Infosys Q2 FY26 Beat Triggers Buy Ratings From Major Brokers
Infosys captured investor attention on the trading session following its better-than-expected Q2 FY26 results. The IT bellwether reported a consolidated net profit of Rs 7,364 crore for the July-September quarter, a 13.2% year-on-year rise, alongside revenue growth of 8.6% to Rs 44,490 crore. On a constant currency basis, growth stood at 2.9% YoY and 2.2% sequentially. Margin stability remained a focal point, with operating margin at 21%, roughly level with the prior year though just shy of some expectations.
What the Results Mean for Margins and Growth Trajectory
Infosys’ margin profile in Q2 FY26 reflects resilience amid a competitive outsourcing landscape. While the reported margin aligns with the company’s historical range, analysts noted that it may temper near-term expectations for outsized improvements. The firm also highlighted a healthy deal pipeline, with large deals contributing $3.1 billion in the quarter — a 29% YoY increase that underscores Infosys’ ability to win meaningful contracts in a challenging macro backdrop. Free cash flow surged 38% to Rs 9,677 crore, representing 131% of net profit, signaling strong cash-generation capacity that supports shareholder-friendly actions such as the Rs 18,000 crore buyback declared during the quarter.
Dividend, Buyback, and Shareholder Confidence
Infosys declared an interim dividend of Rs 23 per share, up about 9.5% from the previous year, reinforcing its commitment to returning cash to shareholders. The company completed an Rs 18,000 crore share buyback in the quarter, a move that typically resonates with investors seeking value creation beyond earnings per share. The combination of dividend yield and buyback, along with improving cash flows, has a positive impact on the stock’s attractiveness amid a volatile IT sector backdrop.
Analyst Takeaways: Buy Ratings and Target Prices
Following the results, several brokerages upgraded or reiterated bullish views on Infosys. Key targets cluster around Rs 1,700 to Rs 1,730 per share, implying upside of roughly 10% to 17% from the prior close.
- Nomura initiated a buy with a target of Rs 1,720, noting that Q2 revenue slightly surpassed expectations and that margins should stay near 21% in FY26. The stock trades around 19.8x its FY27 earnings, a multiple that still leaves room for upside given steady execution.
- Jefferies also assigned a buy with a Rs 1,700 target. The note described performance as broadly in line with expectations, but cautioned that the raised lower-end growth guidance hints at a softer second half despite a robust deal pipeline. Jefferies projects a 6% CAGR in EPS over FY26-28, supported by margin resilience and ongoing efficiency gains.
- HSBC issued a buy with a higher target of Rs 1,730, highlighting stable margins driven by cost rationalisation and potential benefits from rupee depreciation. The bank also pointed to AI-led productivity enhancements and improved macro visibility in the US that could lift enterprise technology spending in 2026.
Stock Performance Context and What’s Next
Infosys shares closed at Rs 1,470.9 on Thursday, slipping slightly by about 0.24% ahead of the results. Over the past year, the stock has underperformed the Nifty 50, dipping roughly 25% against the index’s modest 3.4% gain. The current brokerages’ price targets imply a potential upside of up to 17% from yesterday’s close, suggesting sentiment could shift as investors reassess the growth trajectory and margin framework in a post-results environment.
The company narrowed its FY26 revenue growth guidance to 2-3% in constant currency, from a prior range of 1-3%, while maintaining a 20-22% operating margin band. The achievable upside hinges on sustaining deal momentum, optimizing costs, and capitalising on AI-enabled productivity gains that various large-cap peers are betting on. With the ongoing focus on digital transformation across industries, Infosys’ improving deal pipeline and cash flow generation are critical levers for upside in the near term.
What Investors Should Watch
Traders will monitor how the market prices the improved earnings visibility and the effectiveness of Infosys’ cost rationalisation programs. Any updates on large deal wins, client concentration, and currency mix can influence the stock’s trajectory. Moreover, the broader IT sector’s risk appetite, US tech spending patterns in 2026, and competition from peers will shape subsequent moves in Infosys’ share price.
