction.
None of those questions of, you know, why you didn't decide to stay on and what the mandate was and, you know, if the second half would be better, you know, if you could clarify all of those points.
So there, I think as I shared earlier, you know, my sense is we've had a tremendous, I've been fortunate to have a tremendous sort of opportunity and what we've done at Infosys over the last many years and having taken the business from about 10 billion to 20 billion. So it's been an incredible journey. And that, you know, with the team we have and with the client work we've done, that's been a fantastic sort of an outcome. On the mandate, I think our AI strategy is well put together and Dash has been part of that. So our thinking is, you know, that strategy we want to execute on. Of course there will be some things which we will look at in terms of fine-tuning but that's a natural course of evolution but the strategy is very well in place to make sure that that goes into the next phase, making sure, you know, the partnerships we have with the various models, the Topaz Fabric that we built today on AI, it's important that clients see that their own data remains sovereign to them and the way we build Fabric it allows for the clients to do that no matter which model they're using and so that's a very big differentiator we have. For example in AI, the token cost, you know, that will be an important factor we think in the future and we have built like Fabric in a way that depending on the task you are using the foundation model for it will use a right model so you don't have to pay for the most simple tasks like an expensive token cost and so on. So we think we're in good position in that. In terms of second half, first half, I think we have the guidance for the full year, we expect the normal seasonality that will come, we're not expecting anything unusual there.
On the irrational competitive pricing in the market that, you know, some of your peers have spoken about.
Yeah, so maybe they are seeing that, you should check with them.
Thanks, thanks Ritu. The next question is from Rishabh Shaw from Moneycontrol.
Salil, if you could tell us your biggest achievement and what will you miss the most and what's next coming for you. On the performance, quarterly performance, how has been the TCV conversion because that's a worry that investors have, you know, on. And the second and the third question is two of your peers have highlighted that AI revenue is slightly lumpy and it could be one or two quarters post which you'll have to go and get those fees again. So is that something that Infosys is also seeing? Thank you.
So let me start with the second one. I'll come back to the first. I think the TCV conversion we see a pretty good way of converting. Now what tends to happen is like when you have a consolidation deal the conversion comes a little bit quicker. When you have a transformation deal, it's a little bit sort of spread out, but that's the normal sort of conversion we see. We don't see that it's suddenly changed like in the last quarter, a couple of quarters or so on. Yeah. On the AI revenue, I think it's moving so quickly that it is a bit up and down in a quarter by quarter basis. So our thought is, you know, that's why we're saying like look at over the last several quarters we see that double digit type of growth quarter-on-quarter and we will see sometimes it could be a little bit faster but it's growing nonetheless meaning if you look at the secular trend we see that is pretty strong and that gives us a little bit of the view that long-term, you know, there's a relevance of what we are doing on AI for the clients. For me, I think I'm very focused on, you know, what we have to do here at Infosys. We have a lot of things to get done. I want to make sure we remain in the leadership position. We win in the market. We are leading in AI and I get a smooth transition done. So that's really my focus and after that I'll see what else happens.
Thanks Rishabh. The next question is from Mani Daw from ET Now.
Hello, good afternoon Salil and Jes. Nice talking to you. Salil, my questions are on client spending, large deals and competitive positioning. So, talking about the client spending, client budgets remain selective across industries. Have you started seeing any improvement in discretionary technology spending or are enterprises still prioritizing cost optimization over transformation? Talking about the large deals, Infosys has maintained a healthy large deal pipeline. So how confident are you that these deals will convert into faster revenue growth? Also, every global IT company today is talking about AI. What would you say is Infosys's biggest competitive advantage in this AI/ML technology cycle? And please start with this one. Which moment during your tenure best reflects the values and culture of Infosys? Thank you.
Okay, there was a few. So I'll start with the first was a conversion of the TCV discussion. I think we see that, you know, the large deals we see a good traction of those. The values over the last few quarters have been strong. This quarter was pretty good. We see the pipeline to be pretty good on the large deals and we feel there's a benefit of the consolidation that we are seeing in some of the large deals which is definitely helping us as we go through it. The conversion whether it's faster or slower it's more I think it's at the same type of a level and we will convert those into revenue with 61% net new it already looks pretty strong in terms of the net new work which we'll see and obviously the renewals are going pretty okay as well there. On AI, I think there's a huge differentiation that I find from what we are sort of working on. First we have a very clear AI strategy with the six areas of focus. We are investing in it. We've actually taken and Jes has shared in the past, he'll share also today, the we invested in building out AI capability. We have as I shared earlier 8% revenue growing double digit Q-on-Q over the last several quarters. We have a good pipeline in that area. Then you look at some of the stats. We have 80,000 people working on the tools today for client work. It's not just training and so on. Then what we built with Fabric I feel is very differentiated because it allows clients to maintain control of their data, maintain control of what they want to do with the AI and still use the different models, use lower cost. We have a harness through which they can leverage what they want to achieve with the foundation model. So that is a significant move up in terms of differentiation that we've seen. I think in terms of values, you know, my sense has always been in Infosys is has incredible values and it's really been sort of a privilege to be associated with that and learn from it and contribute to it. So in many ways it's a great, great sort of fortunate thing that that could happen in the way that it has happened.
Thank you.
