Ladies and gentlemen, good day and welcome to Infosys Ltd Q1 FY26 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to you, Mr. Mahindroo. Hello everyone, and welcome to Infosys Earnings Call for the First Quarter of FY26. Joining us on this call is CEO and MD, Mr. Salil Parekh, CFO, Mr. Jayesh Sanghrajka, and other members of the leadership team. We'll start the call with some remarks on the performance of the company, subsequent to which we'll open up the call for questions. Please note that anything we say that refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risks that the company faces. A complete statement explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I'd now like to pass on the call to Salil. Thanks, Sandeep. Good evening and good morning to all of you. Thank you for joining us. We had a strong start to a financial year. Our revenues grew 2.6% sequentially and 3.8% year-on-year in constant currency terms. Growth was broad-based, with our large five industry groups and our large geographies growing year-on-year in constant currency. Our large deals were at $3.8 billion. Our operating margin was 20.8%, and our free cash flow was at $884 million. The main drivers of our growth were our leadership in enterprise AI and our continued success in clients selecting us for consolidation. We are seeing good demand for AI agents. We built 300 agents across business, operations, and IT areas. Our horizontal and vertical agents are helping our clients drive faster decisions, improve customer experience, and improve operational efficiency. Let me share with you some examples of where we're doing project work on enterprise AI for our clients. An oil and gas major is using Infosys AI agents to enhance production quality in their refinery, orchestrate dynamic pricing in their retail stores, and automate their contract management system for efficient trading. A leading global manufacturing company is using Infosys AI agents across their supply chain to unlock productivity and cost benefits, and using Infosys AI agents to efficiently resolve issues related to malfunctioning equipment. A logistics company is using Infosys AI agents to transform customer care, operations and logistics, and finance and accounting to become more efficient. For a leading North American retailer, we are transforming in-store shopping into a frictionless data-driven experience, boosting customer satisfaction, loyalty, and operational efficiency. This is being done by integrating physical AI through intelligent automation and Edge-based computer vision. A global financial services company is using Infosys Enterprise AI solution with a fine-tuned large language model. This system translates code and automates documentation. The solution increased developer productivity by 25% and automated 50% of business requirement creation in support of the modernization plan. Building on 19 leadership ratings we received in financial year 2025, we are now positioned additionally as leaders in Gartner's 1st Generative AI Consulting and Implementation Services quadrant. We are the only large India-based technology services company to be positioned as a leader. Based on our performance in Q1 and our current outlook, our guidance for growth for financial year 2026 is revised from the earlier guidance of 0%-3%. Now it's 1%-3% growth in constant currency terms. Our margin guidance remains unchanged at 20%-22%. With that, I'd like to invite Jayesh to share his comments. Thank you, Salil. Good morning, good evening, everyone, and thank you for joining the call today. We have been able to successfully navigate a quarter of global uncertainty, which is reflected in our holistic business performance. We delivered market-leading sequential growth, robust large deal wins with strong net new, resilient operating margins, high single-digit EPS growth, and another quarter of free cash flow to net profits of over 100%. Let me cover the key aspects of the results. Growth was strong and broad-based, revenue up 2.6% sequentially, including 0.4% from acquisition and 3.8% on a year-on-year in constant currency terms. Sequential revenue growth was achieved despite a significant reduction in 3rd party costs by 60 basis points to 7.3% of revenue. Sequential growth was once again driven by increase in realization thanks to progress in the Project Maximus. Volume growth while muted was positive. Manufacturing grew in double digits, and FS and EURS grew above 5% year-on-year in constant currency terms. Amongst geographies, North America grew ahead of the company at 2.9% sequentially in constant currency on a year-on-year basis. Europe grew 12.3%, which is over three times the company average. Operating margin was at 20.8%, down 20 basis points QoQ and 30 basis points year-on-year. Sequential margin resilience was despite absorbing balance comp hike, higher variable pay, and investment in sales and marketing. Utilization, including trainees, went up 30 basis points QoQ at 85.2, and including trainees. Up 80 basis points to 82.7. EPS in rupee terms grew by 8.6%, and in dollar terms grew by 5.8% YoY. Our relentless focus on cash continues and is reflected in free cash flows of $884 million, which is 109% of net profit. This is the 5th consecutive quarter of free cash flows being over 100% of net profit. We expect FY 2026 free cash flows to be above 100% of net profit. Consolidated cash and cash equivalents stood at $5.27 billion at the end of the quarter after paying out final dividend for FY 2025. Yield on cash balance was 7.2% in Q1. Return on equity improved by 140 basis points to 30.4 due to dividend payouts. Large deal wins were robust, comprising 28 deals with a total contract value of $3.8 billion, including 55% net new. This includes multiple vendor consolidation deals with a combined total contract value of over $1 billion, including a mega deal with one of the largest global