Shares of IT services major Infosys tumbled as much as 4% to their day’s low of Rs 1,107 on the NSE on Monday after the company reported its Q2 earnings last week. The company posted a modest 6% year-on-year (YoY) growth in its consolidated net profit at Rs 7,823 crore in the second quarter against Rs 7,364 crore in the year-ago period.
The IT giant trimmed its revenue growth guidance to 1-2% in constant currency for FY27, down from 1.5-3% given earlier. Infosys cited a challenging demand environment as a reason for lowering its guidance. Revenue from operations in the reporting period increased 11% YoY to Rs 49,244 crore.
Buy, sell or hold Infosys shares?
Nomura maintains a Buy rating on Infosys with a target price of Rs 1,300, implying an upside of 12.5%. The company's FY27E guidance was slightly above expectations.
Infosys revised its FY27E revenue growth guidance to 1%-2% year-on-year from 1.5%-3.0%, including an unchanged contribution of around 170 basis points from acquisitions. The lower end of the range assumes further macroeconomic deterioration, while the upper end factors in an improvement in the macro environment. The company attributed the revision to pricing pressure from intensifying competition, which resulted in lower-than-expected price increases and softer volume growth in Q2FY27, below its expectations.
Revenue growth estimates for FY27-28F have been revised to 1.1%-2.0% from 1.2%-2.8% earlier.
Goldman Sachs maintains a Neutral rating on Infosys with a target price of Rs 1,000. The second consecutive cut to FY27 guidance points to continued weakness in revenue visibility, with the revised guidance midpoint implying modest negative organic growth.
Sensex Today | Nifty 50 | Catch all the LIVE stock market action here
A mega deal win could partly offset the revenue headwinds expected in FY28 from a client exit. However, sluggish demand, client ramp-downs and competitive pricing pressure continue to weigh on the outlook for the services business. Margins are expected to remain range-bound amid pricing pressure, while revenue and EPS estimates remain broadly unchanged.
Morgan Stanley has maintained its Equal-Weight rating on Infosys while raising its target price to Rs 1,075 from Rs 976. The revised target implies a downside of 6.88% from the closing price of Rs 1,154.50.
The brokerage said Infosys' Q2FY27 revenue and margins fell short of its estimates and consensus expectations, while the FY27 guidance cut was in line with its projections. Strong deal wins could partly offset revenue headwinds in FY28, but a recovery in growth will depend on converting these wins into revenue. Weak discretionary spending, intensifying competition and AI-related pricing pressures remain key concerns, with no clear near-term catalyst for growth.
Citi has maintained its Neutral rating on Infosys while raising its target price to Rs 1,105 from Rs 1,030. Based on the closing price of Rs 1,154.50, the revised target implies a downside of 4.29%.
Also read: Jio IPO allotment likely today: GMP signals 22% listing gains — Here’s how to check status
The brokerage said Infosys is executing reasonably well despite industry-wide challenges, though growth is expected to remain subdued.
The recent mega deal also addresses concerns that the company could enter FY28 at a disadvantage relative to its peers. However, cautious client spending and intense competition over AI-driven productivity gains continue to weigh on the outlook. Citi remains cautious on the sector.
Choice Institutional Equities considers Infosys Q2 results largely mixed, with near-term growth likely to remain under pressure. However, strong bookings and AI adoption offer visibility on a recovery. The brokerage said execution, deal conversion and margin protection remain key factors. It has marginally revised its estimates to account for a slower recovery, while retaining its ‘Reduce’ rating and unchanged target price of Rs 1,060, based on 13x the average FY28E/FY29E EPS.
Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.