Okay, that is the Infosys press conference and you know it's more than a CEO change. A CEO succession plan is important because Salil's term was coming to an end in March 2027 and there was a lot of speculation that after two terms will he get an extension. So the fact that there is clarity and the new CEO designate Ashish Kumar Dash has a good nine months to step into the role, get mentored by Salil is good. But you know if you read the language that you from the, you know, from the board or from Nandan Nilkani it does appear that this is a succession to position the company for an AI era and this is what the press release reads. The board thinks he is uniquely positioned to lead Infosys through its next phase of AI/ML transformation while building on the company's enduring strength. Nandan says the board was clear that our next CEO needed to combine the ability to drive bold transformation. So Ashish Kumar Dash is who Infosys has selected. He's a blue-blooded Infosysian. He spent more than 30 years in the company and he's got diverse experiences over the last three decades. He's been a part of various industries from delivery to operations and he's also been a part of the companies and articulating the company's AI strategy. So he's been, you know, he's got the responsibility to lead the company in this next phase of AI, you know, transformation while keeping the continuity alive.
Did a like a one day session sharing with them what the latest developments were in overall and also in the AI GCC. So our traction on GCC is looking very strong. We don't like externally share the milestone but our revenue growth is good. Our work with them is good. In the GCC there's always a life cycle. So there are some which are expanding well and there are some in the past where they have exited and we've sometimes participated in that and so on and that continues but the overall GCC like work both within the GCC and like the work we are doing with them I think both are growing pretty nicely.
I had two questions, sir. When do you think, you know, AI/ML revenues will be material enough to offset productivity compression that customers are seeing in the market?
So I think my sense is the AI/ML revenues are extremely significant at 8% already and if you look at the growth trajectory and if we execute on that well and the growth trajectory continues we can see now a long-term relevance of AI revenues to our clients from what we are doing. The productivity will also continue but I think it's both of those things because like when we share our strategy and that hexagon and we had outlined like a $300 billion market opportunity addressable market. So that's all new revenue and also the productivity will happen but the significance I think already we can start to see and if I can just add, if you look at when we launched our hexagon in February of this year our AI revenue for Q3 was 5.5% of our revenue. Today it's already at 8.2%. So it's already significant. It's growing at a very fast double digit over double digit growth right and at that pace it is already becoming a growth engine in a way. So that accelerates, it's becoming, you know, a long-term play in the way.
But this is not reclassification in any form, right?
Okay, okay. One last thing, sir, on the status of hikes, you know, Infosys has not called that out yet so where are you on that and secondly also on forward deployed engineers, there's a lot of talk in the tech ecosystem about this but how difficult is it for a services company to, you know, sort of plug FDEs into the existing workflows? There are several challenges that companies are facing.
Let me start with the second one. We'll come back to the first. On frontier engineers, we have now have a very good plan which has been put in place some time ago to scale that up. We have a lot of capability within Infosys which are doing similar work. We are making sure that it works in the way that the frontier engineer needs to work with clients. Today we've set the objective of 6,000 to make sure that the teams can work with different clients to make the impact. We feel we have a good understanding of how that works because the capabilities really the engineering plus the business context and that's something that Infosys was good at even before the AI like wave of work had started and so we are making sure that that becomes very much part of the future in that. On the compensation increases, we will roll out our compensation increases in October and January in two parts and that's part of something internal that we have announced now.
Yeah. With most of the employees getting increase in October and the senior employees will get it in January.
Thanks Shilpa. The next question is from Avi Das from Business Standard.
Salil, good afternoon. Just three quick questions and one for Jes. You talked about how the macro perhaps hasn't sort of improved over the last 3 months that you perhaps would have wanted to. Just wanted to understand which are some of those parts of the macro that led you to first to increase it between 1 and a half to three and a half now you sort of cut it down to three so which are some of those areas which did not really work according to your expectations. Number two is that would Infy ever at all, at least in the near future would you want the company to move into the AI infrastructure business, data centers, something that HCL and TCS has already done. And the last question is what would you classify at least in your tenure as the most challenging period? Was it the COVID or was it the or is it the AI/ML transformation for Infosys? And Jes one question on the margins, once you obviously roll out the hikes and with the growth projections sort of tapered now do you think you would be able to maintain the 20 to 22% band at least for this year? Just wanted to know that. Thank you.
Let me start off on the first one. I think a little bit later Jes can also add a bit of color. I think on the macro it's more I mean what we see in the environment, you know, we had a sense that the macro was settling down so we had a guidance where the upper end looked at maybe things, you know, would settle down in the second half. Things are a little bit more uneven but at the same time it's not, you know, it could easily stabilize over time. So we've kept the option and we always have that ability because tech spending, discretionary spending can also come back if that happens. So we are not meaning we are sharing more what we see today as opposed to like a prediction of what is going to happen exactly in a certain time frame. On the data center piece, so in fact we've internally reviewed what we want to do in terms of our balance sheet. We've had a discussion with the management team and also with our board and we have decided to not do anything in that space at this stage. What was the third? I think, you know, my focus in that is making sure that we are very much focused today on what we need to do for this part of the work that I have to finish. I'm very much sort of enjoying that and we'll come to that at the right time in terms of what was in terms of the tenure and so on. On the margin, Jes will have it but we will hold the guidance.
