Infosys is facing a significant business challenge as one of its major clients considers switching to alternative service providers. The IT services company could potentially lose a substantial portion of its revenue from a key client relationship.

Major Client Relationship at Risk

Daimler, identified as one of Infosys's top three clients, is reportedly seeking a new supplier for software and equipment services. This development poses a considerable revenue risk for the Indian IT services giant.

Revenue Impact Assessment

The potential loss represents more than 33% of Infosys's $400 million yearly revenue associated with this client relationship. This significant exposure highlights the concentration risk that technology services companies face when dealing with major enterprise clients.

Business Implications

The situation underscores the challenges faced by IT services companies in maintaining long-term client relationships in a competitive market. Large enterprise clients regularly evaluate their vendor relationships and may seek alternative suppliers based on various business considerations including cost optimization, service quality, and strategic alignment.

Infosys Ltd. is expected to report muted sequential growth in the December quarter, with margins seen holding firm even as seasonality and furloughs weigh on revenue momentum. The Bengaluru-based software developer will report its third-quarter results on January 14.

Financial Performance Expectations

Bloomberg estimates show revenue and operating profit rising about 2% quarter-on-quarter, while net profit is seen little changed. EBIT margin is expected to inch up to 21.14% from 21.02% in the previous quarter.

Quarterly Dynamics and Growth Drivers

Constant currency revenue growth is projected to improve, while headcount is expected to remain broadly stable. The December quarter is expected to reflect the absence of usual pass-through revenue and the impact of seasonal furloughs. These are partly offset by benefits from earlier deal wins and internal efficiency initiatives.

Management commentary on FY26 guidance, discretionary spending trends and budget visibility for calendar year 2026 will be closely watched.

Analyst Expectations

Investec expects constant currency revenue growth of 0.8% quarter-on-quarter and 0.7% growth in US dollar terms. Growth likely supported by earlier deal wins and partial accretion from the NHSBSA contract. Q4 expected to be stronger than usual, led by accretion from NHSBSA and the Telstra joint venture. EBIT margin expected to improve, aided by Project Maximus and currency benefits.

Jefferies projects revenue to remain broadly flat sequentially, with around 0.3% growth in constant currency terms. Margin likely to expand by about 30 basis points, supported by currency benefits and partly offset by deal ramp-up costs.

UBS notes that absence of pass-through revenue likely to result in a muted growth quarter. Seasonal furloughs expected to weigh on margins. The firm expects the company to maintain FY26 guidance.

Nuvama anticipates constant currency revenue growth of 0.4% quarter-on-quarter and 0.2% growth in US dollar terms. EBIT margin likely to expand by around 20 basis points, supported by Project Maximus and currency tailwinds.

Key Focus Areas

Analysts will focus on several key areas during the results announcement:

• FY26 guidance updates and revenue growth projections
• Calendar year 2026 budget visibility and deal pipeline strength
• Discretionary spending trends in BFSI sector
• AI adoption progress and margin improvement levers
• H-1B visa fee impact on operations
• Large deal total contract value performance

Most analysts expect Infosys to maintain its FY26 revenue growth guidance of 2%-3% and margin guidance of 20%-22%, despite the seasonal softness in the current quarter.