Infosys Abandons $1.5 Billion AI Deal as Global Partner Terminates Agreement Amidst Industry Uncertainty

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Information technology major Infosys has decided to terminate its $1.5 billion agreement with an undisclosed global company, focusing on artificial intelligence (AI) solutions. The deal, initially slated for 15 years and formalized in September 2023, faced cancellation as the global partner elected to terminate the Memorandum of Understanding (MoU). This move highlights the escalating uncertainty in the demands and technology budgets of clients within the IT services sector.

The decision to terminate the agreement was disclosed by Infosys in an exchange filing on December 23, following the abrupt resignation of the company’s former Chief Financial Officer (CFO), Nilanjan Roy, less than two weeks prior. The MoU, aimed at enhancing digital experiences and providing modernization and business operations services, involved leveraging Infosys platforms and AI solutions. However, the global company’s choice to abandon the agreement has led to the cessation of further pursuit of the Master Agreement.

Infosys had initially announced the $1.5 billion contract, reflecting a potential target spend spread over 15 years, on September 14, 2023. Despite the company not disclosing the reasons behind the project’s cancellation, this development underscores the prevailing challenges faced by Infosys and other IT companies in India, grappling with subdued business conditions over the past few quarters.

In the wake of the termination, Infosys’ shares experienced a surge of 1.68% to Rs 1,562.00 per share on the Bombay Stock Exchange (BSE), while the benchmark Sensex increased by 0.34% to 71,106.96 on Friday.

Despite the setback, Infosys had demonstrated robust financial performance in the July-September quarter, with a 3.17% rise in net profit to ₹6,212 crore. The company had narrowed its revenue growth guidance for the full year to 1-2.5% at the upper end. Notably, during the September quarter, Infosys secured its highest-value large deals worth $7.7 billion.

Looking ahead, Infosys is scheduled to declare its October-December quarter earnings on January 11, 2024. Recent victories in securing deals, such as the five-year agreement with LKQ Europe and the $1.64 billion deal with Liberty Global, contribute to Infosys’ resilience amid the challenges posed by the termination of the $1.5 billion AI deal.

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