# Infosys cuts its growth forecast again and its shares fall 4% as AI squeezes India's outsourcing model

India's second-largest IT exporter now expects fiscal 2027 revenue growth of only 1% to 2%, while bank earnings at Kotak Mahindra show domestic finance moving in the opposite direction.

- Published: 2026-10-26T05:15:30.644Z
- Canonical: https://polylog.news/2026-10-26/infosys-cuts-its-growth-forecast-again-and-its-shares-fall-4
- Publisher: Polylog (Global desk)
- Section: markets
- Sources: [Economic Times](https://m.economictimes.com/markets/stocks/news/infosys-shares-fall-4-after-it-major-lowers-fy27-guidance-what-are-goldman-sachs-nomura-others-saying/articleshow/135202432.cms), [Mint (Economy)](https://www.livemint.com/economy/zombie-firms-india-inc-interest-coverage-ratio-corporate-debt-stressed-companies-dun-and-bradstreet-11792948783730.html), [Economic Times (Kotak)](https://m.economictimes.com/markets/stocks/news/kotak-mahindra-bank-shares-climb-4-after-q2-results-what-are-jefferies-goldman-sachs-saying/articleshow/135202411.cms)

Infosys shares [fell about 4% on Monday](https://m.economictimes.com/markets/stocks/news/infosys-shares-fall-4-after-it-major-lowers-fy27-guidance-what-are-goldman-sachs-nomura-others-saying/articleshow/135202432.cms) after the company cut its revenue growth guidance for the fiscal year ending March 2027 to 1% to 2%, from 1.5% to 3%. It cited pricing pressure and a difficult demand environment. Goldman Sachs, Morgan Stanley, Citi and Choice Institutional Equities raised concerns, and Nomura stayed positive, the Economic Times reported.

This is the second cut this year. In July, Infosys [lowered the range to 1.5% to 3%](https://www.outlookbusiness.com/markets/infosys-slides-2-as-q1-miss-guidance-cut-weigh-on-sentiment) from 1.5% to 3.5%. At the time, analysts identified AI-driven price cuts on existing contracts as the main concern, because those cuts were offsetting revenue from new AI work.

Domestic finance is performing better. Kotak Mahindra Bank reported [a 26% year-on-year rise in consolidated profit](https://m.economictimes.com/markets/stocks/news/kotak-mahindra-bank-shares-climb-4-after-q2-results-what-are-jefferies-goldman-sachs-saying/articleshow/135202411.cms) for the July to September quarter, and its shares rose 4%. The corporate debt picture is mixed. A [Mint analysis](https://www.livemint.com/economy/zombie-firms-india-inc-interest-coverage-ratio-corporate-debt-stressed-companies-dun-and-bradstreet-11792948783730.html) of Dun & Bradstreet data found that the share of listed companies whose profits do not cover their interest payments (sometimes called "zombie firms") has fallen since its pandemic peak. It also found that the accumulated stock of financial stress remains high.

## What this means

India's IT exporters sell skilled labor by the hour, and AI tools let clients demand the same output for fewer billed hours. That compresses revenue on existing contracts faster than new AI projects can replace it. The exposure runs from IT-services stocks to India's services trade surplus, which has supported the rupee and funded the current account. Domestic lenders such as Kotak draw on a different source, credit growth at home, so India's equity market is splitting between export services and domestic finance. Repeated guidance cuts suggest the market still prices this as a cyclical slowdown. The evidence points instead to structural price deflation in labor-based outsourcing. The closest precedent is the offshoring wave of the 2000s, which permanently lowered prices for US IT services, with India on the winning side that time. The likelier outcome over the next several quarters is more guidance cuts across Indian IT firms and slower growth in services-export receipts. A broad rebound in large contract renewals at stable prices would prove this wrong.

## What to watch

- Guidance from Tata Consultancy Services, Wipro and HCLTech in their next results. Similar cuts would confirm a sector-wide pricing problem rather than one company's difficulties.
- India's monthly services export data. Slowing receipts would show AI price pressure reaching the balance of payments and the rupee.
- Hiring numbers at the large IT firms. Falling headcount alongside flat revenue would show companies are replacing billable staff with AI tools.