AI will be major driver of growth, will not do layoffs: Infosys CEO Salil Parekh

So Chitra, good to be with you. Thanks for doing this. What we see is really a big shift with the AI transformation. So one of the highlights for us really was when we had the AI day where we shared in detail what our AI approach is for services. And there we outlined six areas. Those six areas, for example, engineering, legacy modernization, data, process, physical AI, and trust. And those are the areas where we see a huge opportunity, almost $300 billion of addressable market. What we've now done is, and we shared a little bit in Q3, a number which was about 5.5% of the AI revenue, which is growing at a very fast clip. So for us the AI transformation is here. We put our strategy together. We are executing on that, and that is moving very quickly. And that will continue to be a major driver of growth as we see going ahead. The year itself I thought was pretty good with 3.1% growth, very good operating margin, very good large deals, 14.9 billion of large deals. And that's another source of growth for us, all the new work that comes from that. And then a continued focus as we looked out into the next year, we had a guidance of growth between 1 and 1/2 and 3 and 1/2 percent in terms of constant currency. Now all this with the changes in the macro environment as you've seen the macro environment in the fourth quarter with all of the changes in the Middle East was upon us. Now all of that macro elements look like they're coming on to stabilization, and that will give a further support to the growth going ahead. So we see this AI transformation well underway. We also see last year when we started we started with a growth guidance of zero to three. This year we started with 1 and 1/2 to 3 and 1/2. So a narrower band and slightly higher starting point. So from my perspective, we look like we are now driving the AI growth. And as that becomes a larger larger part of our mix, we'll see more and more traction.

So there, you're absolutely right. It's a huge shift in terms of what clients are looking for. So one of the biggest things really is the partnerships that we are doing with some of the foundation model companies such as Anthropic and OpenAI. We announced one last week. We announced one a few weeks ago. And that makes a huge change in the way we are driving our work with our clients. On top of that, we have built something called Topaz Fabric, which really allows all of our engineers to build code with the use of foundation models and some other tools which can be readily used by our clients. For example, we built a white coding tool ourselves, which uses much less number of tokens than other tools in the market. And we are deploying that at great speed. In terms of the people side, we've laid out again in the AI day an approach to what the new people model will look like. So there'll be more specialist skills. There'll be people coming in at different levels, even from college. There'll be more ability for individuals to get deep into a domain whether it's in terms of the knowledge of a business, in terms of knowledge of the tools and the coding. And that becomes a new model that we go through. With all of that we still recruited 20,000 college graduates in the last financial year. We have plans to recruit another 20,000 or so college graduates this year. My sense is AI will actually open up new things, new areas of work which we will need people for. We are seeing, of course, a tremendous amount of code generation by models. There's tremendous amount of agent work which is being developed. But the types of things that we are doing is expanding. You know, we did something as elementary as legacy modernization. But that was something that was not happening because the costs were too high, the time was too long. And now we shared, for example, one example with a client where we're taking 7 million lines of COBOL code, building it into microservices, and making all that happen at significantly less cost and time. So more and more new things are coming. We're building something for a consumer products company which is looking at what are they doing with their customer, how are they improving that usage, that experience, and from that driving more growth for their products. So these are things which we see as new areas. And with that, we will continue to see the growth in terms of revenue and the growth with people and with agents, but also with people.

So there, I think we are seeing, you know, essentially a big transformation which is underway right now. The focus is lot of growth on AI services and making sure that all of the large deals are converting to net new. For example, in our 14.9 billion of large deals we had almost 55% of net new on new type of work that was coming in, and the rest were more renewals. When we see that sort of a growth coming in, that gives us a boost for the coming years. The AI shift plus this large deals is giving us a support for the growth. Then sort of to keep in mind a little bit the macro conditions also in Q4 were not ideal. Now we are seeing the macro gradually improve with a lot of the tension in the Middle East now coming under more and more working a solution. With that sort of a scenario, we will see more support with AI, with large deals to see more growth coming into the business.

Uh there, Chandra, I think if you look at our large deals, firstly at 14.9 billion, I think it's 20% larger than the previous year. Uh even in Q4, we had 3.2 billion, which is pretty strong. Our pipeline looks very good. Uh overall, we we are as you mentioned, there were 96 uh large deals. So, we are very competitive. We're very active in the market, and we're looking at all of the deals with great attention. We've also been very clear, and these are one or two uh situations where when the economic profile doesn't match what we want to do, we are being much more rigorous about it. But outside of that, the vast majority of very competitive deals, we we are in the mix with it, and we want to make sure that we continue to grow. So, my view is uh even on GCCs, uh on last week, on Friday, we had a GCC event on campus where we shared uh with I think there were over 500 GCC leadership teams in there. What we're doing for creating AI-driven uh GCC, how they drive innovation, and how Infosys can support them, and had tremendous traction. Our own GCC business is growing very nicely. So, we we collaborate very strongly on that basis. Keeping all of that in mind, my sense is we have a good traction, good pipeline, and pretty good play on large deals, and working with GCCs, which should support our growth going ahead.

So, there, my own sense, we do see compression as we shared on the AI day, and we showcased where the growth is, and some of the services which witness the compression that you mentioned on the deflation. Overall, however, we had growth last year, which was, and if you look at the organic growth stripping away some of the other inorganic factors across the industry, as was the leading growth in that sense what we are driving. So, while people may have models on this, the reality is our growth is very strong. As you compare the last year, even in Q4, our year-on-year growth was 4.1% in constant currency terms. And as we look out, we started off with the the guidance we started off with, but we see the macro improving as well. The guidance band is also narrower. It's two points. It's not three points that we had last year, and we feel quite good that with what we are driving on the AI transformation, we are really already well underway into what that new AI business is going to look like. And the pipeline for that, for the legacy modernization, for building agents, for creating engineering in AI, is just really strong. So, we feel quite good with the outlook we see.

