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 revenue grew +14.03% YoY, while operating margin improved only 0.14 percentage points to 23.66%.
- Sequential net profit fell -8.63% as the tax rate rose 8.31 percentage points, despite profit before tax increasing +2.14%.
- The stock fell -0.62% initially, below its 4.5% median post-results move, before gaining +7.90% by day five.
Price around the results
Revenue growth remained positive but slowed sequentially
Infosys reported consolidated revenue growth of +14.03% YoY and +3.90% QoQ in Q1FY27. Operating profit rose +14.74% YoY and +2.17% QoQ, showing that most of the sequential revenue increase translated into operating profit. The YoY comparison is more favourable, with expenses growing +13.81%, slightly below revenue growth.
Tax, costs and other income shaped profit quality
Sequential expenses grew +4.45%, faster than revenue growth of +3.90%, which narrowed operating margin by 0.41 percentage points. Net profit fell -8.63% QoQ even as profit before tax rose +2.14%, because the tax rate increased 8.31 percentage points to 29.5%. Other income declined -15.10% QoQ and accounted for 8.92% of profit before tax, making it a material contributor to reported profit.
Margin stayed above peers but below the recent peak
Infosys's 23.66% operating margin was 5.51 percentage points above the 18.15% median for 31 Information Technology peers that had reported. The margin was 0.14 percentage points higher than Q1FY26 but 0.41 percentage points below Q4FY26. The five-quarter trend has been uneven, rather than a sustained rise or a third straight decline.
The initial market reaction was modest, then reversed
The stock opened down -1.85% and ended the initial session down -0.62% after the results. That first-day move was smaller than the 4.5% median absolute move across the last eight results, when the stock rose three times and fell five times. By day five, the stock was up +7.90%, with a +5.74% relative move.
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 | ₹36,802 cr | ₹35,235 cr | +4.45% | +13.81% |
| Operating profit | ₹11,409 cr | ₹11,167 cr | +2.17% | +14.74% |
| Operating margin (%) | 23.66% | 24.07% | — | — |
| 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 23.66% compares with a Information Technology sector median of 18.15% across 31 peers that have reported Q1FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -0.62% | -0.19% |
| Next session | +3.04% | — |
| 5 sessions | +7.90% | +5.74% |
Volume on the results session was 2.26× its 20-day average.
What to watch
- Whether operating margin recovers from 23.66% after the 0.41 percentage-point sequential decline.
- Whether the tax rate falls from 29.5% after its 8.31 percentage-point sequential increase.
- How much other income contributes to profit before tax versus 8.92% this quarter.