Infosys shares plummeted over 7 per cent to a 52-week low following its Q4FY26 results and a cautious FY27 revenue growth guidance, sparking concerns among investors and analysts about the impact of AI-led deflation and margin pressures on the IT giant.
IMAGE: Salil Parekh, CEO & Managing Director, Infosys. Photograph: ANI Photo
Key Points
- Infosys shares fell over 7 per cent to a 52-week low after announcing Q4FY26 results and a modest FY27 revenue growth guidance.
- The company reported a 20.9 per cent year-on-year increase in net profit and a 13.4 per cent rise in revenue for Q4FY26.
- Infosys guided for a 1.5-3.5 per cent revenue growth in constant currency for FY27, which was below analysts’ estimates.
- Brokerages like Emkay Global, Nomura Research, Motilal Oswal, and JM Financial have revised their EPS estimates, citing concerns over AI-led deflation and margin pressures.
- Despite the near-term challenges, analysts believe Infosys’ positioning in AI-led transformation and cost optimisation programmes should support gradual improvement.
Shares of information technology (IT) services major Infosys slipped up to 7.2 per cent on the BSE on Friday, logging a 52-week low of Rs 1,152.35 apiece.
At close, Infosys shares were down 7.09 per cent at Rs 1,154.45. By comparison, the BSE Sensex was down 1.29 per cent at 76,664.21.
The stock was under pressure after the company released its results for the fourth quarter of 2025-26 (Q4FY26) on Thursday.
The results were announced after market hours.
The Nifty IT index too was a big loser in trade, shedding 5.29 per cent to close at 28,530 points.
Factors Behind the Decline
The fall in the index was on account of a sluggish growth guidance by major information technology (IT) companies, including Infosys, lower discretionary spends, and worries of margin pressure brought on by shift to artificial intelligence (AI).
In Q4FY26, Infosys posted a 20.9 per cent year-on-year (Y-o-Y) increase in net profit to Rs 8,501 crore, while revenue rose 13.4 per cent to Rs 46,402 crore.
However, the company guided for modest revenue growth of 1.5-3.5 per cent in constant currency (CC) for FY27.
Brokerage Insights and Outlook
Emkay Global Financial Services said that Infosys delivered a soft operating performance in Q4FY26, with revenue missing estimates, though margins were in line.
The company guided for 1.5-3.5 per cent revenue growth in FY27 on a constant currency basis, which was below estimates.
The guidance included 25 basis points (bps) contribution from Stratus, while excluding Versent and Optimum Healthcare acquisitions, pending closure.
It also factors in a 0.75-1 per cent drag from reduced spending by a large European manufacturing client, along with a 50 bps impact from an offshore shift.
The management is eyeing an earnings before interest, tax, depreciation, and amortisation (Ebitda) margin in the 20-22 per cent range.
This is despite headwinds from wage hikes, productivity pass-throughs, 70 bps impact from acquisitions, and AI investments, though some of this will be offset by Project Maximus initiatives.
The brokerage trimmed its FY27-FY28 earnings per share (EPS) by 0.5-1 per cent, factoring in Q4FY26 results and guidance.
It has a “buy” rating, with a target price of Rs 1,450.
Nomura Research has retained Infosys as its top pick in the largecap India IT space, with the stock currently trading at approximately 15 times FY27 EPS of Rs 82.
Nomura expects Ebit margins to remain broadly stable at 21 per cent in FY27, flat Y-o-Y, within the guided band of 20-22 per cent.
It has made less than 1 per cent change to its FY27-FY28 EPS estimates, reflecting the broadly in-line quarter and guidance. Nomura has a “buy” rating, and it has raised its target price to Rs 1,640 from Rs 1,630.
Motilal Oswal Financial Services noted that guidance reflected increasing pressure on the existing book of business, and highlighted that AI is now compressing business.
While part of this is attributable to competitive intensity and pricing in a low-demand environment, Motilal Oswal expects the impact of deflation to continue as AI productivity benefits are passed on to clients.
The brokerage cut its FY27-FY28 EPS estimates by 2-4 per cent to reflect lower growth assumptions and continued pricing pressure from AI-led deflation, partly cushioned by lower taxes.
Near-term growth remains constrained, with guidance implying 2.5 per cent organic growth.
While execution on deal conversion and pricing remain key monitorables, Infosys’ positioning across AI-led transformation and cost optimisation programmes should support gradual improvement over the medium term, according to analysts.
The brokerage has a “buy” rating, though it has cut the target price to Rs 1,450 from Rs 1,500.
Infosys’ Q4FY26 revenue and margins were below expectations of JM Financial Institutional Securities.
Margin headwinds for FY27 also include a potential 70 bps dilutive impact from acquisitions.
JM Financial prefers Infosys among the top-6 Indian IT companies, given its healthy, large deal wins.
Valuations are at 16 times FY27 consensus EPS. Analysts have revised their EPS estimates down by 1-2 per cent over FY27-FY28, incorporating Q4FY26 results.
The brokerage has a “buy” rating, though the target price has been cut to Rs 1,500 from Rs 1,525.
