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IT services companies grow revenue by winning and expanding client work, realizing better prices, and selling a mix of services and contracts that generates more billable work. Their margins depend on what it costs to deliver that work—including staffing, utilization, delivery location, third-party services, and the economics of each contract. Revenue growth and margin improvement are related, but one does not guarantee the other.
Infosys’s fiscal 2025 Form 20-F illustrates these mechanics with company-specific figures. They are examples, not industry averages or targets.
How can revenue grow without margins improving?
Revenue rises when a provider sells more work, expands services within existing accounts, wins new engagements, or realizes better pricing. The mix and timing of that work also matter. A company may report higher revenue while spending more to deliver it, so its margin percentage can stay flat or fall.
For example, Infosys says onsite services typically generate higher revenue per capita than services performed at its own facilities in India, but at lower gross margins as a percentage of revenue. A shift toward onsite work can therefore lift revenue per employee without lifting the margin percentage.
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Infosys reported that 52.3% of its fiscal 2025 revenue from billable IT-services professionals came from onsite work and 47.7% from offshore work. These figures describe Infosys for that fiscal year; they are not a sector-wide delivery mix.
Why does utilization affect profitability?
Utilization connects a company’s available delivery capacity to the work it can bill. Infosys defines IT-services utilization as billed person-months divided by available person-months for relevant professionals. Sales, administrative, and support employees are outside this measure.
When professionals are assigned to client work, their capacity can generate billable revenue. When they are unassigned, or when time goes to training rather than billable work, the company may still carry compensation costs without corresponding client revenue. Infosys also identifies unexpected project termination and training as factors that can reduce utilization; project needs and timetables shape staffing.
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Infosys reported fiscal 2025 utilization of 83.4% including trainees and 85.5% excluding trainees. The distinction matters: a utilization rate is meaningful only alongside its definition, and these company figures should not be treated as universal targets.
How do delivery location and staffing mix affect margins?
Onsite, nearshore, and offshore staffing can have different revenue and cost profiles. Onsite professionals may support work that commands more revenue per person, while compensation and other delivery expenses can also be higher. Offshore delivery at a company’s own facilities may have a different cost structure. The effect on gross profit depends on both the revenue earned and the cost of delivering it.
Infosys says the proportions of onsite and offshore work vary over time and affect revenue, cost of sales, and gross profit. As a result, a change in delivery mix can move reported revenue and margins in different directions. There is no blanket rule that offshore work always improves margins: the outcome depends on the engagement, staffing plan, and costs.
What role do pricing, contracts, and large deals play?
Pricing realization—the price a company ultimately earns for its services—affects how much revenue an engagement produces relative to its delivery costs. But price is only one part of contract economics. Staffing assumptions, purchased delivery items, project execution, and the timing of work all influence profitability.
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Infosys reported that approximately 54% of its fiscal 2025 revenue came from fixed-price contracts. That share alone does not show whether fixed-price work is more or less profitable than other contract types: profitability depends on the price agreed, the work delivered, and whether the provider controls its costs.
Large engagements can also have different economics at different stages. Infosys says large deals typically have lower margins early in the deal period, when work is ramping up. A growing contract may therefore add revenue before it reaches its later delivery scale or margin profile.
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How do service mix and delivery costs change the picture?
Companies sell different services and may report different results across business segments. Infosys attributed fiscal 2025 profitability changes to factors including pricing realization, onsite mix, third-party delivery costs, and large-deal ramp-up. The contribution of these factors can vary across segments, so company-wide results may conceal different trends in individual lines of business.
For fiscal 2025, Infosys reported 95.3% of revenue from software and BPM services and 4.7% from products and platforms. Those figures describe its own reported mix, not the typical mix of an IT services provider.
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Third-party items purchased to deliver services add another cost variable. Infosys also identified foreign-currency translation among factors associated with segment profitability changes. The impact depends on a company’s contracts, delivery footprint, costs, and currency exposure; the filing does not establish one universal effect for all providers.
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What should investors or customers compare between providers?
Compare companies using the same periods and definitions. A headline growth rate or margin can be misleading if one company’s mix, utilization calculation, or accounting measure differs from another’s.
- Revenue growth: Check the period, currency basis, and whether growth reflects existing operations or acquisitions.
- Pricing and work mix: Consider the services sold, pricing realization, and whether major engagements are newly ramping or more established.
- Delivery footprint: Compare onsite, nearshore, and offshore staffing where disclosed, while accounting for differences in revenue and cost per delivery location.
- Utilization: Read the definition and check whether trainees are included; rates using different definitions are not directly comparable.
- Delivery costs: Look for labor compensation, subcontractor or third-party delivery costs, and productivity initiatives.
- Profitability measure: Distinguish gross margin from operating margin or another reported measure, and compare the same business segments where possible.
Infosys’s fiscal 2025 filing demonstrates why these distinctions matter, but it does not provide peer-company results for a sector ranking.
What the available figures can—and cannot—show
Infosys’s fiscal 2025 disclosures illustrate how utilization, delivery location, pricing, contract stage, and delivery costs can interact. They do not establish how much each factor contributes across the IT services industry, a universal utilization target, or a rule that a particular delivery location or contract type will always produce higher margins. Treat each figure as a company- and period-specific measure, and compare it only with figures reported on a compatible basis.
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