banks. This reflects our deep-rooted client relationships and differentiated delivery capabilities. Vertical-wise, we signed nine deals in communication, six in EURS, five in manufacturing, four in financial services, two each in high tech and retail. Region-wise, we signed 20 deals in America, six in Europe, and two in ROW. Headcount at the end of the quarter was 323,788. Attrition increased marginally to 14.4. Operating margin for Q1 was at 20.8%. Decline of 20 basis points sequentially. The major components of sequential margin change for the quarter are as follows. Headwinds of 100 basis points from compensation increase, higher variable pay, partly offset by other salary-related items, 30 basis points from currency movement, and 20 basis points from sales investment. Partly offset by tailwinds of 70 basis points from increase in realization due to Maximus and seasonality, 40 basis points on account of lower amortization cost on intangibles, and 20 basis points from lower 3rd party costs, leading to a 20 basis point drop in operating margin sequentially. ETR for the quarter was at 28.9%. The effective ETR rate for the financial year 2026 to be in the range of 29%-30%. While Q1 was steady, business environment remains uncertain due to lack of resolution of tariffs and geopolitical situation. Clients continue to be cautious in their discretionary spending decisions, reflecting in delayed decision-making. Near-term visibility remains good, and we expect stronger H1 compared to H2 on account of normal seasonality, as highlighted earlier. Coming to verticals, financial services saw good momentum this quarter in the U.S., with capital markets, commercial banking, and wealth management seeing a lot of transformation opportunities. Agentic AI is playing a pivotal role with focus on areas like KYC, onboarding, and portfolio management. We are now the preferred AI partner for 10 of the top 20 clients in FS, with many initiatives scaling from POC to production, especially in Agentic AI. We are partnering with GCCs both in setup and growth-led deals. While pipeline is strong, with new opportunities in vendor consolidation, cost optimization, and simplification, clients are cautious about decision-making due to the volatile environment. Manufacturing segment continues to face challenges in automotive, industrial, and Europe, with decision-making delayed and soft discretionary spikes. While clients are reevaluating their supply chains due to tariff uncertainty, we are helping them leverage technology across end-to-end life cycle, from design to manufacturing to sales. Pipeline remains healthy, with focus on cost takeout and opportunities. We won a large deal in this vertical in Q1 to help a client set up a GCC. In auto, we are helping clients in rationalizing their footprints, and in industrial, we are helping them in cost optimization. EURS vertical outlook remains mixed due to economic uncertainties. Pipeline for both large and mega deals remains strong. Our investment in industry, cloud, energy, transition, and AI-driven operational efficiency are driving growth and differentiating us in large deals. In energy, high-cost pressures due to oil price volatility are prompting clients to consolidate vendors for savings. In utilities, advancement in renewable energy, smart grid technology, and sustainability regulations are reshaping the market. In services, clients remain cautious about spending across CapEx and OpEx. In retail, uncertainty around tariffs has led to muted spending in large geographies, supply chain impact, and procurement disruption. Budgets remain tight, and decision cycles elongated. There is a slowdown amongst clients on discretionary spend, though our pipeline is strong. We are seeing strong commitment from clients to engage us as trusted partners for AI-first outsourcing and transformation deals in both IT and BPM services. Enhanced interest in AI is resulting in budget reallocation, with discretionary spend expected to be self-funded through AI-led productivity benefits. Deals in the sector continue to leverage Topaz and AINX platform capabilities. Communications is facing growth challenges and increased OpEx measures amidst volatile macroeconomic and political landscape. Clients are focusing on cost takeout and vendor consolidation. There is strong focus on AI and customization to monetize 5G use cases. Though ROI concerns are delaying newer investments, OEMs are aiming for profitable growth and are exploring all levers, including tighter and reduced IT budgets and leveraging AI and automation. Growth for us is led by ramp-ups of previously won large deals. Clients in high tech remain cautious due to macro headwinds and geopolitical tensions, leading to cost pressures and budget cuts. Discretionary programs are paused because of significant investments in GenAI, GPU, and AI. Driven by our Q1 performance and our current assessments of the rest of the year, we have revised our FY 2026 revenue guidance to 1%-3% in constant currency terms. This continues to assume a reduction in 3rd party revenues versus FY 2025 based on existing deals and new deals in the pipeline. Our operating margin guidance for the year is 20%-22%. We will continue to keep a close watch on the economic environment and its impact on client budgets and reassess our guidance as we progress during the year. With that, we can open the floor for questions. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-on telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. 