AI slows growth for Infosys and keeps it afloat at the same time

What happened

Infosys reported its latest quarterly results and lowered its outlook for the full year. Its AI revenue grew quickly, but overall growth was weak. Customers now expect Infosys to charge less when it uses AI, and those savings are already built into its long contracts.

Key numbers

• AI revenue grew 29 percent from the previous quarter and now makes up 10.5 percent of incoming cash.
• Revenue grew only 1.5 percent year-on-year in the second quarter.
• Full-year revenue growth guidance was cut from 1.5 to 3.0 percent to 1.0 to 2.0 percent.
• New deals won in the first half of the financial year totaled $8.8 billion, and 68 percent were from new customers.
• The share price is down more than 25 percent over the last twelve months.

Why prices are falling

Clients expect AI to make work faster and cheaper. So when a company like Infosys uses AI tools, clients want lower prices. Long deals that last three or five years lock in those lower prices, so the company earns less from each contract over time.

Why it matters

Infosys is one of the biggest tech services firms in India. Its story shows how AI can be a big new source of income and also a threat to old business. Other companies that sell IT services may face the same pressure. Analysts have also cut their ratings on the company, which shows they worry about its future.

What to watch

• Whether AI revenue keeps growing fast enough to offset price cuts.
• How well the company's 'Project Maximus' cost-cutting plan works.
• Whether the retail and high-tech industries start spending more on services again.
• Whether Infosys can keep its profit margin near 21 percent without losing big deals.