IT Services Sector: Implications of Infosys/SAP results

Research evidence excerpt

IT Services Sector: Implications of Infosys/SAP results

J P M O R G A N Asia Pacific Equity Research

24 July 2026

IT Services Sector

Implications of Infosys/SAP results

Infosys (covered by Ankur Rudra, CFA) reported 1Q FY27 sales of $5,082 million, Japan Equity Research

down by about $49 million (0.95%) versus JPMe of $5,131 million. Constant

IT Services and Telecoms

currency (CC) sales growth was also weak, coming in at +1.0% QoQ (JPMe:

+2.0%) and +2.4% YoY (JPMe: +4.0%). Operating margin, on the other hand, was Matthew Henderson AC

slightly above JPMe, at 21.1% vs 21.0%, and improved +10bp QoQ (JPMe +2bp). (81-3) 6736-8831

matthew.henderson@jpmorgan.com

However, Infosys was cautious about the demand environment and lowered FY27 JPMorgan Securities Japan Co., Ltd.

CC sales guidance to +1.5-3.0% YoY (operating margin guidance unchanged at

20-22%). Given the company’s outlook for demand weakness in 1Q to continue in

2Q and through the end of FY27, the announcement seems unlikely to bolster

sentiment toward SIers with overseas exposure. However, large deal total contract

value (TCV) was strong a $3.6 billion, and the AI sales weighting expanded to

8.2%. Infosys’s explanation that AI momentum is rapidly translating into sales

suggests that although general demand is weak, large transformation/AI projects

are more likely to receive funding. By business segment, life sciences CC sales

were robust (+24.0% YoY) while retail CC sales were weak (-1.8%). Management

indicated that communications and retail business segments continue to struggle.

This suggests recoveries at Japanese SIers that have significant overseas exposure

or high retail/consumer-related sales weightings are likely to be slow, while those