Infosys stock falls after Q2 earnings miss, guidance cut, but pares loss to 1%; brokerages see margin pressure

The stock has extended its year-to-date losses to 30 percent, compared with a 13.5 percent decline in the Nifty 50. The company's market capitalisation stood at approximately Rs 4.6 lakh crore. The decline came amid mild weakness in IT stocks, with the Nifty IT index falling 0.12 percent. At about 10 am, the Sensex was down 187 points at 73,311, while the Nifty declined 46 points, or 0.86 percent, to 22,646.

UBS maintained its Buy rating on Infosys with a target price of Rs 1,415 per share, implying approximately 23 percent upside from Friday's closing price of Rs 1,153.80. The brokerage said that Infosys' revenue grew 1.2 percent sequentially in constant currency terms, below its estimate of 1.5 percent and the consensus forecast of 1.8 percent. Operating margin slipped 10 basis points to 21 percent, while earnings per share of Rs 19.3 were also below estimates.

HSBC retained its Hold rating with a target price of Rs 1,110, implying approximately 4 percent downside from Friday's close. The brokerage highlighted that Infosys' revised FY27 revenue growth guidance was at the lower end of its peer group and warned of margin pressure from wage hikes in the second half of the financial year. However, HSBC viewed the company's $2 billion mega deal positively, estimating that it could contribute around one percentage point to revenue growth in FY28.

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

Infosys secured large deals worth $5.2 billion during the quarter, compared with $3.6 billion in the preceding quarter, 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 June quarter. However, the company's weaker growth outlook and concerns over near-term profitability have overshadowed these positives, contributing to the sharp decline in its shares following the earnings announcement.