1st question is from Ankur Rudra from J.P. Morgan. Please go ahead. Hi, thank you. I mean, clearly good to see a refreshing revenue print here. The question is on your organic growth momentum. On a year-over-year basis for the quarters, it's quite strong, probably 3.5%, 3.4%. Overall growth was about 5% last quarter. The question is, why are you still pointing, is guiding for like 2% at the midpoint? What is it that you're seeing that makes you feel that the year-over-year growth trajectory on constant currency will weaken given the solid signings you've had? Or asked another way, why drop the upper end of the guide here? Thank you. Hi, Ankur. This is Jayesh here. As we had said at the beginning of the year, at the lower end of the guidance, we had baked in heightened uncertainty. At the higher end of the guidance, we had baked in steady to improving environment. While Q1 was strong, if you look at the environment underlying, it hasn't really changed. Q2, we are not really seeing the signs of significant environment changes. Tariff situation still remains escalated. The geopolitical situation hasn't really changed. This is the part of the year Q1 and Q2 put together is the strongest part of our year seasonally, right? Looking into all of that, our current guidance at the bottom end expects continuing uncertainty or elevated level of uncertainty. The upper end bakes in a steady environment at this point in time. This is based on what we see today. Okay, appreciate it. Maybe a couple of questions on AI. Are there any kind of margin or pricing trade-offs you see when you engage with clients on renewals or maybe even out of turn where the expectation is some of the benefits of AI is baked into their contracts? Are you also proactively taking this to clients? That's part number one. Part number two is there seems to be a lot of significant increase in vendor consolidation, and I think AI is part of any of those contracts as well. Do you think that is potentially increasing the replaceability of vendors such as yourselves because of more user-generative AI? Thank you. Hi, Ankur. This is Salil. I think on the 1st part. What we see with enterprise AI now is. There are areas where there's good productivity benefits, and especially as we're deploying agents or setting up whole enterprise AI platforms for clients using foundation models. There are some areas where we are seeing new opportunities for revenue. On the first part, typically there are productivity gains, and those are shared between clients and ourselves. In many cases, those are situations where either the clients are seeking it themselves or we are bringing it to clients in a view to make things more efficient. In doing so, we typically get an ability because I think our enterprise AI work is quite solid to do other things, both in enterprise AI but in other areas with the clients. That is how we are seeing that piece of the work going on now. The other question, Salil, was on do you think there's any kind of increase in replaceability of vendors because we hear a lot more of vendor consolidation now? Is that helped by AI in any way? What we're seeing is, at least in the ones that we have benefited from, of which Jayesh mentioned a good number of them in the Q1 large deals, and just looking at those as a sample set, we see that clients have looked at where they have seen companies not bringing them good AI solutions in the recent past, solid delivery, or where they're looking at some of the smaller companies coming out. Those are the areas where, because of our strength of delivery, we feel quite positive that we on net are benefiting from it. I do not think it's making it easier or more difficult, but that track record, whether you brought that AI innovation to the client, whether you've delivered in a way that has worked for them over the past, and whether you have scaled to do a lot of different things because clients are looking at multi-service capability, that is helping with the large clients for us. Thank you, appreciate it. Best of luck. Thank you. Next question is from Kumar Rakesh from BNP Paribas. Please go ahead. Hi, good evening, and thank you for taking my question. Before I get to the question, just a clarification on the guidance part, which you spoke about, Jayesh, just now. Your revision of guidance, especially the top end of the organic growth, is just a reflection of change in the macroeconomic environment assumptions and not necessarily how you look at the deals ramping up or the impact of third-party or any of the operational-related issues, right? Yeah, I mean, see, at the beginning of the year, we had already called out the 3rd party and the lower 3rd party of that. That factor does not change. We had also called out on the top end of the guidance, we expect steady to marginally improving environment. Now, we have not seen the environment improving in Q1. Almost one month of Q2 is gone. The challenges with respect to tariffs, the challenges with respect to geopolitical environment continue. Clients still remain on a wait-and-watch with respect to discretionary spend. Whether it comes through deal signing, the cycles remain elongated. I think from all of that perspective, what we are saying now is the upper end of the guidance, we are expecting the steady environment. That is what is baked in the guidance. Having said that, just to clarify, if you look at Q1 and YoY on Q1, the third-party cost on a year-on-year basis was flattish, right? When you compare a year-on-year growth and then extrapolate that for the full year, there would be a headwind from that perspective when you look at a full-year basis growth on the 3rd party part. Got it. Thanks. Just the 1st question around the revenue piece. In this quarter, you spoke about that there has been pricing and productivity benefit of about 70 basis points in the 1st quarter. Can you just give some details around that? Where are we getting that? Through the year, you spoke about that the 3rd party will come down on a full-year basis further. From 1st quarter level, will it further come down from these levels? If you look at the pricing, we've spoken about it earlier. In terms of Project Maximus, the value-based selling within Project Maximus, there are multiple tracks within