Why Infosys shares dropped after Q4 earnings is explained

Infosys, a provider of IT software services, had a 2% decrease in its stock price in early trading after disclosing that its revenue projections were wrong and providing a more cautious outlook for the 2025 fiscal year.

The US-listed shares recovered to a 1% fall at the opening bell on Thursday, although this setback followed an 8% collapse in pre-market trade.

Infosys decided to lower its revenue outlook for FY25 despite obtaining a major transaction value of $4.5 billion in the quarter, of which 44% consisted of new agreements. The company cited extended contract durations and a muted environment for discretionary expenditure.

In FY24, the Bengaluru-based business recorded a record transaction value of $17.7 billion, but it indicated worry about the next fiscal year.

Indifferent comments on the IT company’s Q4 performance and FY25 forecast have been issued by a number of brokerages.

It should be mentioned that Investec has kept its recommendation at “Hold,” admitting that it is impossible to forecast when discretionary expenditure would resume. However, it has emphasized that Infosys will benefit greatly if and when this spending increases.

Additionally, the brokerage lowered its target price of Rs 1,640 for Infosys shares to Rs 1,540.

Conversely, Jefferies maintained its ‘buy’ recommendation, citing scope reductions and contract renegotiations as the reasons for the revenue drop, while highlighting good net new business wins. Jefferies has lowered its target price for the company, nevertheless, from Rs. 1,740 to Rs. 1,630.

Global stockbroker Citi, on the other hand, said in a note that one-time contract adjustments had an influence on the fourth-quarter results and forecast. Citi held a neutral view towards Infosys and set a target price of Rs 1,550 per share.

Nomura reaffirmed worries on the lack of indications of a rebound in discretionary demand and modified its FY25–26 EPS forecasts in line with those concerns. The firm maintained a reduced target price of Rs 1,400 and a neutral position on Infosys.

Of the 46 analysts who are now following Infosys, 32 recommend “buy,” 7 recommend “hold,” and the remaining 7 recommend “sell.”

The 10% fall in Infosys shares over the last month is indicative of larger issues facing the IT industry amid worries about inflation and rising interest rates.

At 11 a.m., Infosys’ shares on the Bombay Stock Exchange (BSE) were down more than 1.3%, trading at Rs 1,401.