Infosys shares may react to guidance raise, sharp surge in ADR after Q3

Shares of technology bellwether Infosys Ltd., India's second-largest IT services company, will be in focus on Friday, January 16, after the company announced its quarterly results post market hours on Wednesday.

Infosys' American Depositary Receipts were the first to react to the earnings, ending nearly 10% higher on Wall Street. In the domestic market, the stock had closed 0.62% higher at ₹1,608.90 ahead of the results announcement.

Its constant currency revenue growth stood at 0.6% quarter-on-quarter against expectations of flat growth. Infosys also raised its FY26 constant currency revenue growth guidance to 3-3.5% from the earlier range of 2-3%.

Adjusted EBIT margin came in at 21.2%, broadly in-line with estimates, while reported margins stood at 18.4%.

The company disclosed a one-time Labour Code impact of ₹1,289 crore during the quarter.

Net profit, however, declined 9.7% year-on-year to ₹6,654 crore, compared with ₹7,365 crore in the year-ago period.

Deal wins remained strong at $4.8 billion in the third quarter, with 57% classified as net new. This marked a sharp increase from $3.1 billion in the previous quarter, aided in part by a large contract win from NHS UK.

Infosys also reported its highest headcount in 11 quarters. The company added 11,246 employees over the last two quarters.

Here's how brokerages reacted

HSBC, which has a 'Buy' rating on Infosys with a price target of ₹1,870, said the company's Q2 performance was marginally ahead of expectations, while Q3 delivered a much stronger beat. This resulted in a surprise 75 bp upward revision to the mid-point of its FY revenue growth guidance.

Further, demand commentary improved, particularly across the banking and energy verticals. HSBC also said that greater clarity on the impact of AI and improving US corporate sentiment are driving IT demand.

CLSA has an 'Outperform' rating and a price target of ₹1,779. The brokerage said the revenue surprise during the quarter was largely driven by the ramp-up of the NHS contract and sustained discretionary spending in the BFSI segment.

CLSA pointed to management's confidence in signalling demand acceleration in the BFSI and energy and utilities verticals in FY27, underpinned by AI-led projects.

The brokerage has raised its CC revenue growth forecasts for FY26 and FY27 to 3.4% and 6.3%, respectively, from 3.1% and 6%, citing a better exit rate and improved demand visibility.

Jefferies maintained its 'Buy' rating on Infosys with a price target of ₹1,880. The brokerage said the higher growth guidance appears to reflect the Q3 outperformance rather than expectations of a stronger Q4, though management commentary remained upbeat.

Jefferies raised its estimates by up to 1% and expects Infosys to deliver a 7.5% recurring EPS CAGR over FY26-28.

Nuvama reiterated its 'Buy' rating on Infosys and raised its price target to ₹1,900. The brokerage said Infosys has delivered two consecutive quarters of strong deal wins and growth, providing high visibility for the coming quarters.

It added that FY27 growth will now hinge on how the March quarter shapes up, with the potential for a better exit-rate compared with the past two years.

Out of 51 analysts tracking Infosys, 36 have a 'Buy' rating, 13 recommend 'Hold', and two have a 'Sell' call on the stock.