Project Maximus. I think they have helped. The 70 basis points is a combination of both the benefit on back of Project Maximus as well as some part of seasonality, right? Because in this quarter, you have higher working calendar days. Some part of furlough/flushback also happens. You do get that benefit also. Partly it is on account of seasonality. Partly it is on account of Project Maximus. That has helped. When you look at full-year basis, last year we did talk about 3.5% in terms of pricing benefit that we got. Of course, there was a lot of, there were also low-hanging fruits that we captured. In my mind, Project Maximus is continuing contribution on this side. On the 3rd party, I don't think we are giving quarterly color on this. All we have said is looking at the deals we have signed and the deals in the pipeline, we expect 2026 3rd party to be better than or to be lower than 2025 3rd party. Thanks for that. My 2nd question was on your performance. For the last four or five quarters, Europe has been consistently outperforming your overall growth. A, what is driving that? B, how sustainable do you think this outperformance could be? Or just the strong growth could be? I think the growth in Europe in last multiple quarters and years is on back of a few things, right? We are one of the 1st companies a few years back to call out Europe as an opportunity. We have made on back of that hypothesis investments in Europe, and that has helped us win some of the very, very large and mega deals in Europe. That has definitely helped from the growth in Europe perspective. There are consolidation deals that we have won as well in Europe, so that has helped. Over a period of time, Europe is also opening up from outsourcing perspective, so that is also helping in growth perspective. Going forward, sustainability of this strong growth in Europe. Do you remain confident on that? I think there are enough opportunities in Europe. Now, whether it will continue growing beyond the company growth or not, I do not think we are giving a guide on that. Where we are standing today, we are seeing opportunity in Europe. Many of the large deals sitting in Europe, as well as the pipeline containing a good amount of large deals in Europe. Great. Thanks a lot. Thank you. Next question is from Abhishek Kumar from JM Financial. Please go ahead. Yeah, hi, good evening. Thanks for taking my question. I have a question on vendor consolidation. This has been going on for at least a couple of years now. Do you think there has been a shift in the vendors we are competing with? Maybe earlier it was the longer tail of small vendors, which these enterprises had added post-COVID. You think now it has shifted to more larger like peers. Therefore, the fight to hold on to your turf and add more becomes a bit more challenging and kind of puts pressure on our margins. Hi, this is Salil. I think first on vendor consolidation, what we are seeing is there's a range of options that clients have. In that sense, it's something that's been ongoing for some time, even beyond the last two or three years. Now what we are seeing is Infosys is benefiting from this from a perspective of the type of work we are bringing to clients, and especially what we've done in the last couple of years on enterprise AI. The consistent delivery that we've shown across all of our other offerings over that time frame, that in the past we've talked about, we also have today automation and lean. All of those elements come together, and that's where we see clients selecting us. These are with respect to some large other companies and some mid-size small other companies as well. In terms of pricing, we see that there is that sort of usual approach, which is focused on productivity. It's not any different when there's a consolidation or where there's something new. Over time, there's an expectation of productivity improvement. We are in that discussion quite mindful of what are the benefits we can provide through automation, lean, and all the enterprise AI work we're doing. My 2nd question is on your seasonality. You're probably the only company who's saying that H2 will be weaker than H1. Most of the others are hopeful of a rebound in 2nd half. Is it just seasonality that is driving this kind of a view, or do you think some of the large deals which are helping us in sectors like communication, they kind of get into steady state, and therefore the visibility, given the large deals last year were weaker than the year before, the visibility from deals ramping up in the 2nd half is lower? I think it is also a factor of what you deliver in H1, right? If your H1 is relatively in line with what you are expecting, then the usual seasonality will come in. If you've seen a higher pressure on H1, then your hope on H2 is better. I think you have to see that all of those commentary in line of the performance of H1 and H2. I think our Q1 has been strong. If you look at compared to all the results in the market, I think we have delivered strong performance. That makes us believe that we would have a usual seasonality in the model. Thank you, Nandan. Thank you. Next question is from Nandan Bryan. From TD Cowen, please go ahead. Hi, thank you for taking the question. I wanted to ask on geography. Europe, obviously, very strong, while North America was up slightly. Can you comment on North America? Do you have visibility to an improvement in growth there? Bryan, I think North America remains an important part of our business. It's the largest geography for us. At this point in time, we are seeing opportunity in pockets, especially in the financial services in North America, et cetera. There are pockets of geographies, manufacturing, retail, et cetera., which remain challenging. At the same time, when you look at the large deal wins that we signed this quarter, 20 of them came from North America, six in Europe, and two in