Buy Infosys Ltd for the Target Rs. 1,810 by Choice Institutional Equities
INFO Growth Propelled by AI and Strategic Initiatives
INFO is well-positioned to sustain mid-single-digit revenue growth and margin stability, powered by strong demand across verticals, aggressive AI adoption and scaling of forward-deployed engineers. Large deal wins, operational excellence and vendor-agnostic AI capabilities are expected to enhance client engagement, revenue visibility and profitability. Strategic initiatives in localisation, productivity and talent investment underpin delivery resilience and growth capture. We maintain our PE multiple of 22x, applied to the average FY27–FY28E EPS of INR 82.2, arriving at a Target Price of INR 1,810, reflecting INFO’s ability to drive medium-term value-creation.
Revenue and PAT Beat Estimate, EBITM Marginally Misses
* Reported Revenue for Q2FY26 stood at USD 5,076Mn up 2.7% QoQ (vs CIE est. at USD 5,038Mn). The CC growth was 2.2% QoQ. In INR terms, revenue stood at INR 444.9Bn, up 5.2% QoQ.
* EBIT for Q2FY26 came in at INR 93.5Bn, up 6.2% QoQ (vs CIE est. at INR 95.3Bn). EBIT margin was up 20bps QoQ to 21.0% (vs CIE est. at 21.7%).
* PAT for Q2FY26 came in at INR 73.6Bn, up 6.4% QoQ (vs CIE est. at INR 70.7Bn).
Strong Q2 Growth Propels 2–3% Revenue Growth Outlook for H2:
In Q2FY26, INFO reported USD 5,076Mn in revenue, up 2.2% QoQ and 2.9% YoY in CC, driven by broad-based growth across 4 verticals and 3 geographies. Financial Services, Manufacturing and Europe saw strong performance, each exceeding 5% YoY growth, while strategic acquisitions contributed 20bps sequentially. Growth was supported by higher realisation, pricing improvements under Project Maximus and AI-led enterprise initiatives, offsetting soft volumes. Q2FY26 Order Book TCV stood at USD 3.1Bn (67% being net new).. Management targets 2–3% revenue growth for H2, factoring in seasonal headwinds, such as fewer working days, year-end furloughs and calendar effects, following a strong H1 performance versus peers. We expect mid-single-digit growth, driven by a strong demand, AI adoption and scaling up of forwarddeployed engineers. Large deal wins and operational excellence should enhance client engagement, revenue visibility and margin resilience.
EBIT Margin Guidance Intact at 20–22%:
EBIT margin expanded 30bps QoQ to 21% in Q2, driven by operational efficiency, Project Maximus initiatives and better pricing, partly offset by higher post-sales support and lower onsite utilisation. Currency tailwinds added 60bps, while moderated subcontractor cost supported expansion. Management maintains FY26 margin guidance of 20–22%, underpinned by the continued focus on productivity, automation and pricing optimisation, alongside strategic investments in talent, sales and marketing. Voluntary LTM attrition rate came to 14.3% as compared to 14.4% in previous quarter. We expect sustained large deal wins and AI-led operational efficiencies to drive margin stability and reinforce profitability, positioning Infosys to capture medium-term growth while maintaining disciplined cost management.
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