JM Financial raises price target to Rs 1,930, maintains BUY rating on expectations of accelerating growth
JM Financial Institutional Securities has upgraded its price target for Infosys Ltd. to Rs 1,930 from Rs 1,890, maintaining its BUY rating on the IT services giant following better-than-expected third-quarter results and positive management commentary on future growth prospects.
The brokerage firm cited strong deal momentum, raised revenue guidance, and expectations of growth acceleration in FY27 as key drivers behind the upgrade. “INFO remains our preferred pick among the top-6,” analysts Nandan Arekal and Anushree Rustagi wrote in their report dated January 15, 2026.
Quarterly Performance Beats Expectations
Infosys reported 0.6% constant currency (cc) quarter-on-quarter revenue growth for 3QFY26, ahead of JM Financial’s estimate of 0.2% and consensus expectations of 0.3%. “Growth remained resilient despite seasonality and lower third party revenue,” the report noted.
The company’s adjusted EBIT margins (excluding labor code provisions) stood at 21.2%, in line with estimates. However, excluding a one-time gain from property sales worth Rs 165 cr (Rs 1,650 million), margins came in at 20.8%. “Variable pay in the quarter explains the miss,” analysts said.
Reported profit after tax stood at Rs 6,650 cr (Rs 66,500 million), impacted by a labor code charge of Rs 1,289 cr (Rs 12,890 million). Excluding one-offs, PAT came in at Rs 7,621 cr (Rs 76,210 million), up 3.5% quarter-on-quarter and 12% year-on-year, beating consensus estimates.
Revenue Guidance Raised
In a significant development, Infosys raised its FY26 constant currency revenue growth guidance to 3-3.5% from the earlier 2-3%. “The revised guidance implies (1.7%)-0% growth in 4Q, with decline at the midpoint, as caution on weaker verticals and lower working days tempers expectations,” the report stated.
Management retained its margin guidance at 20-22%, excluding labor code impact.
Strong Deal Pipeline Provides Momentum
Deal wins emerged as a major positive, with Infosys securing USD 4.8 billion in large deals during the quarter, marking a 92% year-on-year increase. The report highlighted that “even excluding the NHS deal, deal wins were strong at USD 3.2bn (28% YoY).”
The deals comprised 57% net new business, including two mega deals. “INFO highlighted rising traction in AI-led modernisation, vendor-consolidation deals and market-share gains despite firm pricing,” analysts noted.
According to the report, management disclosed that 26 large deals were won during the quarter, with geographic distribution showing 16 in Americas, 9 in Europe, and 1 in Rest of World.
FY27 Growth Expected to Accelerate
Perhaps most significantly, management indicated that growth would accelerate in FY27 compared to FY26. The report quoted management highlighting “some key positives: 1) FY27 growth to accelerate driven by large deal ramp-ups and pick-up in discretionary spend in BFSI and EURS verticals, 2) Continued market share gains despite strength in pricing and 3) Incremental headcount addition of c.5k (1.5%) after c.8k (2.5%) in 2Q, in anticipation of growth.”
“Management expects growth to accelerate in FY27 over FY26, driven by deal ramp-ups, AI-led demand, and a pickup in discretionary spends in BFSI and EURS,” the report stated. BFSI, EURS, and Lifesciences are expected to lead growth, while Manufacturing (especially auto) and Hi-tech are likely to lag.
AI Adoption Driving Transformation
Infosys’s AI strategy appears to be gaining significant traction. “INFO reported that 90% of top 200 clients are adopting AI and that they serve as the AI partner for 15 of top 25 clients,” according to the report.
Management positioned AI as the core growth catalyst, highlighting Topaz Fabric – a suite of purpose-built agents to help clients deploy and manage agents at enterprise scale. The company outlined six AI-led value pools, including AI engineering services, data for AI, and AI software development & legacy modernization.
Vertical and Geographic Performance
Among verticals, Life Sciences led sequential growth with a 13% quarter-on-quarter increase in USD terms, followed by BFSI (+2.3%) and Manufacturing (+1.7%). Hi-tech declined 10.4% quarter-on-quarter due to seasonality and productivity pass-back.
Geographically, Europe led growth with a 3.6% quarter-on-quarter increase, while North America revenue declined 1.2% year-on-year despite strong overall performance.
Workforce Expansion Signals Optimism
In a sign of confidence about future demand, Infosys added approximately 5,000 people (1.5%) during the quarter, following an addition of around 8,000 (2.5%) in the previous quarter. However, utilization including trainees declined to 80%, down 220 basis points quarter-on-quarter.
“Management highlighted capacity build to support future demand,” the report noted, adding that the company onboarded approximately 18,000 freshers in FY26 and trained them.
Estimate Revisions and Valuation
Based on the improved outlook, JM Financial has revised its estimates upward. “We now build 3.5% cc growth for FY26E at top end of the guidance. Headcount addition, NHS deal and uptick in discretionary deals drives our optimism,” analysts wrote.
The firm raised its growth estimate for FY27E by 100 basis points on positive management commentary. EPS estimates (adjusted) saw upgrades of 1.5%-2.8% over FY26-28E.
Valuation Metrics:
- Current Market Price: Rs 1,600
- Target Price: Rs 1,930
- Upside Potential: 20.6%
- Target Multiple: 23.4x FY28E earnings
- Current P/E (FY26E): 22.7x
- Current P/B: 8.0x
- EV/EBITDA (FY26E): 15.8x
- Dividend Yield (FY26E): 2.6%
For FY26E, the firm now estimates diluted EPS of Rs 70.6, rising to Rs 78.0 in FY27E and Rs 83.7 in FY28E. EBITDA margins are projected at 23.0% for FY26E, improving to 24.0% in FY27E and 24.4% in FY28E.
JM Financial continues to value Infosys at 23.4x earnings, reflecting confidence in the company’s growth trajectory and margin expansion potential.
Key Risks to Consider
While the outlook appears positive, investors should be aware of several risks:
Near-term headwinds: Management flagged caution on weaker verticals and noted that lower working days in 4QFY26 could temper growth expectations, with the guidance midpoint implying a sequential decline.
Vertical-specific challenges: Manufacturing faces tariff uncertainty constraining longer-term commitments, with auto remaining particularly challenged. Retail & CPG is experiencing ongoing uncertainty from tariff negotiations and geopolitical factors.
Legacy modernization concerns: The report noted that “legacy areas’ contraction could be a concern but it is likely to be offset by AI led modernisation demand and market share gains.”
Margin pressures: Excluding one-time gains, margins stood at 20.8% in the quarter, impacted by higher variable pay and lower utilization. The company absorbed approximately 50 basis points of higher sales and marketing investment in the first nine months.
Labor code impact: The recurring impact of new labor code charges is estimated at approximately 15 basis points annually going forward, according to management guidance.
Execution risk: The acceleration in FY27 growth is dependent on successful ramp-up of large deals, recovery in discretionary spending in BFSI and EURS, and continued market share gains – all of which carry execution risk.