ROW. We do see opportunities both in terms of large deals, cost takeout, as well as consolidation in North America. Okay. As it relates to the smaller deals, in the past, you've commented on small deal activity. Can you just give some comments on how that progressed during the quarter? We do not comment on a small deal on a regular basis. There was one quarter where we saw a heightened activity in the small deal. That is where we did call it out because we thought it was relevant information from an investor perspective. At this point in time, our overall pipeline continues to remain strong. Within that, the large deal pipeline is also strong. We have delivered $3.8 billion, which is a 44% increase on a sequential basis, 55% net new. I think all of those are positive aspects of the deals and pipeline. Okay, understood. Thank you. Thank you. Next question is from Jonathan Lee from Guggenheim Partners. Please go ahead. Great. Thanks for taking our questions. Just a clarification on what you had called out earlier in terms of what's contemplated in the range of outcomes. Is it fair to assume that the midpoint of your outlook contemplates slight deterioration in demand environment? Jonathan, as I said earlier, we build multiple models that lead us to multiple ends of the guidance, right? It's not necessary to converge. These models are not built to converge on a midpoint of the guidance. That's an outcome of it. At the lower end of the guidance, we have baked in higher uncertainty from where we are today. At the upper end of the guidance, we have baked in stable environment. There will be multiple models that will lead us to various midpoint of the guidance in between. That's how the guidance band has arrived at always. The midpoint just becomes an outcome of the two ends of the guidance. Thank you for that color. Just as a follow-up, can you help decompose what you saw in terms of client demand as you progressed from April through June and whether any of those trends have continued into July? Hi, this is Salil. I think on client demand. What we see is huge interest in AI and especially what we are providing as agents. And what we are able to do with large enterprise AI platforms, what we're doing with small language models. Those are places where there's discussions and then actual project work everywhere, part of larger programs. We saw more and more interest in the consolidations that we have already discussed. We've seen good attention on cost and efficiency. We've seen strong interest, for example, in the foundations of enterprise AI on cloud and data and analytics type of areas, especially some of the newer areas on the new SaaS data model or data platforms. We've seen very good traction on enterprise application areas where there's movement to new generations of SaaS platforms on enterprise scale. Those are the things where we're seeing some interest. We see because of the economic environment, especially if we look at logistics or consumer products or some aspects of manufacturing, auto, and so on, we see some constraints that have come in in this current environment. It's been a mix of those sorts of things. Thanks for the color, Salil. Thank you. Next question is from Surendra Goyal from Citi. Please go ahead. Yeah, hi. Salil, Jayesh, good evening. Just one question, and sorry to kind of focus on the same point. The slight lowering of the upper end of the organic guidance, is it due to taking a more conservative view of the environment or something that you actually saw on the business? Ramp down, slower ramp up, discretionary, declining faster, not picking up? Something on the business, or it's just taking a more cautious, conservative view of the environment? Thank you. No, Suren, I think it goes back to the commentary I gave in Q1, the beginning of Q1. We did say that the upper end of the guidance does take in slightly improving environments, right? Having had a benefit of one quarter gone and a stronger visibility of Q2. We do not see the environment changing significantly. That is also visible from all other results. All of that factor is baked in in the upper end of the guidance today. Today, what we have baked in at the upper end of the guidance is a steady environment, right? As I said earlier, the H1 is stronger for us than H2. Once the stronger part of the period is gone, as an uncertain environment, our ability to change the guidance in a positive manner at the upper end gets that much more restrained, right? Yeah, yeah. No, no. I understand that, but it's a lowering that I'm talking of. How did you kind of arrive at that conclusion? What did you see which tells you that the environment is not improving? I'm just trying to understand the data points behind that. Yeah, so same thing, right? The client behavior in terms of decision-making, the discretionary spends that's happening on the accounts, various accounts. All of those are anecdotal data points that we get when we do a ground-up model in terms of where we stand. Understood. Thank you. Thank you. Next question is from Rishi Jhunjhunwala, from IIFL. Please go ahead. Yeah, thanks for the opportunity. Two questions here. Firstly, if you look at the overall wage hike impact that has played out over the past two quarters, almost 240 basis points, it seems like it is relatively higher than where the industry has been. Of course, the growth has been fairly muted for us and for the industry as well. Just wanted to understand the thought process behind that kind of a wage hike, and is it fair to assume that with that, we would not see any other action in FY 2026? Rishi, the wage hike has been phased out, as you know, and as you mentioned, in two phases. Large part of our organization, up to middle level of the employees, got a wage hike in January, and the rest of the employees got the wage hike effective 1st April. What I called out, 100 basis points in