So at this point in time we have given a guidance of 20 to 22%. If you look at our first quarter we are at 21.1%. Right? If you look at puts and takes of where we are the currency will be a tailwind, you know, at least where we see today. Project Maximus is working well. If you look at last 3 year period, we have been consistently able to hold or improve our margins despite investments in business whether it is AI, whether it is talent or whether it is sales and marketing and we believe the project will continue to deliver value from pricing from, you know, utilization etc. So that given of course we'll have headwind coming from, you know, the compensation in the second half of the year but we are very confident at this point in time of the guidance band that we have given.
Thank you Avi. The next question is from Haripriya Suresh from Reuters.
Good evening gentlemen. One is I wanted to get some color on each of the verticals as well within financial services. Retail has seen some sort of hit this quarter as well. You know, and some of your peers have called out some percentage of AI deflation in their portfolio. I mean obviously that's growth coming from AI but also existing portfolio sees some sort of deflation. If there's any number you can provide for that and also on is outcome based pricing becoming a larger part of your portfolio and are there certain deals that are tend to see more outcome based pricing than others if there's any kind of quantification you could do that that'll be very helpful.
I'll start on the industries, Jes will add a little bit and then let me address the other one which is on what we see on the outcome based pricing and the compression piece that you mentioned on the indices. What we see right now is for example financial services we see the growth in that part of our business will be higher than the average growth within the company like in energy utilities part of our business we will see something similar. We still see for example in retail some constraints in terms of the growth and we are not yet seeing the pickup in that and there might be other things that Jes will add. On the compression we absolutely had said in the past we do see that in some places across our portfolio but we've not externally quantified that compression at this stage. Was there anything else?
On outcome based pricing? We see clients have a stronger interest in that but typically it's not so much that it's become a large part of our activity but there is definitely more discussions on it and typically when the investment needs are heavy for transformation it becomes more part of that discussion but it's not that we are like shifting massively to it but there is definitely more discussion on it.
Kind of that tend to have.
There is no particular type. It's more I think a function of are the clients going through a transformation and is there a need for some, you know, upfront investment which can then translate into a transformation and then the outcome gives a benefit of that transformation.
Thanks Haripriya. The next question is from, sorry.
So just to add to what Salil was saying on segments, you know, financial services and sure both is going to both we expect to deliver higher than the company average going forward or for the rest of the year. Manufacturing while we had an impact coming from one of the clients which we had called out last quarter as well. Despite that manufacturing has grown very well at, you know, what close to 1 and a half% or slightly over 1 and a half%. So I think that's commendable considering the headwind that the sector has seen. Life sciences we will see benefit coming on back of the acquisition in healthcare and life sciences. The only two segments that continue to see challenges is communication and retail from that perspective and just to add on the outcome based pricing that's one of the specific tracks within Project Maximus as well. So there is a leader at the organization level who is working with all the segments and driving outcome based pricing, you know, and we have a very specific focus on that.
Thanks Haripriya. The next question is from Bina Parmar from the Economic Times.
Just a bit on the consolidation deals, the six consolidation deals, which spaces are these in and how many of these are large deals and secondly, you know, Infosys has lost some of the existing renewals. You know, at least three in the know. What are the factors that led to that? What are your, you know, reasons on the guidance also if you could just extend a little bit on the color on why really, you know, the upper limit was reduced. Do you see macroeconomic environment further worsening or, you know, do you see that conversations have been a little different from last quarter? You know, are you still looking at acquisitions and investments and which spaces will these be in and lastly, what next for Salil Parekh?
So on the first one I think the consolidation deals, the ones I was referring to all in the large deal. So is those are not the ones we only saying like within the large deal we see those many consolidation deals. We're not specifying like in which areas but these are typically, you know, in the bigger industries that we operate in and there's big companies who are looking to consolidate across partners and that's where we've seen it but we're not specifying like which one where we see that. What was the other one, sorry?
Yeah, so we don't comment in any specific deals in the environment. In any case, however, we are quite clear that our focus overall is to make sure that we working with clients on projects and contracts that make economic sense to us. But no, no specific comment beyond that.
So, no, no, no other specific comment beyond that. We want to make sure that, you know, economically it makes sense to us in some of these situations as well.
The guidance I'll also request Jes, I've also said a few things but he'll add to it. What we see is given where we were in Q1 with the outcome that we had with one of the delivery client decisions that I shared, we want to make sure that we have a guidance that reflects all of that and then looking at the changes is whether it's in volumes, whether it's in some level of pricing mix, that's how we've built the guidance. As we go through the year, we typically reduce the band as well. So instead of two points, it's now like a one and a half point band as we go through the quarters and that's how we build the guidance. Jes will add to it to your other question. I think for me really the attention is on what we're driving through for this year. Making sure that we continue to lead in AI, making sure that we continue to win market share. And making sure that we have an absolutely smooth transition. I very much enjoy what I'm doing. And I'm sure once all of this is done I'll have time to focus on what's next.
Acquisitions. We are continuing to look at it. Acquisitions, we have a good pipeline in that. We did the acquisition on health, life sciences, healthcare. We did the acquisition on insurance. We have other areas that we have an interest in. So we have a view in geography that we're looking at some geographies where we could do more work and those are good geographies. We could do more in some of the other industries as well. For example, we've seen good, we're not doing anything but we've seen that there could be things we could do in telco and financial services a little bit more in healthcare. There are areas that we could do which are more service line oriented. We think there's good traction in where AI can be leveraged into processes and agent building. So, but there's a pipeline and we will continue with the acquisitions.
