A strong Q1 performance and deal bookings should have resulted in a guidance raise, in our view.
| Photo Credit:
VIVEK PRAKASH
Target: ₹2,085
CMP: ₹1,553.55
Infosys’ Q1 revenue growth (+2.6 per cent q-o-q cc) beat the street and our expectations despite the lower third-party item sales, largely on increased pricing and seasonality. EBIT margin saw a 13 bps q-o-q contraction and was slightly below consensus and our expectations. Infosys raised the lower end of its FY26 cc revenue growth guidance by 1pp to 1-3 per cent (implies c0.5-2.5 per cent organic vs 0-3 per cent earlier) and retained the EBIT margin band of 20-22%, leaving the mid-point of its organic growth guidance unchanged.
A strong Q1 performance and deal bookings should have resulted in a guidance raise, in our view. However, Infosys noted that an implied cut in the top-end of the organic growth guidance reflects its upper end assuming a stable demand environment, versus an improvement earlier, and not any change in operating performance assumptions.
Infosys also expects EBIT margin to recover, aided by reduced third-party costs, a lower mix of low-margin mega deals and efficiency gains from Project Maximus.
With dividend yield that is close to its all-time high (ex-Covid period) and earnings growth that should outperform its peers in FY26, we view Infosys’ equity story as attractive.
We tweak our FY26-28 estimates as we bake in Q1 results, commentary and guidance. Our DCF- based TP rises marginally to ₹2,085. Retain Outperform. Infosys is our top pick in the sector.
Published on July 24, 2025