this quarter is a combination of wage hikes as well as a higher variable pay that we paid to our employees. That is a combination of both of those factors. We have not really split that out, but that is the overall wage hike. The wage hike, as we said at the beginning of the year, are relatively similar to the wage hikes that we have done in the earlier years in terms of percentages, etc. Coming to the 2nd part of your question, I think too early. We just have begun the year. We have had the wage hike effective this quarter. We have not really decided when and when about the next wage hikes at this point in time. We take multiple factors when we consider the wage hikes, including market scenario, inflation, peer practices, et cetera., et cetera. We will take a call at the appropriate time. Fair enough. The 2nd question is some of these vendor consolidation and GCC kind of deals that we have won. Just wanted to understand, are these any different in nature when it comes to the kind of upfront investments that are required, either on the P&L side or on the balance sheet side versus, say, some of the large deals we have done a few years ago? If you look at the commentary that I gave in terms of cash flows, we are still continuing to believe that we will generate 100%+ conversion of our free cash flow to net profit, right? We've already had five very strong quarters of cash generation, and we're still expecting that to continue for the rest of the year. Obviously, these are not impacting our balance sheet or cash flow from that perspective. We expect these to be the regular deals with the regular contours of the deals. These are not significantly different from that perspective. Understood. All right. Thank you so much. Thank you. Next question is from Sandeep Shah from Equirus Securities. Please go ahead. Yeah, thanks for the opportunity and congratulations on a very solid quarter. Just, Salil, wanted to understand. The commentary about vendor consolidation deals has been bullish, not by just you or others. It seems that Infosys is winning a higher share versus some of the peers. Considering that, and this may continue going forward, one can assume that TCV can continue to remain healthier in the coming quarter as well because vendor consolidation deals are larger in size. Hi, this is Salil. I think typically, we do not give a comment on the large deals' value in the future quarters. As Jayesh was sharing earlier, the pipeline for large deals is in a good place. We see that we are benefiting from, as you were describing, on consolidation and then some of the other areas on enterprise AI. We do not have a view on what that value will be for the next three quarters by quarter. Overall, we feel good in where the pipeline is. We see mega deals in that pipeline. That is where we would leave it. Okay, fair enough. Just in terms of what will change for clients to start spending on discretionary, apart from improving macro? Any discussion with the client implies or gives you any hope for green shoots possible on the discretionary side? It may not be near term, but maybe by the fag end of FY 2026. There, again, we have not, in that sense, have a view on where or when that would happen. What we do see is clients are quite comfortable in working with us on enterprise AI programs, on cloud, on data analytics, on enterprise applications. This, what we've discussed a little bit, in more depth on the consolidation programs. There is still quite a lot of attention on cost and efficiency. We will see how and when the clients change their thinking on some of the other points you mentioned. Okay, okay. The last question, Jayesh, I think in the press, you also mentioned that the aspiration to improve EBIT margin in this year over last year continues to remain. With the Q1 being lower than 21.1%, which was the margin in FY 2025, is it fair to assume we can still aspire to improve margin Q1Q in the rest of the three quarters? That will take us to better margin on a YoY in FY 2026. What would be the levers, apart from likely decline in the 3rd party equipment for service delivery? Salil, it's only 1/4 of the year which has gone behind. This is the part of the quarter or part of the year where we also have rolled out a compensation increase, right? That's a large headwind that we have absorbed in the quarter as we got into the year. As we go further down, there are multiple tailwinds in terms of Project Maximus, value-based selling, et cetera. That will help for sure. The 3rd party, as it reduces, will help on margins. At the same time, there will be headwinds from the mega deals or the deals that will ramp up. In terms of transition, et cetera., that will incur where we do not get revenue, but we incur costs, et cetera. These are factors that one will have to balance as we go through the year. At this point in time, as I said earlier in the press, also our aspiration remains to improve margin from where we are. Okay. Thanks and all the best. Thank you. Next question is from Vibhor Singhal from Nuvama. Please go ahead. Yeah, hi. Thanks for taking my question. Congrats again for a solid growth in this quarter. Salil, my question was on basically, again, the outlook that you provided, that we have not seen much things improving, and that is why the guidance stands where it is. Now, in your conversation with the clients, I mean, what is the deduction that we have that, look, the tariff was probably one of the most important reasons that we had the guidance when we gave it at the end of Q4? The 9th July deadline has come and passed. Now we are looking at the August 1st deadline. We had a trade deal with Japan. Do you think that over the next few months or quarters, maybe if these trade deals get finalized, the client spending could come back quickly and basically they might look at restarting the discretionary spend also? Do you think it is more structural