Last Update03 Oct 25Fair value Decreased 1.59%
Analysts have increased their price target for Infosys from $18 to $19, citing stronger-than-expected Q1 results and improved guidance as justification for the upgrade.
Analyst Commentary
Recent updates from market analysts highlight a mix of optimism and caution regarding Infosys's business outlook and valuation trajectory.
Bullish Takeaways- Bullish analysts point to the stronger-than-expected Q1 performance as a sign of operational resilience and effective execution.
- The upward revision of company guidance, particularly the raised lower end, signals increased confidence in the business’s near-term revenue visibility despite broader market challenges.
- Valuation support comes from the company's ability to mitigate anticipated declines in third-party revenue while maintaining overall growth momentum.
- Improved operating leverage is expected to bolster margins and enhance the company’s attractiveness relative to peers.
- Some cautious analysts maintain a neutral stance and highlight ongoing concerns around a projected decline in third-party revenue, which could limit upside in the near term.
- There are questions about whether the recent upgrade in guidance is sustainable, especially with evolving global macroeconomic pressures.
- Potential headwinds around client budget cycles and elongated deal timelines remain areas to monitor, as these could introduce volatility to future quarters.
What's in the News
- President Trump is expected to sign a proclamation requiring a $100,000 fee for H-1B visa applications. This change could impact Infosys and other outsourcing firms operating in the U.S. (Bloomberg)
- Infosys announced an expansion of its strategic collaboration with Sunrise to accelerate IT transformation, with a focus on advanced technology, AI integration, and enhanced customer experiences.
- The company authorized a share buyback plan to repurchase up to 100 million shares, representing 2.41% of its issued share capital. The aim is to improve return on equity and increase long-term shareholder value.
- Infosys has formed a joint venture with Telstra by acquiring a 75% share in Versent Group. This move enhances its AI and cloud solutions capabilities for Australian enterprises.
- Infosys will hold a Special/Extraordinary Shareholders Meeting on November 4, 2025, via postal ballot in India.
Valuation Changes
- Fair Value Estimate has decreased slightly from ₹1,748.14 to ₹1,720.41 per share.
- Discount Rate has risen marginally from 15.90% to 15.99%, reflecting a modest increase in perceived risk.
- Revenue Growth Forecast has declined from 5.55% to 5.14% annually.
- Net Profit Margin is projected to increase from 16.58% to 16.81%.
- Future P/E multiple has edged down from 33.76x to 32.97x.
Key Takeaways
- Strong positioning in AI, cloud, and digital services enables Infosys to capture larger, higher-margin deals and expand recurring revenue streams.
- Investments in automation and digital transformation drive earnings stability, while ongoing demand supports sustained growth and improved efficiency.
- Automation-driven productivity gains, margin pressures, market concentration, and intensifying competition threaten sustained growth, predictability, and profitability for Infosys amid global economic uncertainty.
Catalysts
About Infosys- Provides consulting, technology, outsourcing, and digital services in North America, Europe, India, and internationally.
- Infosys is seeing strong demand and deal momentum in AI-driven transformation, with $3.8 billion in large deals this quarter and significant traction as an enterprise AI partner; ongoing adoption of AI and automation across client industries is expected to expand addressable markets and drive robust revenue growth.
- Clients are actively consolidating IT service partnerships, frequently choosing Infosys for its capabilities in digital, cloud migration, and AI, which positions the company to capture larger, higher-value deals-supporting both average deal size and net margin expansion as business shifts to more complex, higher-end projects.
- Infosys' continued investment and recognized execution in core areas such as cloud, data analytics, and managed services, alongside platforms like Finacle, is leading to higher-margin IP-led offerings and greater recurring revenue streams, improving earnings stability and net margins over the long term.
- Widespread global organizational focus on digital supply chain resilience, compliance, and efficiency-including rapid uptake of enterprise automation and digital tracking-positions Infosys to benefit from multi-year technology upgrade cycles, underpinning steady topline growth.
- Despite strong productivity gains from automation and AI enabling stable delivery with flat headcount, Infosys is reaching peak utilization; future hiring to support new project volumes should allow topline growth to scale alongside demand while productivity improvements help defend or gradually improve net margins.
Infosys Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Infosys's revenue will grow by 5.6% annually over the next 3 years.
- Analysts assume that profit margins will increase from 16.4% today to 16.6% in 3 years time.
- Analysts expect earnings to reach $3.8 billion (and earnings per share of $0.93) by about September 2028, up from $3.2 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $3.4 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.8x on those 2028 earnings, up from 21.7x today. This future PE is greater than the current PE for the US IT industry at 26.7x.
- Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 15.9%, as per the Simply Wall St company report.
Infosys Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Rising productivity from AI and automation is driving significant efficiency gains, and Infosys is already passing 5-15% of these savings to clients; this trend could reduce headcount and decrease long-term revenue per employee as engagements become less labor-intensive and pricing shifts lower.
- Persistent macroeconomic uncertainty-especially in major markets like North America-continues to limit management's confidence, with only a modest upward revision to revenue guidance (1-3% growth), indicating ongoing risk to sustained top-line growth from global economic or geopolitical disruptions.
- Wage hikes, variable pay increases, and rising compliance costs (especially in Europe and the US) are contributing to margin pressures, as seen by recent quarter declines in margin and explicit discussion of full-year compensation impact, threatening long-term net margin expansion.
- Heavy reliance on large, mature markets (North America and Europe) makes Infosys vulnerable to protectionist regulations, "onshoring" trends, and regional downturns, which could introduce revenue unpredictability, customer concentration risk, and currency headwinds.
- Fierce competition and client consolidation activity is leading to continued pricing pressure, potential revenue cannibalization, and client renegotiations; coupled with the shift toward productivity/AI-driven projects, this could erode Infosys' ability to grow high-value digital revenue streams and maintain current earnings levels.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of ₹1748.136 for Infosys based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹2085.0, and the most bearish reporting a price target of just ₹1440.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $22.9 billion, earnings will come to $3.8 billion, and it would be trading on a PE ratio of 33.8x, assuming you use a discount rate of 15.9%.
- Given the current share price of ₹1479.1, the analyst price target of ₹1748.14 is 15.4% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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