Infosys shares slide as brokers cut targets following muted revenue guidance

Infosys shares fell 3 percent after the Indian technology giant reported first-quarter results that prompted multiple brokerages to downgrade the stock and slash price targets. The negative market reaction stems from a sharp miss in revenue expectations and a significant cut to forward guidance for the second consecutive quarter.

Despite the market skepticism, the company posted a 12 percent year-on-year increase in consolidated net profit to 7,769 crore rupees for the first quarter of fiscal year 2027. Revenue from operations also climbed 14 percent year-on-year to 48,211 crore rupees, supported by stable margins and healthy cash flows.

However, the lowered revenue guidance of 1.5 percent to 3 percent for fiscal year 2027 signals limited demand visibility across the broader IT sector. Clients are delaying decision-making and reducing discretionary spending, while artificial intelligence-driven productivity gains are creating unexpected deflationary pressure on existing contracts.

Diverging Broker Views

JPMorgan downgraded the stock to Neutral with a 1,050 rupee target, citing weak demand and specific setbacks including challenges with the Daimler contract and the termination of an Energy, Utilities, Resources and Services agreement. Citi also maintained a Neutral rating but reduced its target to 1,065 rupees, warning that volume growth and pricing fell short of management expectations amid rising competition from captive client centers.

Not all analysts turned bearish, as several firms maintained buy ratings despite lowering their valuation multiples. Emkay revised its target to 1,300 rupees, noting that artificial intelligence services already accounted for 8.2 percent of first-quarter revenue and highlighting stable earnings before interest and tax margins at 21.1 percent.

Nuvama retained its buy recommendation but lowered its target to 1,250 rupees, citing pricing pressure and soft European demand. Motilal Oswal similarly maintained its buy rating with a 1,170 rupee target, pointing to strong deal wins as a buffer against macroeconomic uncertainty. Nomura projected a 23 percent upside to 1,290 rupees, arguing the stock trades at an attractive 13 times its projected fiscal year 2028 earnings per share of 80.4 rupees.

Jefferies maintained a hold rating but slashed its target to 1,020 rupees and cut estimates by up to 3 percent, expecting a recurring earnings per share compound annual growth rate of just 5 percent. However, the firm acknowledged that the appointment of CEO-designate Ashiss Kumar Dash to succeed Salil Parekh could eventually provide comfort to nervous investors.

The mixed broker response underscores a pivotal moment for Indian IT exporters. They must now prove that their artificial intelligence capabilities and strong deal pipelines can offset near-term pricing pressures and a volatile global macroeconomic environment.