Infosys Q2 FY26: A Beat that Revives Optimism
Infosys surprised the market with a better-than-expected Q2 FY26 performance, sealing a fresh wave of optimism among brokerages. The IT bellwether reported a consolidated net profit of Rs 7,364 crore for the July-September quarter, up 13.2 percent year on year, and revenue at Rs 44,490 crore, rising 8.6 percent on an annual basis. In constant currency terms, the growth stood at 2.9 percent year-on-year and 2.2 percent sequentially. While the operating margin held steady around 21 percent, slightly below some expectations, the numbers nevertheless underscored Infosys’ resilience amid a volatile macro environment.
What the Street is Saying: Buy Ratings and Target Prices
Following the results, several leading brokerages issued “buy” calls with target prices in the Rs 1,700–1,730 range. Notable notes came from Nomura, Jefferies, and HSBC, each highlighting factors such as a steady execution engine, robust deal momentum, and potential upside from AI-enabled productivity and cost rationalisation.
Nomura: Steady Margins, Attractive Valuation
Nomura’s wrap emphasised that Infosys’ margins are likely to remain around 21 percent in FY26, supported by efficiency gains and a stable pricing environment. With the stock trading at roughly 19.8x FY27 earnings, the broker argues the risk-reward remains favorable at current levels, particularly as large deal wins continue to improve the growth trajectory.
Jefferies: Healthy Pipeline but Cautious on H2
Jefferies’ verdict was a cautious but constructive “buy.” While acknowledging a healthy deal pipeline and respectable execution, the brokerage flags a softer second half to the year due to a guided 2-3% constant-currency growth range. It still projects a 6% CAGR in earnings per share over FY26–FY28 on the back of margin resilience and ongoing efficiency improvements.
HSBC: AI-Driven Gains and Macro Visibility
HSBC’s note spotlights AI-led productivity gains and cost rationalisation as key margin supports, alongside rupee weakness that can help USD-denominated revenue. The broker also points to improving macro visibility in the United States, which could boost enterprise technology spending in 2026 and ahead, benefitting Infosys relative to its large-cap peers.
Key Operational Highlights from the Quarter
In addition to the topline beat, Infosys delivered several operational positives. Large deal wins totalled $3.1 billion for the quarter, up 29 percent year-on-year, signaling a healthy demand environment. Free cash flow surged 38 percent to Rs 9,677 crore, equating to 131 percent of net profit, underscoring strong cash generation and the company’s ability to return capital to shareholders. Infosys also announced an interim dividend of Rs 23 per share, up 9.5 percent year over year, reflecting management’s confidence in a strong cash profile.
What This Means for Investors
From a shareholder perspective, the mix of steady margins, improving deal momentum, and a steady capital return program reinforces the appeal of Infosys in a market where growth leaders are few. The Q2 performance, coupled with a narrowed FY26 revenue growth guide of 2–3 percent in constant currency and a maintained 20–22 percent operating margin band, provides a balanced outlook that brokerages seem to agree will likely translate into upside potential in the near term.
Market Set-Up: Stock Price and Next Steps
Infosys closed at Rs 1,470.9 on Thursday before the Q2 results, with shares having fallen about 25 percent over the past year, underperforming the Nifty 50’s gains. The fresh buy recommendations and target ranges imply a potential upside of up to about 17 percent from the prior close, contingent on execution and global tech demand trends. Investors should monitor how the stock reacts to the next round of quarterly and annual results, as well as any commentary on AI-driven productivity and large deal wins.
Conclusion: A Cautiously Optimistic Street Post-Q2
Infosys’ Q2 results have rekindled bullish sentiment among top brokerages, with buy ratings anchored by margins in the low- to mid-20s, a solid deal funnel, and stronger cash generation. While there is recognition of a potentially softer H2, the consensus indicates that the stock’s upside reflects a favorable balance of fundamentals and strategic long-term drivers, including AI-enhanced services and steady share buybacks.
