Infosys shares dip 1% ahead of results, guidance in focus

Infosys shares fell as much as 1% on the National Stock Exchange on Thursday, touching an intraday low of ₹1,039.10. The stock opened at ₹1,046.90, down from Wednesday's close of ₹1,052.10, as investors positioned ahead of the company's April-June earnings release on July 23.

For market participants, the quarterly figures themselves are largely priced in. The real focus is on the company's forward-looking guidance and management commentary regarding client spending. Analysts widely agree that clarity on future demand will outweigh any marginal earnings beat in determining the stock's near-term trajectory.

Brokerage firm Motilal Oswal forecasts a 2% quarter-on-quarter constant currency revenue increase, including a 1% organic boost driven by the two-month contribution from recent acquisitions Optimum and Stratus. However, the firm anticipates Infosys will cut the upper end of its fiscal year 2027 revenue guidance by 50 basis points, bringing the range to 1.5% to 3.0%.

Underlying demand remains uneven across the Indian IT giant's key markets. US banking and financial services are expected to stay resilient, but telecom and manufacturing verticals face headwinds from client-specific issues, notably a ramp-down at Daimler. Despite sluggish discretionary spending, analysts expect healthy total contract value in large deals, sustained by cloud migration and AI-driven transformation.

On profitability, Motilal Oswal projects operating margins will expand by 40 basis points sequentially to 21.4%. This improvement is expected to stem from the absence of first-quarter wage hikes, a reversal of prior visa costs, and ongoing efficiencies from Project Maximus. SMC Global Securities noted that margins should remain resilient overall, though integration costs from acquisitions and AI investments may cap further expansion.

The pre-earnings positioning reflects a cautious market. Harshal Dasani of INVasset PMS noted that while recent corrections have made valuations more reasonable, the earnings cycle still lacks the visibility needed to justify aggressive buying. “In the current cycle, clarity on future demand is likely to matter more than a marginal earnings beat,” Dasani said.

Mahesh M Ojha of Kantilal Chhaganlal Securities echoed this sentiment, highlighting that the management's outlook will dictate not just Infosys's direction but broader market sentiment toward the entire IT sector. “While the earnings numbers are important, the outlook provided by the management will largely determine the stock's near-term direction and overall market sentiment toward the IT sector,” Ojha said.