Bengaluru-based IT giant Infosys (INFY) has signaled a turning point for the technology sector by increasing its financial targets for the year. Following a period of slow corporate spending, the company announced on Wednesday that it expects its annual revenue to grow by 3% to 3.5%.
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The primary driver behind this revised forecast is a change in how global companies are spending their money. For much of 2024 and 2025, high interest rates and geopolitical tension caused banks and retailers to cut back on discretionary IT projects. However, CEO Salil Parekh noted that clients now view Infosys as their “AI partner of choice.” Instead of pausing projects, companies are now actively funding AI-driven digital transformations to stay competitive.
Infosys Demonstrates a Strong Deal Pipeline
The company’s deal book provides the most educated look at where the industry is headed. In the quarter ending December 31, Infosys secured $4.8 billion in large contract wins, with more than half of those being “net new” business rather than just renewals. This strong pipeline is why management feels confident enough to raise their forecast even though the broader economy remains unpredictable.
Infosys Still Has to Navigate Regulatory Hurdles
Despite the positive sales outlook, Infosys stock has had to absorb some one-time costs. The company reported a ₹1,289 crore ($143 million) expense related to India’s new labor codes, which increased liabilities for employee gratuity and leave. Additionally, the industry is bracing for potential changes to the H-1B visa regime in the United States, which could increase hiring costs. However, by focusing on high-margin AI and cloud services, Infosys aims to maintain its operating margins between 20% and 22%.
Is Infosys a Good Stock to Buy?
TipRanks data shows Infosys (INFY) carries a “Hold” consensus rating from 6 Wall Street analysts over the past three months. The breakdown includes one Buy, five Holds, and no Sells.
The average 12-month INFY price target stands at $18.95, implying a modest 8.2% upside from the latest close.
