Infosys shares drop 3% on Q4 miss. Should you buy, sell or hold?

Shares of top software services exporter Infosys fell up to 3% to day's low at Rs 1,379.70 on BSE in Friday's session after reporting a sequential revenue decline of 2.2% in constant currency (CC) terms and missing estimates.

Amid persistent weakness in discretionary spending due to caution on macro recovery, Infosys provided an underwhelming CC revenue growth guidance of 1%-3% YoY for FY25, below market estimates. EBIT margin (adjusted for one-off charges in Q3) declined 100 bps QoQ to 20.1%.

"Muted growth in FY2024-25E is not driven by structural factors but due to higher exposure to impacted segments. Strength in digital capabilities, good track record on large and mega deals and robust account management will drive healthy growth once discretionary spending environment improves," Kawaljeet Saluja of Kotak Equities said.

Also read | Infosys Q4 Results: Profit jumps 30% YoY to Rs 7,969 crore; co sees FY25 revenue growth at 1-3%

Brokerages' take on Infosys after Q4 earnings:

Nomura

We lower our FY25-26F EPS by 2-3% driven by lower revenue and margin outlook. Our FY25-26F EPS are 6.6-7.3% below consensus. Our new target price of Rs 1,400 (Rs 1,500 earlier) is set at an unchanged 20x FY26F EPS.

JP Morgan

Maintain overweight but target price cut to Rs 1,700 from Rs 1,800. The Q4 print was a miss. Infosys' new revenue guidance of 1-3% appears realistic.

We find numbers de-risked for an environment of no-recovery, backed by solid signings and optionality of any cyclicality.

Cut earnings by 4-5% which appears to have been priced into the 18% correction over the past month.

Jefferies

Target price cut to Rs 1,630 on missing Q4 estimates. Strong deal wins provide comfort on our expectation of 9% EPS CAGR over FY24-27E.

UBS

Target price cut to Rs 1,700 from Rs 1,800. FY25 guidance is disappointing, but looks conservative given strong deal wins. We believe that the market has already positioned itself for a disappointing performance and see limited downside from hereon.

Kotak Equities

We believe Infosys has the elements to deliver industry-leading revenue growth once the demand environment improves. We expect normalized growth from FY2026. We value Infosys at an unchanged medium-term multiple of 24X Jun 2026E earnings leading to FV of Rs 1,750 (Rs 1,790 earlier). Maintain BUY.

Motilal Oswal

Despite the near-term weakness, we expect Infosys to be a key beneficiary of the acceleration in IT spending in the medium term. Based on our revised estimates, the stock is currently trading at 19x FY26E EPS. We value the stock at 22x FY26E EPS, implying a target price of Rs 1,650.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)