Infosys shares slip even after Q1 beat; Here's why investors are wary

Business Standard

2 days ago

Shares of Infosys Ltd. declined on Thursday, despite analysts remaining positive after the company reported in-line first-quarter earnings. The drop was likely driven by trimmed revenue guidance, even as deal wins rose. Sentiment was further weighed down by a sharp sell-off in mid-cap peers following their results, dragging most stocks in the index lower.
The information technology (IT) firm's stock fell as much as 1.16 per cent during the day to ₹1,556.1 per share. The stock pared losses to trade 0.8 per cent lower at ₹1,560 apiece, compared to a 0.2 per cent advance in Nifty 50 as of 9:50 AM. Meanwhile, the Nifty IT index fell 1.25 per cent, dragged down by Persistent Systems and Coforge, which declined 7.5 per cent and 6 per cent, respectively.
Shares of Infosys were trading at the lowest level since June 6 this year. The counter has fallen 17 per cent this year, compared to a 6.4 per cent advance in the benchmark Nifty 50. The IT firm has a total market capitalisation of ₹6.48 trillion. Track LIVE Stock Market Updates Here
Infosys Q1 results
The net profit of Bengaluru-based company came in at ₹6,921 crore, marking a sequential decline of 1.6 per cent. The top line grew 3.3 per cent on quarter-on-quarter (Q-o-Q) to ₹42,279 crore. Both the numbers beat Bloomberg estimates, where analysts had estimated a net profit of ₹6,778 crore and revenue of ₹41,724 crore.
For the IT giant, financial services and manufacturing, which contributed 28 per cent and 16 per cent to the top line, respectively, were up 5.6 per cent and 12.2 per cent. Growth in manufacturing was a contrast at a time when other companies have seen their revenue hammered due to tariff fears.
Why did Infosys stock fall?
As the tech firm only raised the lower end of its revenue guidance, analysts said that this reflects heightened global uncertainties.
Despite productivity improvements and a 44 per cent sequential increase in deal wins, totalling $3.8 billion, Infosys narrowed its organic revenue growth guidance from 0-3 per cent to 0.6-2.6 per cent, analysts at JM Financial noted.
At first glance, the cut at the upper end may seem negative. However, analysts said that a strong first quarter and normal seasonality suggest that the revised guidance is not relying on a second-half recovery. Symbolically, the narrower range also reflects greater confidence, JM Financial said.
Analysts at Antique Stock Broking noted that although this was a good quarter, the organic guidance was largely unchanged. The narrow guidance reflects a mid-point increase in guidance from 1.5 per cent to 1.7 per cent. The revision accounts for a continued uncertain environment driven by tariff-related concerns, geopolitical risks, and lower third-party revenue, analysts said.
Infosys narrowed its FY26 revenue growth guidance, reflecting its Q1 performance, robust large deal wins, M&A contribution, Emkay Global said in a note. The upper end of the guidance assumes macro stability, while the lower end factors in risks from further deterioration in the external environment, Emkay said.