Yeah. Just to add to what Salil was saying and I'll come to guidance in a bit. On the consolidation deal of the six deals that we have won, it's a $700 million of net new business that we have won. So we have seen positive impact coming out of the consolidation deal and we have been on the positive side of the market share. On the guidance, you know, whatever happens in Q1 typically has a cascading impact on the whole year. While we will see benefit coming out of the acquisition that we completed in Q1, the one-off impact that we had in Q1, the softer than expected volume and price that we got in Q1 will have a cascading effect on the rest of the year in terms of guidance in terms of the large deal that we talked about with the European client where we decided to not bid beyond a point because it did not make commercial sense or economic sense as Salil said that will have an additional impact in Q4 as the deal comes to a closure in December. So that is also baked in in a guidance and if you compare to last year we have additional headwinds coming from, you know, the lower on-site mix as I called out in the last quarter because of our conscious decision of de-risking our business model, the deal that we lost in the last quarter, you know, from the same European manufacturing client and that impact which was baked in the original guidance as well. All of this cumulatively results in a guidance. There are multiple models that lead to the lower end at the upper end of the guidance. And that's how the guidance is baked in.
Thank you. The next question is from Sanjana from the Hindu Business Line.
Good evening gentlemen. Just two questions. Coming to rupee depreciation, how much of a tailwind has that provided to your margins, you know, in Q1 or going ahead how do you see that panning out and the other one is how is AI improving or what kind of impact does it have on your employee productivity and how is this affecting the revenue per employee metric. Just these two questions. Thank you.
I'll start on the second one and Jes will come on the first. So we have seen, if you look at not this quarter but the previous several quarters we've had a good improvement in productivity, revenue productivity and we generally speaking see overall that there is a benefit from that productivity coming. Having said that we are recruiting, we have recruited last year 20,000 college graduates. This year we have a plan to recruit 20,000 college graduates. We've already done over 4,000 in the first quarter but equally we see that there is a productivity benefit that will continue to come through. Then of course you also have pricing issues within the market. So those sometimes balance out. But if I look back not this quarter but the previous several quarters we've seen a continuous sort of expansion of that.
And on rupee appreciation, you know, every 1% change in the currency or depreciation and dollar typically gives you anywhere between 15 to 17 basis points on margin. But the important thing to note also is whenever dollar appreciates against rupee it generally appreciates against most other currency also and we have roughly 45% of revenue coming from non-US geography and, you know, that kind of offsets some part of the rupee depreciation benefit.
Thank you. Next question is from Umar Kanan from Deccan Herald.
Good evening gentlemen. With the rise in security incidents around autonomous AI agents and recent breach at model hosting platform, it's about OpenAI hack, how are you updating your approach to safety and security? Just adding on to it, using cross-domain network is it not a risk for your client database as AI tools will have full access to it and also tell us about the guardrails you have put in place for AI systems.
So on the cyber, I think what we have done is made sure that for example when there was a whole discussion some time ago with Mythos, we had worked with the previous model OPUS 4.7, made sure that we got an understanding of some of the security protocols beyond that and built an approach that enabled our clients to have an understanding of the vulnerability and how to protect against it. That's some work that we are doing with several clients. So our approach across cyber encompasses that related to the point that you made. I think each client environment has to have that sort of a cyber defense built and we have a way to support our clients when we work with them on the cyber area beyond working just on the foundation model area. Our own approach to cyber within Infosys incorporates that as well and then that translates to like when we do work for our clients or when we do work for our clients through security operations centers and so on. So that's broadly the approach we have.
So just one more question, you spoke about acquisition plans. One of your peers has invested in Indian AI firm. So do you have plans to invest, you know, especially in Indian AI firms?
So we generally speaking have a view on what we have like innovation fund which invests in companies which are in very early stage and where we don't have essentially majority interest. We have a small minority interest in that more from the perspective of seeing if that early or new technology can be deployed across our client base or can be leveraged in some way. So that's like the way the innovation fund is working and we have several investments into that over the past years, a lot into data and analytics but now in many other technologies. So in that light we will look at all opportunities that are there without, you know, specifically saying yes or no to what you're suggesting but in that broad context of the innovation fund we'll look at it.
Thanks. The next question is from Rohit Chintapali from Business World.
Hi Salil, give us an idea about the large deal TCV was about $3.66 billion with 61% net new. How much of this pipeline was tied to agentic AI and Topaz and the second part of the question is how what's the typical time lag when it comes to converting this TCV signing to kind of, you know, AI deals, the recognition of these AI deals.
So what has happened today with clients discussions is almost every discussion has some element of AI and of Topaz Fabric because Topaz Fabric is like a foundational thing many clients come use it here experiment with.
It and are using it, and we use Topaz across all of the work we're doing. So it's not like the total TCB is for AI, but it is without that you are not able, we are not able to participate because that's integral to the work that we're doing. The conversion is the same in the sense of when the deals are signed, typically depending on the type of deals. If there are deals where have some level of transfer consolidation, that ramp up pretty quickly. If there are some deals which have a transformation, then that activity starts and then the deal ramp. So it's not like one thing for all the deals. But it's the similar thing of what we have seen over the past several quarters. It's not like suddenly the TCB has come and then the ramp up has not happened for a long period and so on.
Also, on the transition, of course, does this transition, is it all about strategic continuity? How should investors kind of read into it? What do you want to see?