in nature? It will also be weighed down upon how the U.S. economic growth picks up, how basically clients are looking to spend on all the other factors. Is it a mix of all, or do you think an improvement of the tariff scenario could restart the spend that has been put on hold? This is Salil. I think those are sort of important questions. What we see is there is an interest with clients across industries to essentially leverage massively the new enterprise AI technology. A lot of that for productivity, a lot of that for new ways of doing business, which will spur their own growth and spur and expand revenue for us. The foundation of that is much more attention to be on the cloud, much more attention to have a strong sort of data infrastructure, and then much more attention to have even enterprise apps onto the cloud environments. All that interest is there. There is also the view of where does sort of GDP growth and economic activity go. Our view is to make sure that we play today, there's an interest in cost and efficiency. We see some benefits of consolidation. We play that as an activity because we have strength there in addition to enterprise AI and the other areas. We try to make sure that we are well positioned for that. The other points in terms of timelines, we look at it for this year based on what we see. At the end of next quarter and so on, every quarter, as we see things which are different or the same, sort of we then update what we are looking at in terms of the overall activity. Got it, got it. Now, just one last bit from my side, since you touched upon the interest in AI. Is the current AI cycle very similar in nature to the digital adoption cycle that we saw in 2015-2016? Do you think clients are. The interest of the client, the level of interest of clients is pretty much the same, the trajectory that the industry took at that point of time in the sense that initially we had our industry's IMS and other revenues cannibalized by the cloud adoption, and then gradually it picked up momentum. Do you think the AI cycle could also play out in a similar manner? Any thoughts on that would be really helpful. There, I mean, my view is every sort of big technology shift has a way of enterprise clients making decisions in different ways. Whether it's that cycle or the one before that, with everything on the internet, or the one before that, each tech cycle has had a way of playing out. What are the factors we see? Large enterprises already have a landscape of different technologies. For anything to make a big impact, it needs, of course, the technology to be distinctive, which we think enterprise AI is. It has to then work with the ecosystem and make an impact there. I don't have a view on whether that will look like the one in the past or how similar or different it is. What we do have a view on is we see a tremendous interest in enterprise AI from clients. We see foundational capabilities that they need, which we are good at cloud, data, et cetera. which we think will help. We are also pretty good at enterprise AI, so we are more prepared as that plays out. Now, the timeline of that and the scale at the end, the enterprise tech landscape is much larger today than it was in that 10-year-ago period. There are a lot more things which need a change. Generally speaking, that gives me a good sort of feeling about the future. To try to put that as it's similar or different is more difficult for me. Got it, got it. Thank you so much for that comprehensive answer, and I wish you all the best. Thank you. Next question is from the line of Apurva Prasad from Franklin Templeton. Please go ahead. Yeah, Salil. Is the outlook that you have for the rest of the year more a function of spend velocity, related client uncertainty, or is it more of the structural AI-related productivity prospects? Can you repeat that, please? What was it? Velocity something? Yeah, Apurva, if you can repeat the question. Yeah. Am I audible now? Yeah, yeah. Go ahead. Yeah, yeah. So Salil, I'm asking if the implied outlook for the remaining part of the year, is this more a function of macro and client tech overall spend-related uncertainty that you're referring to, or is it more of the structural AI-related productivity prospect? You did share some numbers of 5-15% related benefits that are being passed through AI programs. Hi, this is Jayesh here. This is more about the macro uncertainty that we are seeing, right? As I talked earlier, we haven't really seen the environment improving from where we were at the beginning of the year. The tariff-related uncertainty still continues. The geopolitical uncertainty is still there. The client behavior hasn't changed. Many of the clients are still in a wait and watch mode when it comes to discretionary spending, et cetera. We haven't really seen the environment changing in the most strong part of the period, seasonally strong part of our business. All right. If I still want to understand the AI-related productivity, the impact that you're facing already, is there any geo or vertical-specific trend that you see here, perhaps more maybe on North America and high tech? Is there any such trend across geographies and verticals? On the AI, we see good adoption in many places. There is not like one thing which will stand out. One of the sort of comments we shared earlier was, again, financial services, if you look at our largest clients, half of them now we have become their AI strategic partner. It is a key, I would say, positional advantage that I think Infosys has there. All right. Thank you. Next question is from Nandan of Ashwin Mehta from Ambit Capital. Please go ahead. Hi, thanks for the opportunity. Two questions. One, Jayesh, in terms of the depreciation and amortization going down to almost 50 basis points, what has been the driver of that? The second is in terms of the SG&A bump-up that we have seen, which is