Infosys shares fall 3% as JPMorgan downgrades stock, Jefferies cuts target after Q1 results
The lower revenue guidance indicates limited demand visibility despite strong deal wins and growing AI-led revenue. The IT sector continues to face slower discretionary spending, delayed client decision-making and pressure from AI-driven productivity gains.
The company reported a 12% year-on-year (YoY) rise in consolidated net profit to Rs 7,769 crore for the first quarter of FY27, compared with Rs 6,921 crore in the year-ago quarter. Revenue from operations increased 14% YoY to Rs 48,211 crore.
Also read: Infosys names Ashiss Kumar Dash to succeed Salil Parekh as CEO
Infosys shares: Buy, sell or hold?
JPMorgan downgraded Infosys to Neutral with a target price of Rs 1,050, saying the company’s Q1 revenue missed expectations sharply and its revenue guidance was cut significantly for the second consecutive quarter following a major miss in Q4. The brokerage said growth momentum has faced multiple setbacks, including weak demand, rising AI-led deflation, sometimes even during ongoing contracts, challenges with the Daimler contract and the termination of an Energy, Utilities, Resources and Services (EURS) contract. The new organic growth guidance of -0.2% to 1.3%, within an overall growth range of 1.5%-3%, points to a sharp slowdown that would require quarterly sequential growth of 0.4%-1.4% in a difficult environment, it added. While deal signings remain strong, AI-led deflation is keeping revenue conversion subdued, the brokerage further said.
Jefferies maintained its Hold recommendation on Infosys but cut the target price to Rs 1,020 from Rs 1,235, citing a worsening growth outlook that is now reflected in the stock price. The brokerage said the appointment of CEO-designate Ashiss Kumar Dash could provide some comfort around the leadership transition. Jefferies cut its estimates by 1%-3% and expects Infosys to deliver a recurring EPS CAGR of 5%.
Morgan Stanley maintained its Equal Weight rating on Infosys while cutting its target price to Rs 1,075 from Rs 1,112, implying a potential upside of 4%. The brokerage cited a weaker-than-expected quarter and a sharp reduction in guidance as the key reasons for the revision. While deal wins remained strong, revenue conversion was hurt by subdued discretionary spending. Morgan Stanley expects limited near-term valuation triggers and flat organic growth.
Citi maintained its Neutral rating on Infosys but cut the target price to Rs 1,065 from Rs 1,080. The brokerage said Q1 performance was weak after excluding the contribution from acquisitions, while deal wins and margins were key positives. However, volume growth and pricing fell short of management’s expectations, while commentary pointed to caution around discretionary spending. Citi also flagged high competitive intensity and the leadership transition as concerns, while remaining cautious on the IT sector amid AI-led deflation and the growing market share of captive centres.
Nomura has a target price of Rs 1,290 on Infosys, implying an upside of 23%. The CFO said the revised guidance reflects a volatile business environment, with the lower end factoring in further macroeconomic deterioration and the upper end assuming less improvement than previously expected. “Infosys is currently trading at an attractive valuation of 13x FY28F EPS of Rs 80.4,” it added.
Motilal Oswal Financial Services maintained its BUY rating on Infosys with a target price of Rs 1,170, implying a potential upside of 13.3% from current levels. The brokerage said Infosys lowered its FY27 revenue growth guidance amid macroeconomic uncertainty and weaker demand. It noted that Q1 revenue grew 1% quarter-on-quarter in constant currency terms, while margins remained stable. Strong deal wins, healthy cash flows and investments in artificial intelligence supported its positive view on the stock.
Read more: Infosys ADRs fall over 4% as Q1 revenue guidance cut overshadows profit growth
Nuvama retained its BUY rating on Infosys but lowered its target price to Rs 1,250 from Rs 1,650, implying an upside of over 21%. The brokerage attributed the cut to weaker-than-expected Q1FY27 growth, pricing pressure and soft demand in Europe, which also weighed on the company’s revenue guidance. It said stable margins at 21.1%, strong deal wins, increasing AI adoption and hiring plans remain positive for Infosys’ long-term growth outlook.
Emkay retained its BUY rating on Infosys and revised its target price to Rs 1,300 from Rs 1,350, indicating an upside of around 26%. The brokerage highlighted the improvement in EBIT margin to 21.1% and noted that AI Services accounted for 8.2% of Q1 revenue. While Infosys lowered its FY27 growth guidance to 1.5%-3%, Emkay identified growth in BFSI, continued AI momentum and the leadership transition as key positives.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