On on the revenue, I think what we're seeing is for large enterprises, uh there's a real interest in having Infosys work with them to get all of the AI, let's say the opportunity or the capabilities, really make it effective within an organization. So, for example, when you're building something, let's say with agents on a process, let's say a KYC process in a bank, or something in an insurance company, or something with the energy utilities business, the need to take a foundation model, take a tool, and then have Infosys actually make that work, is still very much part of the mix. Then, in terms of the competitive pressure, there is intense pressure, and there's a couple of companies that are quite uh uh forceful in in in the competitive intensity to come back. However, what we see is clients really value a company like Infosys who knows how to deliver things, and that they can trust will deliver with consistency. So, there again, uh for the vast majority of the situations, I think there's a clear understanding with clients that Infosys is someone they can trust to make that sort of a delivery happen. So, with with that in mind, even as the situation with the macro is more difficult, uh we've seen last year, in the full year, very strong organic growth relative to where the other industry players are. As we start the year, we see the same. We see a good traction. As the macro eases, we will see more more traction, or more opportunity, more than likely. And we will, with our knowledge of the AI foundation models, and overall delivery strength, continue to win with clients who want to make this really a part of their business.

So, the the acquisitions, as you pointed out, have been very targeted. Uh the healthcare one, I think, you know, we've we've talked about healthcare for last couple of years. We are delighted with the acquisition. The focus is to expand the uh percentage of healthcare work that Infosys is doing. Similarly with insurance, the acquisition we've done. So, that type of acquisition will continue. There could be some again in industry verticals. There could be some in a service line. And there could be some which could be more job geography-based. In terms of AI services today, there's nothing very large. There are some very sort of early players in that. Uh so, it may take a little bit longer time to find something substantial on AI services. Uh and as and when that happens, we we will of course look at it, but there's nothing that's at least uh visible to me right now that that could be on the AI services side.

Uh on My Thoth, so first, we know what has been shared publicly, plus we've had some discussions, but we've not had access to the My Thoth at this stage. We're working uh to understand even from 4.7 sort of what the vulnerability vulnerabilities could be and how those can be addressed across the board. Once we have a clear view of that, we we'll be in a better position to comment. There could be situations that that's what I was sharing last week where we might we are in discussions we might get called in and nothing has happened yet but they could look to us to help to address some of the vulnerabilities with large clients and then put in place solutions but it's very early days. We are absolutely in discussions to get a sense of what's the way to address and work with Infosys at this stage.

Uh so there I think first we've had a pretty good recruitment with college graduates at 20,000 in the last year. So we are still recruiting. We are building up. The coming year plan is also for approximately 20,000 new college graduates. The type of work and and something we sort of talked about earlier as new college graduates are joining Infosys we're going through the exhaustive training. In that training we are encouraging the engineers to build code, do engineer software engineering in the way they used to in the past and then as they get more and more comfortable introduce some of the new tools and the foundation models. We want them to learn how to do it with and without the foundation models but also evaluate like when the foundation models build the code how to assess it and then have of course other tools which do evaluations of the code. So all of those skills become important and then what we were discussing a little bit earlier as individuals go through different stages of their career a little bit more attention also to deep individual knowledge and skill as becoming a subject matter expert in addition to the traditional ways of doing things. So my sense is the look of how people talent different levels are within a company in Infosys will evolve but I don't know I don't think it's going to evolve in the sense of next year or year after but maybe over the next you know five or 10 years we could see changes coming about in in the way this is done. There's definitely going to be more and more work with agents and with humans but there's also potentially much more overall work. So in which case you still need people doing different levels of tasks. The task done by a college graduate may not be the same that that was being done five seven years ago. It could be a new newer type of task which you need those skills so they come in much more experienced in that sense.

So there as as you have seen we have not done any of those I understand you mentioned and and we've also seen in the press some other companies have done that. We've not had any of that in the last year and we don't see anything of that sort coming up in the future.

Uh no no comment on that Chandra. Not But are you excited to run Infosys for five more years? Uh as I said last week when when we met at the press event and no no comment from my side.

I think the sort of the sense within Infosys today is really very energized and very exciting. The AI day that we did was even as we laid out the strategy and as we built it incredibly useful to articulate it both externally but also internally in terms of the mobilization we've had. My sense is we feel you know with the tremendous growth we're seeing in AI services there's lots of opportunities and the pipeline. We seem well on our way in terms of the transformation for AI. Of course it is an incredibly important moment so it is very like clear to us that we have to execute well and make sure we deliver on it but we think we've laid out the first stages of the strategy pretty clearly and there will be refinements along the way but the broad outline of the six areas seems to be where where the market is and that's what we want to execute against. So there's a lot of energy, lot of excitement but we do recognize it's an absolutely critical and important moment for within Infosys and I'm sure across the industry.

You know my my sense is you know first the AI transformation strategy is well articulated. We see tremendous growth from it. Large deals we see a very good traction and growth. We've also started an initiative a year or so ago which is focused on large companies where we have presence which is relatively smaller and that is gaining tremendous traction and growth. Big parts of our business into that. So I see a lot of these sort of growth drivers and then we do see the points that we discussed discussed earlier with regard to some of the deflation and we do see the macro which now is starting to improve. So overall as we go into this year I feel quite good with where we've started and we will continue to build on that as the macro changes as well.

Thanks Chandra. Wonderful to catch up with you.