INFY: Gradual IT Spend Recovery And AI Adoption Will Shape 2026 Outlook

Infosys' updated narrative reflects a modestly higher fair value estimate of ₹1,820.45 from ₹1,776.09, broadly in line with the series of recent analyst price target increases as analysts point to a supportive setup for services demand and a slightly adjusted view on growth, margins, discount rate and future P/E assumptions.

Analyst Commentary

Recent Street research around Infosys clusters around a series of modest price target increases in US$, with analysts broadly pointing to a more constructive setup for IT services heading into 2026 and a view that current valuations remain discounted relative to that backdrop.

Bullish Takeaways

Bullish analysts are lifting US$ price targets in small increments, which lines up with a view that Infosys is executing well enough to justify a slightly higher fair value rather than a major reset.
The reference to a "constructive" setup for 2026, with gradual improvement in enterprise IT spend, supports the idea that Infosys could have a more supportive demand environment for core services over the medium term.
Comments about average sector valuations being discounted suggest some analysts see room for multiple expansion if execution holds up and IT budgets continue to normalize.
The clustering of upward target moves, even by amounts like US$0.20 to US$2.50, points to a more positive risk reward skew for investors focused on consistent delivery and capital discipline.

Bearish Takeaways

The presence of a Hold rating alongside a higher US$17 target highlights that some analysts still see limited upside at current levels, even with a slightly stronger services backdrop.
Use of terms like "gradual improvement" in IT spend implies expectations for a steady, not rapid, recovery in demand, which could cap near term growth and margin momentum.
Comments about discounted average valuations can also be read as a reminder that the whole sector carries similar support, so relative outperformance may depend on Infosys proving it can sustain consistent execution.
The small size of many target changes indicates that, while the tone is constructive, analysts are not repositioning Infosys as a high growth outlier and instead appear to be fine tuning their models around measured assumptions for growth and profitability.

What's in the News

Infosys issued fiscal 2026 guidance, indicating expected revenue growth of 3.0% to 3.5% in constant currency and an operating margin range of 20% to 22% (company guidance).
The company completed a share buyback, repurchasing 100,000,000 shares, or 2.41% of outstanding equity, for ₹180,000m under the program announced on September 11, 2025 (buyback update).
Infosys inaugurated a new Swiss headquarters at The Circle at Zurich Airport. The company is positioning the office as a hub for digital and AI-led transformation work with clients across multiple sectors and is expanding its local ecosystem partnerships and talent base (business expansion).
Infosys announced several AI-focused offerings, including the launch of Infosys Topaz Fabric to unify IT service delivery and an AI Agent aimed at transforming energy sector operations using generative AI and cloud technologies (product announcements).
The company is deepening client-facing AI collaborations, including work with AWS on generative AI solutions across industries and a collaboration with Cognition to deploy Devin within Infosys' engineering workflows and client engagements in financial services and other sectors (client announcements).

Valuation Changes

The Fair Value Estimate has risen slightly from ₹1,776.09 to ₹1,820.45, reflecting a modest uplift in the underlying model assumptions.
The Discount Rate has fallen slightly from 16.00% to 15.85%, indicating a marginally lower required return in the updated framework.
Revenue Growth has edged higher from 5.44% to 5.70%, suggesting a small adjustment to expected top line expansion.
The Net Profit Margin has moved slightly lower from 16.59% to 16.53%, pointing to a minor change in profitability expectations.
The Future P/E has been reduced from 33.37x to 30.03x, implying a lower valuation multiple applied in the revised model.

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.What are the underlying business or industry changes driving this perspective?

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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