Infosys Q2 FY26 results: Why the stock dipped 0.24% despite Rs 18,000cr buyback

Infosys Limited (NSE, BSE, NYSE: INFY) reported a robust financial performance for the second quarter of FY26 on October 16, 2025. Yet, its share price ended marginally lower by 0.24%, closing at ₹1,470.90 on the NSE. This slight pullback came even as the Indian IT services bellwether declared an ₹18,000 crore share buyback and an interim dividend of ₹23 per share—an increase of 9.5% over the prior fiscal. Institutional sentiment appeared restrained, suggesting that much of the optimism may have already been priced in ahead of the earnings release.

Infosys’ Q2 results were packed with solid metrics: a stable operating margin of 21.0%, free cash flow conversion at a remarkable 131.2% of net profit, and large deal total contract value (TCV) of $3.1 billion, of which 67% was net new. Despite these positives, the stock’s flat-to-negative trajectory reflects broader sector concerns over delayed enterprise tech spending and ongoing caution around global IT budgets. While the company’s fundamentals remain sound, the equity market is clearly seeking clearer top-line acceleration before resuming a re-rating.

How does Infosys’ Q2 FY26 performance compare with past quarters and peers?

For the quarter ended September 30, 2025, Infosys reported revenue of $5,076 million, growing 2.2% sequentially and 2.9% year-on-year in constant currency terms. In rupee terms, revenue stood at ₹44,490 crore, reflecting 8.6% growth year-on-year. This marked the second consecutive quarter that Infosys surpassed the $5 billion revenue threshold—a psychological marker of scale and resilience in a turbulent demand environment.

Operating margin for the quarter came in at 21.0%, down just 10 basis points year-on-year and up 20 basis points sequentially. Net profit rose to ₹7,364 crore, up from ₹6,506 crore in Q2 FY25, while earnings per share increased 13.1% year-on-year to ₹17.76. Free cash flow for the quarter surged to ₹9,677 crore, a 38.0% increase over the previous year, with strong cash conversion and collections.

Compared to industry peers, Infosys has managed to outperform on deal flow, margin resilience, and capital return, even as others struggle with margin compression or client hesitancy in discretionary IT spends. The 67% net new component in its $3.1 billion deal tally is particularly significant, highlighting a growing preference among global clients for long-term digital transformation programs anchored by AI and cloud services.

What does the ₹18,000 crore buyback signal about Infosys’ capital allocation strategy?

Infosys’ decision to launch a ₹18,000 crore buyback—coupled with a 9.5% increase in interim dividend payout—demonstrates its continued commitment to shareholder value creation even during a period of cautious topline guidance. CFO Jayesh Sanghrajka emphasized that the company’s strong cash generation and liquidity allowed it to adhere to its capital return policy while simultaneously investing in growth and talent.

The company’s cash and equivalents climbed to ₹31,832 crore from ₹24,455 crore in March 2025, supported by steady receivables and disciplined operational spending. This surplus has enabled Infosys to not only return capital to shareholders but also invest in expanding its AI-first delivery models and upskilling workforce initiatives.

For long-term investors, the buyback program serves as both a confidence booster and a near-term yield enhancer, especially in the absence of aggressive earnings upgrades. It also indicates that Infosys sees its own stock as attractively valued in the current market context.

What are the key growth drivers Infosys is leaning on for FY26?

Infosys continues to position itself as a digital transformation enabler across AI, cloud, enterprise applications, and cybersecurity. CEO Salil Parekh underlined the success of Infosys Topaz—its AI-first platform—as a key differentiator in recent client wins. The company signed large deals with several marquee names during the quarter including ABN AMRO, Mastercard, RWE AG, AGCO, Sunrise, and HanesBrands, spanning sectors from banking and energy to telecom and retail.

A standout engagement was with Mastercard, where Infosys is powering secure, cross-border payments by integrating with Mastercard Move’s money movement capabilities. In the telecom sector, Infosys deepened its collaboration with Telstra through a joint venture involving a 75% stake in Versent Group to scale AI-enabled cloud services. Another significant deployment was with RWE AG, where Infosys is automating digital workplace transformation with sustainability and agility at the core.

In the financial services vertical, Infosys Finacle continues to add clients at a rapid pace. Uniting Financial Services in Australia went live with Finacle’s SaaS core banking solution in under five months, while clients in the Middle East, including Qatar National Bank and Banque Saudi Fransi, won regional awards for their Infosys-powered real-time payment platforms.

How are institutional investors and market analysts reading Infosys’ cautious FY26 guidance and margin outlook?

Infosys has retained its FY26 constant currency revenue growth guidance at 2% to 3%, while reaffirming its operating margin range of 20% to 22%. This continuity in guidance, despite global macroeconomic challenges, was received with a measured reaction by the investor community.

Institutional investors appeared cautious but not bearish. The reaffirmed margin band suggests that Infosys is confident about managing wage hikes, offshore mix shifts, and continued investments in AI capability-building. However, the lack of a higher revenue forecast dampened expectations for a near-term re-rating.

Analysts tracking the Indian IT services sector interpret Infosys’ numbers as fundamentally sound, but not exceptional. The results did not offer a significant beat, and the forward outlook continues to bake in demand softness, particularly from the U.S. and EU discretionary spending portfolios. Despite this, Infosys remains a top-tier bet for long-term exposure to AI and digital transformation themes, especially given its track record of deal wins, zero-debt balance sheet, and consistent capital return track record.

What potential risks and operational challenges could impact Infosys’ growth trajectory in the second half of FY26?

Infosys faces a few visible challenges as it heads into the second half of FY26. Firstly, there is the ongoing impact of delays in discretionary tech spending, particularly in Europe and the U.S. market. Enterprise clients continue to reassess project timelines amid inflation, cost optimization pressures, and regulatory uncertainty. This could elongate deal conversion cycles.

Secondly, wage inflation and attrition risk—though lower now than during the pandemic highs—remain lurking headwinds, especially in AI-intensive roles where competition is fierce. Infosys is continuing its investment in reskilling over 320,000 employees to adapt to a “human+AI” workplace, which while forward-looking, may weigh on short-term SG&A.

The McCamish cybersecurity incident and possible fallout from evolving U.S. immigration policies also pose potential compliance and cost risks. Infosys flagged the potential impact of the September 19, 2025 presidential proclamation on the H-1B visa program, which could affect visa processing timelines for Indian IT services firms, especially those with large onshore delivery commitments.

What does Infosys’ Q2 FY26 reveal about its trajectory and market position?

The Q2 FY26 results showcase Infosys’ consistency and focus during a time when tech services firms are navigating an uncertain global environment. The firm has struck a careful balance—executing on deal wins, preserving margin, investing in generative AI, and returning cash to shareholders—all without overpromising on growth.

Infosys may not have delivered a surprise upside this quarter, but it did what matters most: deliver predictability. In the current cycle, that may prove to be its biggest asset. The ₹18,000 crore buyback is more than a financial maneuver—it’s a signal to the market that Infosys is confident in its fundamentals and sees long-term value in its own equity.

For investors looking to add IT services exposure to their portfolio, Infosys remains a high-quality, low-leverage, high-cash-yield option that is steadily building an AI-native delivery model. While the broader market may wait for stronger revenue momentum, the groundwork for the next growth phase appears firmly in place.