Infy vs TATA CONSUMER PRODUCTS Q2 FY26

IN

Infy

Q2 FY26 · Diversified

Infosys delivered a strong Q2 FY26 with constant currency revenue growth of 2.9% YoY and sequential operating margin expansion of 20 bps to 21%. Large deal TCV was robust at $3.1 billion with 67% net new, and a subsequent $1.6 billion mega deal was announced. Growth was driven by financial services and manufacturing, while AI-related projects (2,500+ generative AI, 200+ agentic) are scaling. Management raised FY26 revenue guidance to 2-3% CC, maintaining margin guidance of 20-22%. Key risk: persistent macro uncertainty and tariff-related headwinds could elongate decision cycles and pressure discretionary spending.

Guidance read

FY26 revenue growth guidance raised to 2-3% CC: Revised from previous range; reflects strong H1 performance and includes seasonal H2 softness. Operating margin guidance maintained at 20-22%: Margin guidance unchanged despite revenue guidance revision; Project Maximus and cost levers support. Mega deal with NHS worth $1.6B to ramp up this fiscal year: 100% net new deal announced post-Q2; expected to contribute to H2 revenue. Versant JV expected to close this fiscal year: Pending regulatory approvals; last year revenue AUD 210M; not included in guidance.

Risk read

Key risks include Macro uncertainty and tariff risks — Geopolitical tensions and tariff uncertainties are causing elongated decision cycles and pressure on discretionary spending, especially in retail and manufacturing.; H1B visa fee hike impact on delivery model — Analyst raised concern about visa cost increases; management acknowledged potential model shift but provided no specific quantification of margin impact.; AI deflationary pressure on revenue growth — Analyst questioned whether AI-driven productivity gains could compress revenue; management noted cost reduction focus but did not quantify net impact.; Seasonal H2 softness — Lower working days, furloughs, and calendar effects expected to impact H2 growth; guidance reflects this but could be worse if macro deteriorates..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.

Tata Consumer delivered a strong Q2 FY26 with consolidated revenue growth of 18% to ~INR 5,000 crore, driven by 14% underlying volume growth in India branded business. India tea and salt posted double-digit growth for the second consecutive quarter, while growth businesses (30% of portfolio) grew 27%, led by Sampann (+40%) and RTD (+31% volume). EBITDA margin expanded 80 bps sequentially to 13.6%, aided by tea margin normalization. International revenue grew 9%, but U.S. coffee margins remain under pressure from volatile coffee prices and tariff uncertainty. Management expects consolidated EBITDA margins to reach ~15% by Q4, contingent on coffee cost stabilization. Key risk: further escalation in coffee prices or tariffs could delay margin recovery in the U.S. branded coffee business.

Guidance read

Consolidated EBITDA margin target of ~15% by Q4 FY26: Management expects to reach ~15% EBITDA margin by Q4, implying 130-160 bps expansion from current 13.6%, barring coffee cost headwinds. India tea gross margin to remain in 34%-36% range: Tea gross margins will be maintained at 34%-36% to balance profitability and market share; pricing adjustments will be made as needed. Growth businesses to continue 30% growth trajectory: The 30% of portfolio growing at 30% is expected to sustain in the near term, driven by low penetration and distribution expansion. U.S. coffee price increases in January and possibly March 2026: Price increases announced for January 2026; a second round may be needed in March to normalize margins, subject to coffee cost and tariff evolution.

Risk read

Key risks include U.S. coffee margin pressure from volatile coffee prices and tariffs — Coffee prices remain volatile due to Brazil tariffs; management uncertain on timing of margin normalization, with at least one more quarter of pressure expected.; Distributor discontent over full portfolio mandate — News reports of distributor protests; management acknowledges discontent due to requirement to distribute entire portfolio, but denies abnormal inventory build-up.; GST disruption impact on Q2 growth and potential Q3 restocking — GST rate changes caused inventory destocking in late September; management unable to quantify how much demand was postponed vs. lost, creating near-term uncertainty.; Tea market share decline in Nielsen data — Nielsen reported 80 bps tea market share dip; management attributes it to under-representation of modern trade and e-commerce (37% of sales), but general trade share may still be declining..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.