Infosys falls 2% post Q1; analysts cautious on guidance cut, trim targets

Infosys reported a 12.2 per cent increase in net profit for the first quarter to ₹7,769 crore on a year-on-year basis. Revenue for the quarter was up 14 per cent to ₹48,211 crore.

Infosys Q1 results review: Infosys' share price tumbled after the company reported its Q1FY27 results, delivering weaker-than-expected performance for the April–June quarter. The IT services major's earnings saw management cut guidance at the top end, from 3.5 per cent to 3 per cent on a constant-currency basis. 

 

At 9:19 AM, Infosys share price was trading 1.50 per cent lower at ₹1,204.80 per share on NSE. In comparison, Nifty 50 was down 0.38 per cent at 24,124.45. In intraday trade, the stock declined 3.19 per cent to touch the day's low at ₹1,182.60 per share.

 

Infosys Q1 results highlights:

 

• Infosys’ net profit for the first quarter rose 12.2 per cent year-on-year (Y-o-Y) to ₹7,769 crore, while revenue was up 14 per cent at ₹48,211 crore.
• Financial services, the main contributor of revenue, was up 2.4 per cent in constant currency Y-o-Y
• Operating margin went up 30 basis points to 21.1 per cent
• Total employee count at the end of the quarter stood at 328,062, down 532 people. Attrition for the quarter was at 13 per cent, up from 12.6 per cent reported in Q4FY26.
• On a dollar basis, revenue rose 2.8 per cent Y-o-Y, while on a constant currency basis, it was up 2.4 per cent. On a sequential basis, revenue grew by 1 per cent.
• Total contract value of large deals won during the last three months was $3.6 billion, with four of the six large deals just shy of $500 million.
• Infosys also said its AI revenue accounted for 8.2 per cent of the topline, up from 5.5 per cent when it first disclosed it in February, and growing in double digits sequentially.

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Brokerages’ view on Infosys post Q1 Results

Nirmal Bang | Sell | Target ₹968

 

 

Nirmal noted that, Infosys reported a weak performance in Q1FY27, with the guidance cut at the top end from 3.5 per cent to 3 per cent CC "has left questions on expected AI deflation".

 

"Revenue at US$5,082 million was 1 per cent higher than consensus estimates. But, it was 1 per cent lower than NBIE estimates. It was up by. We had estimated 1.4 per cent Q-o-Q CC growth. Full year weak expectation was on the back of macro uncertainty and competitive pricing environment."

 

Nirmal Bang remains underweight on the IT sector for FY27, citing margin pressure from the rapid adoption of Generative AI, which it believes is impacting the industry sooner than expected. The brokerage has reiterated its 'Sell' rating on Infosys and lowered its target price to ₹968 from ₹1,051, while reducing its valuation multiple to 13 times from 14 times.

 

Emkay | Buy | Target ₹1,300

 

The brokerage noted that Infosys reported a mixed operating performance in 1Q, with revenue missing estimates, while margins remaining in line. 

 

Emkay cut Infosys earnings per share due to the Q1 miss, noting that, " We cut FY27-29E EPS by 0.9-3 per cent, factoring in the 1Q miss and organic guidance cut. Considering undemanding valuation, we retain Buy and cut target price by 4 per cent to ₹1,300 from ₹1,350, at 16 times Jun-28E EPS."

 

PL Capital | Buy | Target ₹1,240

 

The brokerage noted that Infosys' organic revenue performance was flat Q-o-Q CC, below their estimate of 0.8 per cent Q-o-Q CC, attributed to softer volumes, a one-off EU&R client’s project termination (50bps Q-o-Q impact) and weakness in a large European manufacturing client.

 

PL Capital also highlighted that the company's guidance for FY27 lowered to 1.5-3 per cent Y-o-Y CC compared to 1.5-3.5 per cent organic growth earlier while Ebit margin guidance maintained at the band of 20-22 per cent. The ask rate for the remaining quarter comes to 0.5-1.4 per cent CQGR based on the revised guidance. 

 

PL Capital has cut its FY27 and FY28 earnings estimates for Infosys by 1.8 per cent and 2.7 per cent, respectively. However, the brokerage believes the stock's attractive valuation of 12 times FY28 earnings and a dividend yield of around 6 per cent should provide near-term support. It has retained its 'Buy' rating but lowered the target price to ₹1,240, valuing the stock at 15 times FY28 earnings versus 16 times earlier. 

Anand Rathi | Buy | Target ₹1,270

 

The brokerage said that Infosys reported soft Q1FY27 quarterly results led by a 50 bps impact due to an EURS program termination,  higher volume softness than planned, and lower price realisation than expected.

 

In terms of risks for the company, Anand Rathi highlighted that AI-led revenue compression may accelerate beyond current estimates, during renewals, competitive intensity on pricing could intensify further, worsening macro conditions, and closure timelines of the Versent acquisition. 

 

Anand Rathi has marginally lowered its FY27 and FY28 revenue and profit estimates for Infosys to reflect a softer outlook. Despite the revisions, the brokerage expects adjusted earnings per share (EPS) to grow at a healthy pace over FY26–FY28 and has maintained a target price of ₹1,270.

   

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Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.