almost 90 basis points this quarter. Is it more sales aggression that is driving it, or are there any, say, one-off events which possibly led to a material bump-up? Sorry, can you hear me? Yeah, I can hear you. Yeah. On the depreciation and amortization, if you recollect last quarter, we had a one-off on account of amortization of intangibles with respect to one of our acquisitions that has impacted by 40 basis points. That is what, not the reversal of it, but the lack of it this quarter, on a quarter-and-quarters walk, shows up as 40 basis points delta pretty much. The balance has some part of the currency impact as well. On the SG&A, it is multiple factors. Of course, comp increase that we did in Q1 has an impact. The variable pay that we did has an impact. The hiring for the S&M mainly to improve our growth trajectory, which is what I called out as 20 basis points as a safe investment in a margin walk, so that has an impact. The investment that we have done in terms of brand building, and we had some events this quarter, so that also impacted. I think all of that is reflected in SG&A. Okay, thanks, sir. All the best for the next one. Thank you. Next question is from the line of Abhishek Pathak from Motilal Oswal. Please go ahead. Yeah, hi, team. Morning and congrats on a good quarter. A couple of questions, just the firstly on the inorganic contribution. The 40 basis points impact that you're referring to, is this entirely from the acquisitions and consolidated in this quarter? Because if I were to assume some residual impact from intake, the full year inorganic number comes out to be slightly higher. Just that clarification will be helpful. The 2nd question is, there was a commentary around how discretionary spends are being kind of bankrolled entirely by the savings made by AI. Just wondering, is this going to be sort of a structural trend where there is going to be a cannibalization going forward regardless of how the demand improves? Will the clients expect us to just keep self-funding the discretionary initiatives based on these gains, or is there sort of a more structural demand recovery built in, let's say, post the next 12- 18 months where the clients do need a serious amount of investment in their data and their tech stack to basically modernize? Those are two questions. Thank you. Abhishek, the 40 basis points that I talked about is sequential. 2.6% includes 40 basis points on account of acquisitions. These are the acquisitions that we made in this quarter, the MRE and The Missing Link in Australia. That has contributed around 40 basis points out of the 2.6%. India, I think there was a last year. Right. I think I was just referring to your comment in the press conference where you said even the full year impact will be 40 basis points and hence the confusion. Yeah, so intake was pretty much 10 out of the 9. I mean, 12 months in the last year. If you look at full year basis, it's not significantly. That's the reason I said it's similar. Impact on a full year basis. If you add two months of two, two and a half months of intake and whatever, 11 months of MRE and Missing Link. Clear. Yeah. Got it. Thanks. Thank you. Next question is from Keith Bachman from BMO. Please go ahead. Hi, thank you. This is Keith Bachman from Bank of Montreal. My first question is your headcount was relatively flat quarter- on- quarter, including software professionals. How do you think about headcount trends through the year? Keith, we were able to increase our utilization this quarter by 30 basis points. That helped. Part of our growth, as I mentioned earlier, came on back of the pricing increase, including the seasonality in the business. That has helped as well. As we go forward, whatever volume growth will come in, considering that we are operating at a peak headcount, that would need additional headcount either through subcontractors or our own employees in terms of efforts. Okay, perfect. My 2nd question is, and the reason I asked about headcount, I just did not know if you would be able to break the cycle a little bit on growing headcount faster than effort because AI might help you, but it sounds like in the next couple of quarters, the answer is no. The second question is related to your delivery model. How do you think about your delivery model changing over the next year or so in terms of having, A, FTE-based versus, B, more success-based or more fixed-price contracts? Do you think your delivery model may change, enabled by or maybe caused by the advent of more AI capabilities? If you look at the delivery model, I do not think the delivery model will change in a short period of a couple of quarters. Over a longer period of time, on the back of AI, et cetera., we may expect some part of newer pricing models emerging. It could be outcome-based pricing model. It could be part-based or studio-based pricing model, etc. There are various new pricing models that are emerging as we speak. I do not think over the next year or so the entire model is going to change. The change will happen gradually in my mind. Okay. Many thanks. Best of luck. Thank you very much. Ladies and gentlemen, we will take that as a last question. I'll now hand the conference over to the management for closing comments. Thank you. Thank you, everyone, for joining us. It's been a fantastic quarter for us. Strong growth, large deals. A very good focus on enterprise AI consolidation, but also good on cloud and data work. We see this as a differentiated performance. With what we have done, which is much more positioning Infosys in that leadership area. We look forward to a good rest of financial year 2026 and connecting with you through the quarter and at the end of this quarter as well. Thanks, everyone. Take care. Bye. Thank you very much, members of the management. Ladies and gentlemen, on behalf of Infosys, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.