So, you know, we have a well-defined AI strategy today. We've looked at like the hexagon with the six areas of the addressable market. We are seeing good growth, the 8% of our revenue, the double-digit quarter-on-quarter growth. So that's the strategy we will continue with as we go through into the next phase. And then, of course, I'll work with Dash very closely on the transition as well.
Thanks, Rohit. The next question is from Polyommy Chaty from Financial Express.
Good evening. Just a couple of questions. I mean, you mentioned just now that the new kinds of AI deals are also a mix of the more traditional ones and pure play AI. How do you see the margins of these new buckets of AI deals essentially evolving? And also, I'm curious, I mean, Infosys had offerings for small language models, specialized models in banking and IT ops, I think. Like, do you see, how is demand for these models and has there been an uptick, especially since, you know, enterprises are moving more towards a more mixed model kind of?
Absolutely. I think that's exactly what we are seeing. For the small language model for the banking is getting good traction. It's based also on a Finacle product set. So a lot of the clients there, it's an easy way to leverage a small language model and the parameter set is smaller. The cost of running it is smaller, the token usage is more efficient and so on. The same for the IT ops. So that's all part of that scaling. On the AI deals itself, we don't comment separately on the margin in terms of the quantitative value, but we are quite comfortable with the margin we are seeing.
Thank you. The next question is from Jaspya from Mint.
Good evening. So in response to a previous question on the mandate for the new CEO designate, you said there were some things that you would fine-tune. Could you just shed some more light on what these things would be? Second, amid all this talk of rising data center demand and, you know, slowdown in mainframe modernization, are you seeing clients spend more on memory chips, GPU? And if yes, are you seeing that lead to some sort of a slowdown in the traditional infra management work? If I may squeeze a third question in, when it comes to deals and, you know, the demand environment, are you seeing AI kind of make the market a little more competitive between the midcaps and the large cap such as yourself?
So on the first one, let me say this. I think our AI strategy is well defined. We are focused on the six areas and that will continue. We see good traction in that, we see good growth in that. It's now becoming a large part of our revenue with 8% and so that will continue and that is the driving part of it. The approach that we will take is always look at what's going on in the environment. We see for example today there's a tremendous attention to token cost. There's a tremendous attention to ensuring there's a sovereignty of data within a client environment. But the overall strategy remains the same. Those sorts of things we will evolve as we go along.
On the related to the infra environment, the costs as you mentioned of memory chips and so on. I think in general these are all areas whether it's infra or other areas where there's always a need for efficiency and that is the overarching theme that we see. Whether there's productivity improvements, a lot of our large deals look at cost and so on and that's primarily the environment that we are in. Having said that, we are still seeing tremendous growth both that I shared earlier in AI which is absolutely new things that we are driving toward.
There's a question on deals and demand environment.
Competitor.
I mean, we see a few companies where we compete, you know, given our client base, and those are the ones that we look at. Our sort of essential differentiator on AI that I shared earlier, but also on the quality of delivery and the depth of delivery is massive and it's at least in my view very difficult for too many, if any, company to really match up with that.
Thank you, Jess. The next question is from Rrookmini Ra from Fortune India.
Thanks, Rashi Sal. Given that if you're looking at Microsoft which recently launched their frontier company and then Anthropic, looking at, you know, with big tech getting into AI services space, are they going to be competitors where probably you and your peers may at someday become just vendors, you know, giving in your engineers who, given that partnership that you have with many of them where you're training lakhs of people on these models, right? Is, I mean, will IT companies end up, Indian IT companies end up becoming subcontractors at the end of the day if these guys get into the game? Two, is that going to, if that happens, will that rob you from say the bigger opportunities that all of you have been talking about in the AI space, that, you know, the massive opportunity that all of you think is going to be, but if the big boys get into this entire services space, is the future opportunity that you're talking about getting squeezed? And second one, in conjunction with, you know, all the problems with in terms of the cyber security part of these LLM models, right? When large corporations are looking at their own agentic environment, are, given your conversations with clients, are large companies okay to have be under the umbrella of just one ecosystem, let's say just a cloud enterprise kind of adoption which we saw. I mean, what happened with SaaS, given the problems that is with these LLMs, will there ever be like an entire, let's say a co-pilot environment in which any enterprise would be okay to work or just an OpenAI sort of environment given, you know, the cyber security problems that are cropping up at very nascent stage of the adoption. Thank you.
So first, on the first one, I think if there are companies that want to enter the services space so that AI can be made to work, it is actually a huge positive for Infosys because that means that what we do will continue to be done because that's what we do every day. Our job is to make AI work as services for clients. It now so happens that we have over 300,000 people doing that. We work with some 1,800 clients. So the scale, the context that we have with our clients is completely different. So to me, it's a huge positive. Of course, we are happy to work with other companies, partner with them. That goes on in many different ways across time. But the first big thing for me is at least if someone new is entering services means there's a very good future for services that they can see and therefore we can see.
On the cyber, I think absolutely, not just cyber actually, the data part also. So many large companies and clients want to be mindful of how they look at what is happening with their own data. Or even beyond that, what is the essence of the company, you know, how they making sure it just doesn't go outside and they lose some of the competitive differentiation. So one of the things we've done in Fabric, Topaz Fabric, is enable the large company client to keep that within themselves. It's not even with us in that sense, Topaz Fabric is not with the model, the foundation model company. So that allows them to keep what is essential for them with themselves and that to me is a huge differentiator for us and I think may become even more and more important as time goes on.
