Infosys Raises Price Target to $19 Amid Strong Q1 Performance

Susquehanna has revised its price target for Infosys to $19 from $18, maintaining a Neutral rating. The company reported strong Q1 performance with 2.6% sequential and 3.8% YoY revenue growth in constant currency terms. Infosys secured $3.8 billion in large deals and maintained a resilient operating margin of 20.8%. The company's guidance for FY26 was revised to 1% to 3% revenue growth in constant currency terms.

Infosys Ltd (NSE: INFY) reported a strong first quarter (Q1FY26) with 2.6% sequential and 3.8% year-on-year (YoY) revenue growth in constant currency (CC) terms. The company secured $3.8 billion in large deals and maintained a resilient operating margin of 20.8%. Despite these positive indicators, Infosys revised its full-year (FY26) revenue growth guidance to 1% to 3% in constant currency terms [1].

The company's performance was driven by traction across various verticals and geographies, with 40 basis points (bps) of inorganic contribution from recent acquisitions. Unlike previous quarters, the growth was not driven by pass-through revenue, indicating improved revenue quality. Infosys exceeded the consensus CC revenue growth estimate of 1.5% and outperformed its tier-1 peers [1].

The total contract value (TCV) for large deal wins declined 7% year-on-year to $3.8 billion in Q1FY26 but rose sequentially. Around 55% of the large-deal TCV was net new, with 28 large deals closed in the quarter. However, the macroeconomic environment remains uncertain due to lingering trade tariffs and geopolitical concerns, leading to cautious discretionary IT spending by clients [1].

Infosys' guidance revision reflects the current macroeconomic uncertainties. The company expects a stronger first half of FY26 but anticipates the usual seasonality in the second half. The organic revenue growth guidance was trimmed from 0-3% to 0.6-2.6%, while the Ebit margin guidance remained unchanged at 20-22% for FY26 [1].

Susquehanna has revised its price target for Infosys to $19 from $18, maintaining a Neutral rating. The company's stock has declined 15% over the past year, more than the 9.5% fall in the Nifty IT index. The stock currently trades at 21 times estimated FY27 earnings, almost at par with TCS and HCL [1].

References:
[1] https://www.livemint.com/market/mark-to-market/infosys-q1-fy26-results-infosys-revnue-growth-infosys-large-deal-wins-infosys-revenue-guidance-fy26-it-earnings-11753347741803.html