Infosys signs five-year AI deal with $2 billion target spend

IT major Infosys has signed an agreement with one of its existing clients. to provide artificial intelligence (AI) and automation-based modernisation and maintenance services, according to its filing to the stock exchanges filed late Monday.

“Infosys has entered into a framework agreement with one of its existing strategic clients to provide AI and automation-led development, modernisation and maintenance services. The total client target spend over 5 years is estimated at $2 billion,” the filing said without disclosing the name of the client. 

The announcement comes just as the Bengaluru-headquartered firm is slated to report its numbers for the first quarter of FY24 on Thursday, at a time when most of its peers Wipro, Tata Consultancy Services and HCL Tech have posted results below market expectations.  Infosys had given a revenue growth guidance of 4-7% in constant terms for FY24, and operating margin guidance of 20-22%. 

In Q4, Infosys reported a 7.8% year-on-year (y-o-y) rise in net profit at Rs 6,128 crore, missing market expectations. Previously in Q3, its profit dipped 7% from Rs 6,586 crore weighed down by a tough macro-environment.

Infosys' share price gained 2% at Rs 1,445.35 after the development and surged nearly 4% to close at Rs 1,475. The company did not respond to DH’s query seeking details on the deal citing a “silent period”. 

The announcement by Infosys comes at a time when there is increasing focus on AI investment worldwide, after ChatGPT, a generative AI chatbot by Microsoft-backed OpenAI took the world by storm in late 2022. 

While Wipro Ltd launched 'Wipro ai360' and planned to invest $1 billion into AI over the next three years, TCS announced it will train 25,000 engineers on generative AI tools from Azure OpenAI over the course of the next 3 years.

Late in May, Infosys had announced a new platform called Infosys Topaz that offers a combination of data analytics and generative AI. The platform is aimed at creating efficiencies across the enterprise by using smart tools, platforms, and autonomous software engineering for business agility.

Recently, Infosys signed a strategic collaboration deal with Nordic-based Danske Bank to accelerate the bank’s digital transformation initiatives. The $454 million deal will be in force for five years with an option to renew for an additional year for a maximum of three times. It also acquire Danske Bank’s IT centre in India, where over 1,400 professionals are employed.

"Integrating AI with internal operations will bring greater efficiency to businesses, large IT companies are also ramping up to be able to offer AI services to clients (like those in the banking sector), who currently have and in the future will have more AI integrated into their core functions. A large part of their projects going forward will have AI components, and companies have to prepare for that," underscored Devroop Dhar, co-founder and managing director of consultancy firm Primus Partners.

"While India has a huge tech workforce, there's a dearth of workforce that can work on AI and the latest technologies. IT firms like Infosys are investing extensively to bridge those gaps,"  he added.