Infosys Q2 Results Beat Triggers Broker Upgrades and Buy Calls
Infosys stamped a better-than-expected Q2 FY26 performance, prompting a wave of bullish assessments from top brokerages. With mixed market conditions for IT peers, the company’s earnings beat and an improving deal pipeline have reignited optimism about its growth trajectory and profitability. Analysts from Nomura, Jefferies, and HSBC have issued buy ratings, nudging price targets into the Rs 1,700–1,730 range and signaling potential upside despite a softer broader market backdrop.
What the Q2 Numbers Show
The IT major posted a 13.2% year-on-year rise in consolidated net profit for the July-September quarter to Rs 7,364 crore, surpassing expectations. Revenue grew 8.6% year-on-year to Rs 44,490 crore, with constant currency growth at 2.9% YoY and 2.2% sequentially. While the operating margin stood at 21.0%, it remained broadly stable versus the prior year, even as some investors had anticipated a modest compression due to wage increases and ongoing competitive pressure.
Cash Generation and Capital Return
Infosys also highlighted a strong cash profile, with free cash flow rising 38% to Rs 9,677 crore, equating to 131% of net profit. The company completed an Rs 18,000-crore share buyback in the quarter, underscoring management’s confidence in the business and its capacity to return value to shareholders even as it funds growth initiatives.
Guidance and Margin Outlook
Management narrowed its FY26 revenue growth guidance to 2–3% in constant currency, from a prior 1–3% range, while keeping the operating margin band intact at 20–22%. This move signals a bias toward stability and efficiency rather than aggressive top-line acceleration. The larger message for investors is that Infosys intends to balance growth with disciplined costs, leveraging the current productivity push across AI-enabled initiatives, automation, and optimization of delivery models.
Deal Momentum and Large Wins
Large deal wins reached $3.1 billion in the quarter, up 29% year-on-year, which bodes well for the revenue mix and near-term visibility. A robust deal pipeline, combined with ongoing efficiency improvements, helps explain why analysts remain constructive about the stock despite a recent pullback in price. Free cash flow strength further adds to the credibility of the cash return narrative through buybacks and potential dividends.
Brokerage Calls: Why the Upgrades Now?
– Nomura maintains a buy tag with a target price of Rs 1,720 per share, arguing revenue marginally beat expectations and that margins should stabilize around 21% in FY26. The stock trades around 19.8x FY27 earnings, which Nomura views as reasonable given the growth and efficiency trajectory.
– Jefferies also keeps a buy stance with a target of Rs 1,700, noting the performance as broadly in line but recognizing a soft second half risk due to a high-quality, but still cautious, guidance. The firm anticipates a 6% CAGR in EPS over FY26-28, supported by margin resilience and ongoing efficiency gains.
– HSBC endorses a buy with a Rs 1,730 target, pointing to stable margins supported by cost rationalization, favorable rupee dynamics, and AI-led productivity improvements. The bank also highlights improved macro visibility in the US as a catalyst for enterprise technology spending in 2026, which could benefit Infosys relative to peers.
Market Context: What a Buy Rating Means for Investors
Infosys’ shares closed at Rs 1,470.9 on Thursday, modestly lower ahead of the results. The stock has fallen roughly 25% over the past year, trailing the Nifty 50’s modest gains. The new buy ratings imply upside potential of up to ~17% from the prior close, suggesting that the current pullback may be an opportunity for investors who believe in Infosys’ margin resilience, cash generation, and a stabilizing earnings trajectory as large deals and AI-driven productivity gains play out.
What to Watch in the Coming Quarters
Key drivers will include the sustainability of margin levels amid ongoing wage pressures and currency movements, the pace of deal wins, and the contribution of AI and digital transformation projects to productivity. If Infosys can maintain its margin band while growing revenue in a volatile global tech environment, the stock could attract renewed interest from investors seeking quality IT exposure with a relatively steady earnings profile.
Conclusion
Infosys’ Q2 beat has reinforced confidence among analysts who see stable margins, a strong free cash flow profile, and a healthier deal pipeline as catalysts for further upside. With top brokerages calling it a buy and pointing to manageable risks, investors may look to position themselves ahead of potential upside in the stock price as we move through FY26.
