Coforge shares rally 6% post Q2 results; should you buy, hold or sell this IT stock?

Coforge Ltd saw its shares surging 6 per cent in Monday's trade after the IT firm reported strong set of quarterly results, triggering revisions in target prices. The stock rose 5.98 per cent to hit a high of Rs 1,866, taking its year-to-date rise to 8 per cent. This is against a 9.2 per cent rise in Nifty during the same period. 

Centrum Broking said Coforge's focus on maintaining 14 per cent EBIT, coupled with disciplined cost management and operational efficiency, reinforces confidence in margin sustainability. "Continued reinvestment in AI-driven delivery models and automation is expected to enhance competitiveness and protect profitability as the firm scales across newer verticals. We expect revenue, Ebitda and PAT grow at rise 23 per cent, 27.2 per cent and 35.6 per cent CAGR over FY25-FY28E. We have revised our FY26-FY28 EPS by 2.4-4.5 per cent," Centrum said.

It retained 'Buy' with a revised target price of Rs 2,179 against Rs 2,122 earlier.

ICICI Securities suggested a 'Hold' with largely unchanged FY27-28 earnings. It lowered FY26 EPS estimate for Coforge, factoring in wage hike and one-off expenses in Q3FY26.

"We have factored in 28 per cent FY26E revenue growth and FY25-28E revenue / EPS CAGR at 17 per cent/34 per cent, led by steady margin expansion. We raise the target to Rs 1,760 (against Rs 1,710 earlier) led by consistent performance on deliverables, revenue and margin outperformance on an unchanged one-year forward P/E of 32 times," ICICI Securities said.

Nomura India said Coforge delivered 5.9 per cent sequential constant currency (cc) revenue growth in the September quarter, broadly in line with its estimate of 6 per cent. The company’s EBIT margin expanded 260 basis points sequentially to 14 per cent, without any one-off adjustments, while free cash flow turned positive at $36.5 million.

According to Nomura, key investor concerns around Coforge’s earnings quality — including margin adjustments stemming from one-offs and negative free cash flow due to data centre investments — were effectively addressed during the quarter. “Both these issues were resolved in Q2, with margins improving and FCF turning positive. Salary hikes will be rolled out in Q3 but should be partly offset by lower ESOP and depreciation costs,” the brokerage noted.

Nomura raised its target price on Coforge to Rs 1,900 from Rs 1,880, reaffirming its positive stance on the company. It called Coforge its top IT pick within the mid-cap space, citing consistent execution, strong order pipeline, and improving balance sheet metrics.

Nuvama Institutional Equities said that alongside solid results, the management has effectively addressed all margin and cash flow concerns, paving the way for a potential re-rating of the stock. The brokerage raised its FY26 and FY27 earnings per share (EPS) estimates by 2.6 per cent and 4.6 per cent, respectively, factoring in higher margins and lower interest expenses. With a valuation rollover to 38 times, Nuvama increased its target price to Rs 2,250 from Rs 2,000, while retaining its ‘Buy’ rating on the stock.

Choice Broking also maintained a constructive stance, highlighting Coforge’s early adoption of artificial intelligence (AI) across service offerings as a key competitive advantage. The firm noted that Coforge is actively leveraging its proprietary IP and digital platforms — including Code Insight AI, BlueSwan, and Forgex — to integrate generative AI and automation into delivery processes. Reflecting confidence in the company’s innovation-led growth strategy, Choice revised its target price upward to Rs 2,015 from Rs 1,930.

The company’s management has guided for operating margins to remain stable at around 14 per cent. However, Motilal Oswal Financial Services (MOFSL) cautioned that near-term pressures in the demand environment could weigh on profitability. “It is possible that management may fall short of its margin guidance. That said, we still expect a notable year-on-year improvement in FY26, with margins likely to land close to the target,” MOFSL said. The brokerage estimates Coforge’s FY26 EBIT margin at 13.8 per cent.

Positioning Coforge as a growth leader within its coverage universe, MOFSL maintained a positive view and assigned a target price of Rs 2,400, suggesting further upside potential supported by resilient execution and steady deal momentum.