Infosys Q2 Results Review: IT Major Still Top Sectoral Pick Even As Pain Points Persist

Information technology major Infosys Ltd. remains the top pick in the sector for brokerages on expectations of being the growth leader. The optimism follows the company's second quarter results where it raised the revenue forecast for fiscal 2025.

Citi Research continues to prefer Infosys over Tata Consultancy Services Ltd., as it expects a modest and gradual recovery in IT services, it said in a note on Oct. 17.

The management's guidance implies no growth in the remaining two quarters at the mid-point, the brokerage noted. The forward-looking indicators still looking sluggish for most companies and margin levers for most companies are at close to optimal levels, it said.

Citi maintained a 'neutral' rating on Infosys stock with a target price of Rs 1,965 per share from Rs 1,955 apiece previously, a potential downside of 0.5%.

The IT bellwether raised its revenue forecast in constant currency terms for the financial year ending March 2025 to 3.75-4.5%, up from its earlier projection of 3-4% for the period.

The company's results showed a 4.3% increase in revenue over the previous three months to Rs 40,986 crore for the quarter ended Sept. 30, 2024, according to an exchange filing.

Meanwhile, Bernstein continues to see upcycle in large-cap IT services. Infosys is expected to be a growth leader, driven by the improved macro and Banking, Financial Services and Insurance segment.

Bernstein maintained 'outperform' with a target price of Rs 2,270 per share from Rs 2,100 apiece, implying an upside of 15% from the previous close.

Morgan Stanley has an 'overweight' rating on Infosys, with a target price of Rs 2,150 per share, a potential upside of 9% over the previous close. The investment bank said the double-digit sequential rise in small deals could drive improvement in the conversion of total contract value to revenue.

However, it flagged key concerns of weak large deal wins, limited discretionary spending outside financial services and deferred wage hikes that may affect margins. Morgan Stanley also trimmed its current-year revenue growth estimate for Infosys to 4.7%.

Share price of Infosys fell 4% intraday on Friday at market open.