So just to sort of, you know, clarify, when you say great opportunity, is it like again the whole subcontracting vendor kind of opportunity that you're talking about or, you know, virgin probably big contracts that a Microsoft would end up winning if they are an AI services company and you end up getting like a chunk of it and everybody else goes about the same way now, you know, and then, you know, vendor consolidation deal coming in about 5 years later, is that what you say when you're saying that you're optimistic about the opportunity?
No, no. I'm more looking at it like if someone with a few hundred people or a few thousand people can get excited about services, we with 300,000 people would be very excited about services.
Microsoft would be building also able to scale that they can do.
So my sense is like where we have an understanding of a client and the context of that client, I think we are extremely well positioned in those places. I would say better than maybe anyone else.
Thank you.
Thank you. With that we come to the end of this press conference. We thank our friends from media. Thank you, Salil, and thank you, Jish. Before we conclude, please note that the archived webcast of this press conference will be available on the Infosys website and on our YouTube channel later today. Thank you and please join us for height outside.
Infosys out with its numbers. But before the numbers, the big story coming in there. The board has approved a new CEO to take over from Salil Parekh when his term ends in 2027. Ashish Kumar Dash, that is who the board has proposed and approved as the next CEO of Infosys. Let's go across to Reema now. She's standing by. Reema, of course, we'll take stock of the earnings, but this is a surprise. Salil still has till 2027, but Infosys is clearly putting a succession plan well in place. Ashish Kumar Dash, the chief executive officer designate of the company until the 31st of March 2027.
Well, indeed, this is very, very big news coming out of Infosys. Salil Parekh has already served two terms as the Infosys CEO. He took charge in, I think, 2017 or 2018. So after two terms, there is a succession plan announced and Ashish Kumar Dash, or Dash, we're just reading the website, he is an Infosys veteran, three decades at the company. He's held multiple leadership roles across delivery, operations, consulting, transformation, and I think most recently he serves as the executive vice president and global head of services, utilities, resources, energy, and enterprise sustainability. So he's led a portfolio which spans more than 12 industry verticals. And I think what also stands out, you know, he's done a lot of work on AI/ML transformation. So he has been driving Infosys's strategy around AI adoption, innovation, future of work. So, you know, there was a lot of speculation in the market on whether Salil Parekh will get a third term or they will look at someone with, you know, a fresh approach to leading the company in this Infosys era. And Salil Kumar, after two terms, will no longer be the CEO and this is big, big management change coming through. Ashish Kumar Dash, and he is going to be an Infosys veteran, so no outsider, it is going to be an internal person who will be taking charge as Infosys. We are also awaiting the numbers. Okay, the other important headline is that Infosys FY27 guidance has been revised lower at the upper end. The current guidance is 1.5 to 3.5%, the company's new guidance stands at 1.5 to 3%, which means the upper end of the FY27 guidance has been lowered. This will not come as a surprise. Many believe that given the fact that the company has lost out on the Daimler contract to competitors, so the manufacturing sector has been under pressure. It was difficult for the company to achieve the upper end. So two big headlines as of now coming through. One, new CEO announced, he only takes charge once Salil Parekh's term comes to an end officially from 1st of April 2027. That's his picture up there on your screen. And two, with respect to numbers, the FY27 guidance at the upper end has been lowered. The new guidance stands at 1.5 to 3%. I think margins have come in line with expectation, approximately 21%. Just trying to get some more numbers if you have on the revenue. On the whole, it's expected to be a decent quarter for Infosys. The street expectation was for a 1.5 to 2% constant currency revenue growth. But this is not purely organic. The company had done two acquisitions, Stratus and Optimum. There would be a two-month contribution on account of those acquisitions. So, big breaking news coming through. Okay, we've got the top line. The dollar revenue growth at 5,082 has come in lower than expectations. So, it's missed our expectations by nearly 404 million. So, the top line has come in disappointing. EBIT margins remain unchanged in the absence of a wage hike. Margins remain anchored around the 21% band in the middle of the company's guided band of 20 to 22%. The EBIT is now at 1,163. But as I said, margins have come largely in line. What I'm awaiting is the constant currency revenue growth which will give us an indication on why the company has lowered the upper end of the guidance. Rupee revenues are about 200 cr short of expectations. Rupee numbers for most companies are looking better on the back of the rupee depreciation. Rupee depreciation has been to the tune of about 8-10%. The bottom line at 779. So these are the numbers that we have. If we could just quickly also read out the statement coming in from the new CEO. I'm honored by the confidence that the board has placed in me. Excited about the opportunity to lead Infosys into the next chapter. I would like to thank Salil for his mentorship, guidance, and the countless opportunities for growth. I look forward to collaborating with him for a seamless transition. You know, Infosys begins the next phase from a position of enormous strength with a clearly articulated AI strategy, talent, deep client relationships. Right, I just wanted to, you know, get our viewers up to speed on Ashish Kumar Dash and what we know about him. As you were pointing out, he is a long-term Infosysian. He's been with the company for a while now. What have been some of the previous responsibilities, you know, to take over from Salil especially in the AI era. How much AI related experience does he have?
