Buy or sell Infosys stock after Q2 earnings miss, guidance cut? UBS sees 23% upside, HSBC flags margin pressure

Infosys reported a 6.2 percent year-on-year rise in net profit and 10.7 percent revenue growth for July-September quarter, but its operating performance fell short of expectations. The company also lowered its FY27 constant-currency revenue growth guidance to 1-2 percent from 1.5-3 percent, marking its weakest annual growth forecast in seven years. The company maintained its operating margin forecast of 20-22 percent.

Infosys stock closed marginally higher at Rs 1,153.80 on Friday, ahead of the earnings announcement. The stock has declined 28.2 percent so far in 2026, compared with a 13.6 percent fall in the Nifty 50. The company's market capitalisation stood at approximately Rs 4.7 lakh crore. UBS maintained its Buy rating on Infosys with a target price of Rs 1,415 per share, implying an upside of approximately 23 percent from Friday's closing price.

The brokerage said that Infosys' Q2 FY27 performance fell short of expectations, prompting another reduction in its full-year revenue growth guidance. Revenue grew 1.2 percent sequentially in constant currency terms, below UBS' estimate of 1.5 percent. Reported earnings per share of Rs 19.3 were also 1-2 percent below estimates. HSBC maintained its Hold rating on Infosys with a target price of Rs 1,110 per share, implying a potential downside of approximately 4 percent from Friday's close.

The brokerage said that Infosys' revised FY27 revenue growth guidance of 1-2 percent places the company at the lower end of its peer group. However, HSBC identified the company's $2 billion mega deal as a positive development, estimating that it could contribute approximately one percentage point to revenue growth in FY28. The brokerage also cautioned that operating margins could face pressure in the second half of FY27 because of wage increases.

Infosys reported a 6.2 percent year-on-year rise in consolidated net profit to Rs 7,823 crore for the September quarter, while revenue increased 10.7 percent to Rs 49,244 crore, marginally exceeding estimates. Operating profit rose 10.4 percent to Rs 10,330 crore but missed expectations, while operating margin slipped 10 basis points sequentially to 21 percent. The company cut its FY27 constant-currency revenue growth guidance to 1-2 percent from 1.5-3 percent, while retaining its margin forecast of 20-22 percent.

Infosys secured large deals worth $5.2 billion during the quarter, up from $3.6 billion in Q1, with 62 percent coming from net-new business. AI services revenue grew 29 percent sequentially, increasing its contribution to total revenue to 10.5 percent from 8.2 percent in the preceding quarter. Strong deal wins and AI growth offered positives amid the company's weaker near-term revenue outlook.