According to Mint, which cited sources familiar with the situation, Infosys Ltd. faces the possibility of losing almost one-third of its around $400 million yearly income from Daimler, one of its top three customers, as the German carmaker searches for a replacement vendor after execution delays.
Infosys–Daimler Revenue Risk Explained
At a time when client technology budgets are being tightened by economic uncertainty, tariff tensions, and automation, the possible loss might be around $150 million, or 0.7 percent of Infosys’ FY25 sales.
Mint claims that the contract’s “workplace solutions” section, where Infosys purchased and provided equipment, software, and devices for Daimler’s back-end IT operations, carries the majority of the risk.
🏢 Infosys–Daimler Contract Overview
- Client: Daimler (Mercedes-Benz Group & Daimler Truck)
- Annual Revenue: ~$400 million
- Revenue at Risk: ~$150 million
- Contract Value: $3.2 billion
- Contract Duration: 8 years (signed in 2020)
- High-Risk Segment: Workplace solutions
Background of the Infosys–Daimler Agreement
In December 2020, Infosys and Daimler struck an eight-year, $3.2 billion IT transformation agreement that included six business units. The engagement’s main focus was workplace solutions. In December 2021, Daimler divided into Mercedes-Benz Group and Daimler Truck; nonetheless, Infosys continued to provide IT services to both companies.
The workplace solutions contract was supposed to be renewed last year, according to Mint, but clarity is now only anticipated in June. According to sources quoted in the paper, the customer rejected an Infosys request for proposals.
Billing Issues and Partial Renewal
The partial renewal coincides with disagreements regarding billing delays and execution. According to persons familiar with the situation, as of January 12, Daimler, which includes Mercedes and Daimler Trucks, owes Infosys around $47 million going back to 2021.
According to Mint, other parts including SAP, network services, and call functions have not been completely extended, while cybersecurity and data center services have been extended till 2029.
📉 Industry View on Large IT Contracts
- Execution Challenges: Billing delays and scope disputes
- Analyst View: Limited short-term upside from renewals
- Trend: Clients rationalising scope and pricing
- Competition: Another Indian IT major has bid for the deal
- Industry Shift: More work moving in-house
Competitive Pressure and Analyst Commentary
According to Mint, one of the major IT services companies in India has already submitted a proposal for a piece of the Daimler contract; however, the competitor was not identified. “It is doubtful that Infosys would receive considerable additional income from Daimler in the short future,” HFS Research CEO Phil Fersht told Mint, noting that scope rationalization and price pressure usually counteract any growth driven by renewals.
Under CEO Salil Parekh, who came over in January 2018 and propelled Infosys to the top of its rivals in big deal wins, the Daimler contract was one of twelve huge transactions totaling more than $1 billion.
Daimler’s Importance to Infosys
After Apple Inc. and JPMorgan Chase & Co., Daimler is one of Infosys’ top three customers, an executive told Mint. Infosys’ manufacturing revenue doubled to $3 billion in FY25 from $1.3 billion in FY20 thanks to the initiative, internally referred to as the “twice as fast program.”
According to JM Financial analysts, revenue from Infosys Automotive and Mobility GmbH, the company formed for the Daimler contract, decreased 8.5% year over year to $418 million in FY25 after two years of growth over 40%. Additionally, the unit has not turned a profit for four years running. According to JM Financial, the drop indicates that the Daimler account’s income has peaked and moved into a mature stage.
Industry Context and Precedents
In the IT services sector, mid-contract terminations are not unusual. In 2023, HCL Technologies and State Street dissolved a long-standing alliance, while Transamerica discontinued a $2 billion, ten-year outsourcing agreement with Tata Consultancy Services, according to earlier reports from Mint. Large outsourcing contracts have decreased as a number of multinational corporations have progressively moved technological work in-house.
Frequently asked questions
1. What may cause Infosys to lose money from Daimler?
Due to billing conflicts and execution delays, Infosys may lose money, which would force Daimler to find a substitute provider for a portion of the IT contract.
2. How much money may Infosys lose to Daimler?
An estimated $150 million might be lost each year, which is almost one-third of the approximately $400 million that Infosys receives from Daimler each year.
3. What is the most vulnerable aspect of the Daimler contract?
The category with the most risk is workplace solutions, which involves purchasing devices, software, and hardware for back-end IT operations.
4. Has Daimler severed all ties with Infosys?
No, although certain services, including data center operations and cybersecurity, have been extended until 2029, others, like SAP and network services, are still up in the air.
5. How important is Daimler to the overall operations of Infosys?
One of Infosys’ top three customers is Daimler, and over the last several years, the deal has greatly increased Infosys’ manufacturing income.
Conclusion
As Daimler reevaluates some aspects of its long-standing IT outsourcing contract, Infosys faces a significant income risk. Even while the possible $150 million effect only makes up a small percentage of Infosys’ total income, the incident illustrates more general issues that IT services companies must deal with, such as price pressure, execution scrutiny, and customers increasingly moving technological work in-house.
Despite the fact that important parts of the Daimler contract are still in place, experts think the account has reached a mature stage, which will restrict its potential for short-term development. The long-term financial effect on Infosys would depend critically on the result of the renewal talks that are anticipated later this year.
Disclaimer: This content is for informational purposes only and does not constitute investment advice.
