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Potential FY26F guidance scenarios

* We try and build potential FY26F CC revenue guidance scenarios.

* Ask rate for 3Q/4QFY26F is flattish to achieve the current FY26F guidance if Infosys reports a 2% CC qoq growth in 2Q (median consensus estimate).

* 4QFY26F appears critical to revision in the context of potential manufacturing vertical-led furloughs in 3QFY26F, and the current tariff-led uncertainty.

Potential guidance scenarios

* Infosys to print 2QFY26F on 16 Apr 2025, but all eyes would be on the update to organic FY26F constant currency (CC) revenue growth guidance, if any, vs. the current 1-3% shared at 1QFY26-end. Although the current macroeconomic uncertainty and general demand softness could weigh, we try and build potential scenarios assuming 1) Infosys achieves median consensus 2QFY26F CC revenue growth estimate of ~2%, and 2) representative sequential growth assumption in 3Q and 4QFY25F.

Ask rate is meagre to achieve the current top-end of FY26F guidance

* If Infosys were to report 2% CC growth in 2QFY25F, a flat 3Q/4QFY26F could yield the top-end of the guidance. Analyzing the sequential growth of the previous three years suggests that the previous three 4Qs have seen an average qoq decline of 3% while the previous three 3Qs witnessed an average growth of 1%. Assuming a similar growth/decline in 3Q/4QFY26F implies FY26F growth could be ~2.8% yoy and within the top-end of the range.

What could it take to lift the upper-end?

* Although narrowing the guidance range could be consensus expectation, our analysis suggests that 1.5% growth in 3QFY26F and a 1.5% decline in 4QFY26F could lift the FY26F upper-end to 3.5% yoy. However, this must be viewed in the context of potential furloughs in 3QFY26F and the current tariff-led/macroeconomic uncertainty.

Previous growth assumptions and target price

* Our prior earnings expectations assume an ~4% US$ revenue CAGR over FY25-27F and 8.6% PAT (Rs) CAGR over the same period. We have an ADD rating on the stock with a target price of Rs1,575.

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