Infosys Flags AI Productivity Pressure as Employee Costs Rise

Infosys has flagged increasing pricing pressure as clients expect greater productivity gains from artificial intelligence (AI), even as the technology creates new business opportunities.

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The development shows the growing challenge for HR leaders in the IT services industry to balance employee costs, productivity expectations and workforce skills.

During its second-quarter earnings discussion on October 23, 2026, Infosys Chief Financial Officer Jayesh Sanghrajka said pricing pressure was increasing due to competition and higher client expectations around productivity.

He also indicated that employee compensation increases would affect the company’s performance in the second half of FY27.

AI Productivity Changes Client Expectations

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Clients are increasingly expecting IT service providers to deliver more work at lower costs as AI tools improve the speed and efficiency of software development and other technology services.

Infosys Chief Executive Officer Salil Parekh said some client expectations for AI-driven productivity were higher than the improvements the company could deliver within its commercial requirements.

Also Read: AI Skills Reshape Entry-Level Jobs as IT-BPM Fresher Hiring Recovers

The company said it would remain selective about contracts that do not meet its financial criteria.

AI-related revenue accounted for 10.5% of Infosys’ total revenue in the September 2026 quarter, up from 8.2% in the previous quarter. AI revenue grew 29% sequentially, reflecting increasing business activity in this area.

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However, higher AI adoption is also putting pressure on traditional IT services pricing, as clients seek to benefit from efficiency gains.

Implications for HR and Workforce Planning

The developments underline several issues for HR leaders in IT services companies.

• Productivity measurement: HR and business leaders may need to assess how AI affects employee output, project delivery time and workforce productivity.
• Skills development: Employees may need training in AI tools and new ways of working to meet changing client expectations.
• Compensation and costs: Companies will need to manage salary increases alongside pricing pressure and business growth requirements.
• Workforce planning: HR teams may need to review skill availability, employee deployment and utilisation as AI changes how projects are delivered.

Infosys lowered its FY27 revenue growth guidance to 1–2% in constant currency terms, compared with its earlier estimate of 1.5–3%.

The company cited softer business volumes, competitive pressure and weaker discretionary spending in some sectors. Its operating margin remained at 21% in the September quarter.

For HR leaders, the key issue is how to prepare employees for AI-enabled work while maintaining productivity, controlling costs and supporting business growth.

The company’s latest comments do not, by themselves, indicate any announcement of workforce reductions.