Infosys shares fall 4% on conservative revenue growth outlook; focus on muted QoQ earnings

India’s second-largest IT sector company, Infosys, shares declined 4% after the opening bell on Monday, October 26, as investors focused on the company management’s conservative revenue growth guidance for FY27 amid a muted sequential Q2 performance due to elevated market volatility.

NSE data showed that Infosys shares declined 4% to touch an early market low of ₹1,107 apiece on Monday’s market, in comparison to ₹1,153.80 apiece at the previous equity market close.

Trading activity surged past 5 million equity shares as of the morning trade, with the stock hovering in the red, impacting the overall sentiment among the Indian IT stocks.

Equity market investors reacted to the conservative revenue growth outlook, exercising selling pressure in the overall sector. NSE data also showed that the benchmark Nifty IT index lost 2.5% during the early trade.

Nifty IT declined 2.53% or around 810 points to touch an early market low of 31,184.70 points on October 26, in comparison to 31,995.50 points at the previous equity market close, as per the exchange data.

What do analysts predict?

After reviewing the Q2 fine print, analysts from Goldman Sachs said the financial performance was largely in line with expectations, with the management marking a second consecutive quarter of a guidance cut.

“Second consecutive quarter of guidance cut, with the mid-point now implying a modest negative FY27 organic revenue growth,” said Goldman Sachs analysts.

The experts suggest that the margins remain range-bound, with Infosys attributing the same to pricing pressure in the market amid elevated competition. “Demand environment remains sluggish, with a few client-specific ramp downs, subdued volume growth and shift in spend priorities by clients, per management,” they said.

In line with expectations, HSBC analysts also said that the H2 FY27 margins are likely to remain under stress due to the wage hikes.

The Q2 performance of Infosys was weaker than expected, as per UBS expectations.

On the deals front, Citibank said, “New mega deal should address some concerns around Infy starting FY28 at a disadvantage relative to peers, after the loss in a European mfg. client.”

Infosys growth outlook

Infosys’ management lowered its revenue guidance to the range of 1% to 2% for the financial year 2026-27, in comparison to the earlier growth forecast in the range of 1.5% to 3%, as per the official announcement.

However, despite conservative revenue guidance, the IT firm maintained its operating margin guidance in the range of 20% to 22% for the current fiscal year.

Infosys CFO, Jayesh Sanghrajka, said, “We delivered operating margins of 21.0% in Q2 amidst heightened volatility. Focus on cost and operational efficiency measures while making the required investments, have led to stable margins.”

Muted Q2 growth?

Although the year-on-year (YoY) financial performance has been positive, the sequential growth in earnings remained flat in the July to September quarter of FY27.

On the revenue front, Infosys’ revenue from core operations increased 11% YoY to ₹49,244 crore, and registered a 2.14% sequential growth in the period under review.

The data further showed that artificial intelligence (AI) revenues contributed 10.5% to the total revenue in the September quarter, recording a 29% QoQ growth in the period.