Well, you know, I'm also trying to, you know, find out. I'm just reading from the website that I can see. But and this is what the website says. Drawing from 30 years of diverse roles and responsibility, Dash amalgamates various skills into straddling delivery, operational, and financial excellence. In addition to driving revenue growth, he's also focused on institutionalizing innovation, AI/ML, re-imagination, and the future of work within the teams. So I think, you know, I mean, I don't know too much about him. I've not interacted with him, Shireen, but I guess the sense is that, you know, it's just a fresh pair of eyes and hands to lead the company. It is a challenging era. It is a disruptive era and Nandan Nilekani, if you remember, had articulated that there is a services opportunity. The application layer is still in a very nascent stage and he spoke about a number of, I think, 300 to 400 billion by 2030 in the next 5 years. So there is that opportunity and I think now the responsibility rests with Ashish for Infosys to capture that. It's been a difficult, you know, last couple of years for the entire IT industry.
No, it certainly has. But back to the numbers, Reema, you know, and just to look at the internals that we already have with us, of course, you were talking about the guidance, but outside of that, what's noteworthy in the numbers?
Well, I don't have the deal wins, but let me just quickly recap the numbers that I have. Dollar revenue growth has come in slightly softer than street expectations. The company's top line dollar revenues have gone up by 8%, lower than consensus expectations. Margins at 21%, I think, have come in line with expectations, while the profits for the company, I think, have slightly come in lower on a quarter-on-quarter basis. So these are the numbers, margins in line, revenue slightly soft, and on account of that, the company has reduced the upper end of the guided range. It now stands at 1.5 to 3%. Just if you could give me two minutes, I will just try and, you know, get some more numbers in from the company. Salil also reads, I have enjoyed leading the company from a $10 billion in revenue to a $20 billion revenue in his two terms. He has established Infosys as a leader in digital transformation. You know, and he looks forward to ensure a seamless transition. Okay. We've got the constant currency revenue growth. Yeah. Go ahead.
And the large deal total contract value at 3.6 billion. AI firms 8.2% of the total revenue. AI, the AI revenue is about 8.2% of the total revenue. And of course, Nandan Nilekani, the chairman, is also going to be addressing the press conference along with Salil Parekh briefly and I would imagine that we may even hear or at least see Ashish Kumar Dash, the Infosys CEO designate, but the press conference is expected to start shortly. 8.2%, that is the percentage of revenue from AI specifically, Reema.
Well, and it's the first time, I think, Infosys has articulated or, you know, informed us about the contribution of AI.
Is speaking, Reema.
Okay, so Shireen, as I was saying, for the first time, Infosys, like its peers, is talking about the contribution of AI as a percentage of the overall revenues. Broadly for the entire industry, it still stands in high single, mid to high single digits, but I think the press has begun.
From 10 billion to 20 billion, completely did the transformation for the digital era and has started the AI differentiation and transformation. But Salil's term comes to an end on March 31st, 2027. And Infosys has been looking at his succession. And today I'm delighted to tell you that the board has appointed his successor, a new CEO who will take over on April 1st, 2027. He's from Infosys. He's been somebody who is a true blue Infosysian. He has worked in Infosys for 31 years. He's worked in every part of Infosys, be it in delivery, be it in sales, be it in account management, starting a new DC in Bhubaneswar, everything. And he's someone who I think everybody likes, respects, he's an uncomplicated guy who focuses on what needs to be done. His name is Ashish Dash.
So Ashish is based out of LA. He's been there for some time. He will move back to India and he will, in the next 2-3 months, he will get some CEO coaching or whatever and then from October 1st, Salil will take him on as his mentee and prepare him for the role so that he can take on this role of managing a complex 20 billion company in a very, you know, transformational time. So I just wanted to let you know that Ashish will be the new CEO and I'd now like to request Salil to say a few words about Ashish. Thanks, Nandan.
So first, welcome everyone. This is an incredible time for us as Nandan shared. I've known Dash for a very long time, working closely with him. A huge congratulations to him and in making sure everything he does works well into the future. He's had an amazing portfolio, the way he's built it, the way he's crafted it in terms of the clients he's worked with, in terms of the people he's worked with and there's a tremendous set of opportunities from that onto the overall company, the learnings from that as we apply to the overall company. Ashish Dash, also a very collaborative individual, working well with all of the various components within Infosys and having been here for a long time, has made sure he's learned everything and also understood how all different parts of the company work. So huge, huge congratulations to him and looking forward to working with him as we do the transition over the next few months.
I now invite Jish to join Salil on stage to commence the quarter updates. As always for this section, I will request one question from each media house. But with that, let me invite Salil for his remarks. Over to you, Salil.
Thanks, Rishi, and thanks, Nandan, for that. So good afternoon, everyone. Thank you for being here. Our revenue growth for Q1 was at 2.4% year-on-year and 1% quarter-on-quarter in constant currency terms. We had a one-time revenue impact of a client decision during the quarter. Our AI services revenue was 8.2% of overall revenue in Q1. Our large deals, 3.6 billion at 61% net new. Operating margin at 21.1%. Free cash flow at $955 million. Earnings per share were up 15% year-on-year in rupee terms. We saw strong acceleration in our AI work as I shared earlier with AI revenues at 8.2%. This is growing at double-digit quarter-on-quarter for the last several quarters. With this momentum, we see long-term relevance of our services for our clients which are all driven through AI. From our delivery team, over 80,000 employees are working on coding tools such as Claude Code or Codex or several others for our clients, for our work inside.
