Infosys Jumps 5% After Q3FY26 Results, But Here’s What The Headlines Missed!

Infosys shares surged nearly 5% today, and at first glance, it looks surprising.
Because if you only read the headlines, you’ll see this:

Margins were down
Profits were under pressure
And the results didn’t look “amazing” on the surface

So why did the stock rally so sharply?
And why did the entire IT sector turn green along with it?
Let’s break it down in a simple and practical way.

The Bigger Story: It Wasn’t Just Infosys Rallying
Today’s rally wasn’t limited to Infosys.
The entire IT sector moved up even before many companies declared their earnings.
Here’s how the sector performed:

LTI Mindtree up 5.5%
Tech Mahindra up 5%(Results not yet declared but expected to declare today)
Wipro (Results not yet declared but expected to declare today) and Persistent up around 3%

And the Nifty IT index was up over 3%

The reason is simple:
When the largest and most trusted IT company signals stability, the market takes it as a positive indicator for the entire sector.
Infosys Q3 FY26 Revenue: Stable and Consistent
For the quarter ending December 31, 2025, Infosys reported consolidated revenue of ₹45,479 crore
That is:

8.9% YoY growth (vs ₹41,764 crore in Q3 FY25)
2.2% QoQ growth (vs ₹44,490 crore in Q2 FY26)

This already tells us something important: demand hasn’t collapsed. It’s steady.
Even better, Infosys reported positive growth in constant currency terms, which removes the impact of currency movements:

0.6% QoQ growth
1.7% YoY growth

This suggests that growth was driven by actual business momentum, not just forex support.
The “Profit Drop” Was Real, But Not For The Reason You Think

Now let’s talk about the part that confused many investors.
Infosys reported weaker profitability:

Operating profit came in at ₹8,355 crore, down 6.3% YoY
Operating margin declined to 18.4% (from above 21% earlier)
Net profit dropped to ₹6,654 crore

Down 2.2% YoY
Down 9.6% QoQ

So yes, the profit numbers looked soft.
But here’s the key point investors noticed:
Infosys booked a one-time exceptional charge of ₹1,289 crore.
This charge was linked to India’s new labour codes.
What Was This ₹1,289 Crore Exceptional Item?
India’s new labour codes change the definition of “wages”, which increases statutory liabilities like:

gratuity
other employee-related benefits

As per accounting rules, when such changes occur, companies have to recognise the total impact immediately in the profit and loss statement.
So Infosys recorded it as a one-time exceptional charge.

This is important because:

It is not part of regular business performance
It is not expected to repeat every quarter
It does not reflect weaker demand or execution

Meaning: the profit drop is not a “core business slowdown”, it’s largely an accounting adjustment.
And that is exactly why investors were willing to look through it.

Segment and Geography: Europe Was The Bright Spot

Infosys’ largest vertical remained Financial Services, contributing 28.2% of total revenue.Some segments like Manufacturing and Communication showed strong growth, while Retail, Hi-Tech and Life Sciences remained soft, indicating uneven demand across industries.

Geographically:

North America remained the largest market but showed marginal decline
Europe stood out with 13.3% revenue growth
Europe now contributes 32.7% of total revenue

In short, Europe helped balance weakness in other regions, making the overall demand picture look more stable.

The Biggest Confidence Booster: $4.8 Billion Deal Wins
This is where investor sentiment truly shifted to the positive side.
Infosys reported large deal wins worth $4.8 billion in Q3 FY26

Even more importantly:

57% of the total contract value was from net new deals, meaning fresh client wins, not just renewals
Infosys also added 121 new clients, taking the total to 1,949 active clients.

Large deal wins improve revenue visibility for upcoming quarters and signal that clients are increasing spending.

So Why Did Infosys Shares Rise?
Because markets didn’t react to the profit number alone.
Markets reacted to the quality of earnings.
The one-time charge created a short-term drop in profits, but the core business looked stable:

Steady revenue growth
Positive constant currency performance
Strong deal pipeline
Europe growth offsetting other weak regions

That’s why investors rewarded the stock.

Why The Entire IT Sector Turned Green
When the leader of the pack, Infosys, shows stability and confidence, the market often assumes the rest of the IT sector will benefit too.
That’s why we saw a broad-based rally in IT stocks even before their earnings were out.

Key Takeaway for Investors
Infosys’ 5% jump today is a reminder of a simple market truth:
Markets don’t reward perfect headlines.
They reward strong underlying business signals.
And despite margin pressure, the biggest negative factor this quarter was one-time in nature, while demand and deal momentum stayed intact.

Infosys Jumps 5% After Q3FY26 Results, But Here’s What The Headlines Missed!

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