Infosys shares in focus as ADRs fall 4%; here’s why, fresh target prices

Shares of Infosys Ltd are in focus after its American depositary receipts (ADRs) fell 4 per cent overnight following weak FY27 guidance. This comes as FY27 guidance by HCL Technologies and Q1 outlook by Wipro also failed to meet Street expectations, raising fears that AI-led deflation has begun to bite and is increasing pressure on the existing book of business. Infosys set its FY27 revenue growth guidance at 1.5-3.5 per cent in constant currency (CC) terms. HCL Tech had guided for 1–4 per cent revenue growth in FY27, following which its shares had plunged 11 per cent in the very next day.

Infosys said its revenue for the March quarter decreased 1.3 per cent CC QoQ, which was slightly below the Street’s estimate of 0.7 per cent CC QoQ. Adjusted EBIT margin stood at 21 per cent, down 20 basis points QoQ, slightly below estimates. Total contract value (TCV) at $3.2 billion, up 21 per cent YoY, was the sole bright spot, said analysts. Analysts noted that the demand environment remains guarded and clients continue to prioritise cost optimisation and operational efficiency over growth-led transformation programs. Macro uncertainty persists amid ongoing geopolitical tensions, elevated interest rates, and rapid technology shifts, they said noting that client decision-making slowed in March.

Following its results, Infosys ADR fell 4.01 per cent to $12.94 in overnight trade. MOFSL said productivity pass-through to clients is an acknowledged headwind on existing portfolios; new deals embed AI productivity commitments upfront, typically over 3–5 year terms. There is no evidence of clients renegotiating recently signed deals for incremental AI benefits—repricing pressure is most visible at the bid/renewal stage, it said.

This brokerage valued Infosys at Rs 1,450, hinting at 17 per cent potential upside.

"Infosys's FY27 guidance was a bit underwhelming—perhaps affected by key client ramp-down, AI led deflation and the Gulf war overhang. At the midpoint, it reflects barely any acceleration in revenue. We are tweaking FY27E/28E EPS by 3 per cent/1 per cent as lower revenue growth gets offset by higher USDINR assumption (93 versus 88 earlier). Maintain 'BUY' with a target of Rs 1,650 (unchanged) valuing at 20 times FY28E PE," Nuvama said.

This brokerage values Infosys at 17 times FY28E EPS with a target of Rs 1,450, implying a 17 per cent upside potential.