Infosys: Strong Growth and Deal Momentum Offset by Margin Constraints, Warranting Hold at Premium Valuation

TD Cowen analyst Bryan Bergin maintained a Hold rating on Infosys yesterday and set a price target of $18.00.

Bryan Bergin has given his Hold rating due to a combination of factors, balancing improving growth prospects with constrained earnings leverage. He notes that Infosys delivered a stronger quarter, including robust large-deal signings and a healthier pipeline, which justified raising the FY26 growth outlook and underpins expectations for faster expansion into FY27, particularly in financial services and energy/utilities. The sustained momentum in total contract value, driven in part by large wins such as the NHS deal, and signs of gradual demand recovery and selective AI-related opportunities are expected to push Street growth estimates higher and help stabilize the stock after recent volatility. At the same time, he observes that recent share strength has been supported by short covering and a broader sector rebound, suggesting some of the near-term optimism may already be reflected in the price.

However, Bergin remains cautious on the company’s margin trajectory and the resulting earnings profile, which constrains his enthusiasm despite the better top-line outlook. Operating margin expansion has been modest and faces additional regulatory cost headwinds, leading him to see only limited upside to earnings growth over the next few years. Given this muted EPS progression alongside Infosys’s still premium valuation versus its historical average, he believes the risk/reward is balanced rather than compelling at current levels. As a result, he raises his price target to $18 to reflect updated estimates and a mid‑teens forward P/E, but maintains a Hold recommendation since upside appears capped without clearer margin and earnings acceleration.