Infosys Stock Price Falls Despite 13% Profit Rise and Strong Q2 FY26 Deal Wins

Strong Q2 Performance Highlights Infosys’ Growth Potential Despite Near-Term Stock Pressure
Infosys Stock Price Falls Despite 13% Profit Rise and Strong Q2 FY26 Deal Wins
Written By:
Kelvin Munene
Reviewed By:
Manisha Sharma
Published on

Infosys Limited, the second-largest IT services company based in India, has reported positive financial performance in the second quarter of FY26 with an increase in net profit by 13.2% to Rs. 7,364 crore in the current financial year compared to Rs. 6,506 crore in the last one. 

The revenue growth was 8.6% year-on-year to Rs. 44,490 crore with constant currency growth of 2.9% year on year and 2.2% sequentially. The operating margin of the company stood at 21%, which is below the expectations of the market, though it has been stable over the past few quarters.

The IT company also announced a transitory dividend of Rs. 23 per share, which is a 9.5% growth over the past year. The free cash flow increased by 38% to Rs. 9,677 crore, which is 131% of net profit. 

The total contract value of large deals signed in the quarter reached $3.1 billion, up 29% year-on-year, which is a positive sign of client demand in the area of digital transformation, AI, and cloud services. Infosys also fulfilled its Rs. 18,000 crore share buyback, which is the highest in its history.

Market Reaction and Analyst Views on Infosys Share Price

Despite robust earnings and healthy deal momentum, Infosys shares fell over 2% on Saturday’s trade, touching a low of Rs. 1,440 on the NSE. The stock has declined nearly 25% year to date, underperforming the Nifty 50 index, which gained 8.2% during the same period. Analysts attribute the stock weakness to cautious revenue guidance and subdued near-term growth expectations.

Infosys lowered its constant currency FY26 revenue growth target to 23%, which is a slight improvement on its earlier target of 13%. However, such a range was considered conservative even with the solid deal flow among investors. The company held its operating margin projection at 20% - 22% this year, which indicated that the company was stable in terms of profits but with minimal growth potential.

Large brokerages continued to have favorable ratings of the stock. Nomura restated its Buy rating and target price of Rs. 1,720, based on stable margins and improved-than-anticipated revenues. 

A ‘Buy’ call was still held by Jefferies with a Rs. 1,700 target, stating that the Q2 performance was expected to be in line, but the second half performance is still likely to be weak. HSBC also maintained a ‘Buy’ rating at Rs. 1,730 target, with cost efficiencies, rupee loss, and productivity gains using AI as among the positives.

Short-Term Pressure Despite Long-Term Strength

The low response in the stock market indicates investor apprehension in the face of global IT expenditure reduction and macroeconomic crosswinds in major markets like the US and Europe. A high number of clients are still withholding technology budgeting, which is impacting the ability to convert revenue in the near term, even when the deals are won.

Analysts think that the steadiness in Infosys' execution, the strong margins, and emphasis on automation and AI would aid the company in the medium-term growth. Nevertheless, dull guidance and the absence of catalysts in the near future can continue to weigh down on the stock. 

For long-term investors, Infosys remains one of the most profitable players in the Indian IT services industry, backed by strong fundamentals and steady cash generation.

Also Read: Stock Market Today: Sensex Down 0.21%, Nifty Drops 0.27%; Titan, Infosys Lead Gainers

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