Infosys Q4: Analysts wager on significant contract wins and a successful strategy despite the company’s weak FY25 outlook

The market was disappointed with Infosys’ FY25 projection, and the stock is now under pressure. The management projects a 1–3% YoY increase in sales for the IT giant and an EBIT margin of 20–22%. The stock has seen a little decline as a consequence of this being far lower than the analyst estimate. The short-term difficulties facing the sector in general and Infosys stock specifically have also been brought up by the experts. But they are placing a large wager on Infosys’ superior level of expertise in comparison to its competitors.

“Despite a slight Q4 revenue drop, Infosys’s future looks promising because of its strong customer focus and a business pipeline,” says Gartner’s senior principal analyst Biswajit Maity. Their growing momentum has been hampered by a number of problems, such as extended sales cycles, ramp-downs, and project cancellations. Regarding their continued favorable development in the next quarters, we remain confident. Its successful approach to closing big agreements has drawn more noteworthy contracts in the last several years.

With an emphasis on value creation and cost effectiveness, he said, “Competitive pricing, a willingness to manage risk, and innovation are key factors attracting enterprise buyers to Infosys.” The firm is using its current client ties to start various transformation initiatives. These qualities strengthen Infosys’ standing as an important participant in the market. Additionally, Infosys has shown a greater degree of competency than many of its counterparts by skillfully navigating obstacles.

During the analyst call, the business emphasized that it continues to win large agreements, including those including cost efficiency. Nonetheless, customers’ discretionary spending has decreased in certain circumstances and has remained modest overall. In general, the revenue and EBIT margin fell short of expectations, according to Centrum, with short-term difficulties in the demand climate and poor client discretionary spending being the key causes. Centrum analysts have updated their FY25E/FY26E EPS projections for the business by “6.9%/6.1%.” With a lowered target price of Rs 1,577 (from Rs 1,851 before) and a PE of 21x on FY26E, we continue to retain our ADD rating on the company. Our goal PE multiple has been lowered from 23x to 21x in order to reflect the unsatisfactory FY25E forecast.