Infosys profit falls sequentially as tax rate jumps
Revenue growth outpaced costs and lifted margin, but a higher tax rate offset the operating gains and drove an 8.63% sequential profit decline.
Filed 23 Jul 2026, 16:20 IST · after market close · Infosys Ltd (INFY)
Key takeaways
- Consolidated operating margin rose 0.08 percentage points sequentially to 21.08% as expenses grew 3.79%, slightly slower than revenue at 3.90%.
- Sequential net profit fell 8.63% despite a 2.14% rise in pre-tax profit, as the tax rate increased 8.31 percentage points to 29.50%.
- The stock's initial 0.80% decline was modest against its 4.50% median absolute move after the last eight results.
Price around the results
Revenue growth outpaced the prior-year quarter
Infosys reported consolidated revenue of Rs 48,211 cr in Q1FY27, up 14.03% year on year and 3.90% sequentially. Operating profit grew faster than revenue year on year at 15.45%, indicating some operating leverage. Other income fell 15.10% sequentially and accounted for 8.92% of pre-tax profit, leaving a non-operating contribution to reported earnings.
Tax, rather than operating costs, drove the sequential profit decline
Expenses grew 3.79% sequentially against 3.90% revenue growth, so operating margin widened 0.08 percentage points to 21.08%. The tax rate rose 8.31 percentage points to 29.50%, which more than offset the 2.14% increase in pre-tax profit and pushed net profit down 8.63%. Interest expense also rose 13.33% sequentially.
Margin recovered from Q3 and stayed above the IT peer median
Operating margin has now moved up from 20.84% in Q3FY26 to 21.00% in Q4FY26 and 21.08% in Q1FY27, reversing the earlier dip rather than extending a decline. Year on year, margin improved 0.26 percentage points as expenses grew 13.66%, below the 14.03% revenue growth. Infosys was 5.34 percentage points above the 15.74% median operating margin of the 12 Information Technology peers that had reported.
Initial market reaction was softer than Infosys's usual results-day move
The stock opened down 1.85% and was down 0.80% on the reaction day, with volume at 2.21 times the reference level. That decline was smaller than the 4.50% median absolute move across the last eight results reactions, during which the stock rose three times and fell five times. The results were filed after market close on 23 July 2026.
Q1FY27 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹48,211 cr | ₹46,402 cr | +3.90% | +14.03% |
| Other income | ₹984 cr | ₹1,159 cr | -15.10% | -5.57% |
| Expenses | ₹38,048 cr | ₹36,659 cr | +3.79% | +13.66% |
| Operating profit | ₹10,163 cr | ₹9,743 cr | +4.31% | +15.45% |
| Operating margin (%) | 21.08% | 21.00% | — | — |
| Interest | ₹119 cr | ₹105 cr | +13.33% | +13.33% |
| Depreciation | ₹1,246 cr | ₹1,424 cr | -12.50% | +9.30% |
| Profit before tax | ₹11,028 cr | ₹10,797 cr | +2.14% | +13.22% |
| Tax | ₹3,253 cr | ₹2,288 cr | +42.18% | +15.52% |
| Net profit | ₹7,775 cr | ₹8,509 cr | -8.63% | +12.29% |
| EPS (₹) | ₹19.19 | ₹21.01 | -8.66% | +14.91% |
Operating margin of 21.08% compares with a Information Technology sector median of 15.74% across 12 peers that have reported Q1FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -0.80% | -0.37% |
Volume on the results session was 2.21× its 20-day average.
What to watch
- Whether operating margin holds above 21.08% in the next quarter.
- Whether expenses continue to grow more slowly than revenue after the 3.79% versus 3.90% sequential comparison.
- Whether the tax rate moves back from 29.50% and reduces its drag on net profit.