Infosys Q1 Results Beat Expectations: Net Profit Rises 8.7%, Should You Buy or Hold?
Information technology services giant Infosys Limited delivered a robust performance in the first quarter of FY26, surpassing Street expectations with strong growth across key financial metrics. The company reported an 8.7% year-on-year increase in consolidated net profit to Rs 6,921 crore for the quarter ended June 30, 2025, demonstrating resilient execution amid challenging market conditions.
Strong Financial Performance Drives Optimism
Infosys showcased solid operational execution with revenue for the fiscal first quarter growing 7.5% to Rs 42,279 crore, beating analyst estimates and reflecting the company's ability to navigate macro uncertainties effectively.
The IT services leader also revised its revenue growth guidance upward, now expecting 1-3% growth in constant currency terms for FY26, compared to the previous guidance range of 0-3%. The company maintained its operating margin guidance at 20-22%, indicating confidence in maintaining profitability levels.
Key financial highlights for Q1 FY26 include:
- Net Profit: Rs 6,921 crore (8.7% YoY growth)
- Revenue: Rs 42,279 crore (7.5% YoY growth)
- Revenue Guidance: 1-3% for FY26 (revised upward)
- Operating Margin Guidance: 20-22% maintained
Market Challenges and Sectoral Performance
Despite the strong overall performance, Infosys management acknowledged continued macro uncertainty impacting certain business segments. The manufacturing and retail verticals experienced the most significant impact from ongoing economic headwinds.
However, the company identified emerging opportunities in European markets, primarily driven by consolidation trends and increased outsourcing activities. This geographic diversification strategy positions Infosys to capitalize on regional growth pockets while managing global uncertainties.
Brokerages noted that when including inorganic contribution of 0.4%, the revenue guidance effectively represents a modest reduction at the upper end, reflecting management's cautious approach given prevailing market conditions.
Brokerage Recommendations: Predominantly Bullish
Leading brokerages have largely maintained their positive stance on Infosys shares, viewing the company as best positioned among large-cap IT peers. Here's what major broking houses recommend:
Buy Recommendations
Nuvama Institutional Equities praised Infosys for delivering solid growth in both magnitude and quality, particularly noting lower third-party revenue contribution. The brokerage maintained its 'Buy' rating with an increased price target of Rs 1,850, up from Rs 1,700 previously.
Morgan Stanley highlighted the balanced nature of Infosys' results compared to industry peers. The international brokerage believes Infosys is likely to deliver the strongest EBIT growth within the large-cap IT universe in the current fiscal year, maintaining its 'Overweight' call with a price target of Rs 1,700.
CLSA noted that the earnings growth exceeded estimates and the company "ticked all the right boxes." The broking house reiterated its 'Outperform' rating with a price target of Rs 1,861.
Bernstein concurred with the positive sentiment, stating that Infosys delivered a solid quarter while beating both revenue and order book estimates. The brokerage maintained its 'Outperform' recommendation.
Neutral Stance
Motilal Oswal adopted a more cautious approach, maintaining its 'Neutral' rating despite acknowledging the strong Q1 performance. The brokerage highlighted ongoing client hesitancy, with no material improvement in discretionary spending budgets or decision-making cycles.
The firm noted that tariff uncertainties and geopolitical tensions continue to weigh on market sentiment, with management indicating that the macro environment remains largely unchanged from the previous quarter.
Stock Performance and Market Reaction
Infosys shares traded relatively flat following the earnings announcement, down 0.86% to Rs 1,560.90 on the NSE as of July 24, 2025. The muted market reaction suggests that while results were strong, investors may be adopting a wait-and-see approach given ongoing macro uncertainties.
The stock's trading range for the day was between Rs 1,556.10 and Rs 1,582.00, with significant trading volume of over 4 million shares, indicating active investor interest.
Strategic Positioning and Future Outlook
Infosys appears well-positioned to navigate the current challenging environment, with brokerages highlighting several competitive advantages:
- Quality Revenue Growth: Lower dependence on third-party revenue sources
- Margin Stability: Consistent operating margin guidance maintenance
- Geographic Diversification: Emerging opportunities in European markets
- Strong Execution: Consistent delivery against guidance parameters
Investment Recommendation Summary
Based on brokerage consensus, Infosys presents a compelling investment opportunity for investors seeking exposure to India's IT services sector. The majority of analysts maintain bullish recommendations, with price targets ranging from Rs 1,700 to Rs 1,861, suggesting potential upside of 9-19% from current levels.
However, investors should consider the cautious management commentary regarding macro uncertainties and client spending patterns. The company's ability to maintain growth momentum will depend on global economic recovery and increased technology spending by enterprise clients.
For existing shareholders, the strong Q1 performance and revised guidance provide confidence in holding positions. New investors may consider building positions gradually, particularly on any market weakness, given the company's strong competitive positioning and execution track record.
Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.
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