We see strong traction across the six areas of growth. The new growth that we see in AI are hexagon for AI strategy. We see client work, for example, in building agents for processes, work on data modernization, and using coding tools. We are building a team of frontier engineers to support our client work. Our plan is to have 6,000 frontier engineers over the next few years. We built a platform, Topaz Fabric, that enables our clients to get the benefits of AI while keeping the sovereignty of their own data within their company. Our clients are able to work with any foundation model, closed, open weight, or on the cloud, on their own servers. Our clients are able to optimize token cost, which has become very critical now to make sure it's appropriate for the type of work they're doing and not out of hand.
Overall, we continue to see the macro environment remaining uncertain. With our Q1 results and a view for the rest of the financial year, we are changing our revenue growth guidance to 1.5% to 3% year-on-year growth in constant currency terms. Our operating margin guidance remains the same at 20% to 22% operating margin. Thank you, and with that, let's open it up for questions.
Thank you, Salil. We will now open the floor for questions. The first question is from Ritu Singh from CNBC TV18.
Thank you very much. I know you've asked for one question, but if I may, Salil, you've given us a big news in this quarter. To begin with, you know, since you speak about how you've brought in, and, you know, Mr. Nilekani spoke about how you brought in calmness at a time when, you know, the company was going through quite a bit, even now you're speaking of this global uncertainty because of which you've had to again, you know, pull down your guidance as well. Why decide to leave at a time like now instead of perhaps, you know, looking at an extension? I wanted to understand. And with the new CEO coming in, any mandate for the new CEO that you could highlight for us more clearly and perhaps that's something the investors would also want to know. And then on the earnings, of course, you know, the reason for this revision down, you know, if you could give us a little more color on what you're seeing in the environment, where's the weakness? Where's momentum picking up? You know, some of your competitors like TechM have been talking about irrational competitive pricing. Wipro's also, you know, spoken about that a bit. So, what are you seeing in the environment? And with a 1% kind of growth in the first quarter, do we assume the second half will be meaningfully better if you're to reach that upper end of the 3% guidance you're speaking about? And just on AI, if you could update us, you know, how the revenue is moving, is it proceeding as per, you know, what your expectations were, any updates you could share on that front as well as far as revenue contribution from AI is concerned.
So let me start with the first one. I think you've had that question collectively for some time now, we have the answer. As I look at it, I'm really delighted with the role I've played here. We've taken the business as Nandan said from 10 billion to 20 billion. It's working very well, the digital transformation, now the AI transformation is launched. So I'm really delighted, working well with our clients and with an incredible team that we have inside. So that's what I would like to say on the first one. On the second, I think what we are seeing is an environment where a little bit, sort of combining the third piece as well, AI services is growing extremely well. Double-digit growth if you look at it like quarter-on-quarter. If you look at it over several quarters in the past, we see that those six areas that we have identified, like the process, the agents, the data, the engineering, all of those are working extremely well with our clients. So we are now looking at revenue growth in each of those areas. The pipeline is even larger than the 8% which is the revenue today. So we see good traction in that. Therefore we feel there's a good long-term relevance of our services to our clients because this is going to continue to grow as we look out into the future.
Now the question on the guidance, we had a one-time impact that I shared with a client decision. There are factors related to what is going on in the macro environment which we talked about. There are factors related to the volumes in the quarter. But we look at the large deal number, 3.6 billion, 61% net new. So we see a lot of support in that. We see, I think, there are six of those deals which are consolidation deals that we have been the beneficiary in, as an example. There are four deals which are just under the $500 million range. So just like a mega deal. So we see, you know, really good traction. The pipeline there is looking good. So when we balance, we decided to look at our guidance in a different way. The upper end of the guidance was really based on if the macro was improving. We now see the macro, it may improve but not at the level that we were thinking initially and so that's how we really constructed the guidance. But we have tremendous view that this is a good place for Infosys to operate with AI the way it's looking and all of the work that we're doing on large deals gives us continued traction.
None of those questions of, you know, why you didn't decide to stay on and what the mandate was and, you know, if the second half would be better, you know, if you could clarify all of those points.
So there, I think as I shared earlier, you know, my sense is we've had a tremendous, I've been fortunate to have a tremendous sort of opportunity and what we've done at Infosys over the last many years and having taken the business from about 10 billion to 20 billion. So it's been an incredible journey. And that, you know, with the team we have and with the client work we've done, that's been a fantastic sort of an outcome. On the mandate, I think our AI strategy is well put together and Dash has been part of that. So our thinking is, you know, that strategy we want to execute on. Of course there will be some things which we will look at in terms of fine-tuning but that's a natural course of evolution but the strategy is very well in place to make sure that that goes into the next phase, making sure, you know, the partnerships we have with the various models, the Topaz Fabric that we built today on AI, it's important that clients see that their own data remains sovereign to them and the way we build Fabric it allows for the clients to do that no matter which model they're using and so that's a very big differentiator we have. For example, in AI, the token cost, you know, that will be an important factor we think in the future and we have built like Fabric in a way that depending on the task you are using the foundation model for, it will use the right model so you don't have to pay for the most simple tasks like an expensive token cost and so on. So we think we're in good position in that. In terms of second half, first half, I think we have the guidance for the full year, we expect the normal seasonality that will come, we're not expecting anything unusual there.
