IT sector stocks Are in focus. infosys There has been a fall of over 1% intra-day, but renowned domestic brokerage house, JM FinancialAI has reiterated its ‘buy’ rating on Infosys after a recent interaction with the company’s investor relations team. According to JM Financial, demand trends remained stable in the March quarter despite widespread global uncertainty.
The brokerage said IT head Stick to its FY26 revenue growth guidance, while early signs of discretionary spend recovery in two large verticals and a strong large deal pipeline of $4.8 billion provide visibility into medium-term growth.
What JM Financial found after talks with Infosys management
JM Financial analysts Rajeev Barlia, Nandan Arekal and Anushree Rustagi spoke with Infosys’ investor relations team ahead of the company’s fourth quarter results.
The brokerage said the demand environment remains stable compared to the beginning of the quarter, with no decline seen so far.
Infosys management reiterated constant-currency revenue growth guidance of 3% to 3.5% year-on-year for FY26.
According to JM Financial, guidance estimates a fourth-quarter growth range of -1.6% to +0.2% with the lower end factoring in potential macroeconomic uncertainty.
Both verticals are showing quick expense recovery
One of the key signals from the conversation is that both Financial Services and Energy, Utilities, Resources and Services (EURS) discretionary spending are showing early signs of recovery.
These two segments contributed 41.4% to Infosys’ revenue in Q3FY26.
JM Financial That said, both verticals are expected to perform better in FY27 compared to FY26, a trend that was also flagged by the management in its January earnings call.
In financial services, Infosys is seeing continued momentum with improvement in discretionary spending across banking, payments, mortgage and property/assets. Clients are increasingly shifting from compliance-driven projects to business-growth initiatives and vendor consolidation, which is supporting a strong strategic pipeline.
In the EURS vertical, demand is growing in utilities as companies invest in infrastructure, data platforms and artificial intelligence. The energy sector is seeing traction from cost optimization driven by decarbonization initiatives and low-carbon priorities as well as enterprise adoption of AI.
where the trouble spots are
Not all industry sectors are seeing the same level of recovery.
In the manufacturing sector, customers are hesitant to commit to long-term transformation programs due to tariff uncertainty. While the industrial and aerospace segments remain relatively resilient, the automotive sector is facing pressure, with companies prioritizing cost discipline and operational efficiency.
In retail and consumer packaged goods, ongoing uncertainty around tariff negotiations and geopolitics has driven customers toward cost-cutting programs and AI-led productivity initiatives rather than new digital transformation investments.
The high-tech vertical is also witnessing pressure on spending as customers focus on cost optimization. However, there remains room for strength in areas related to AI infrastructure and server build-out.
The deal pipeline is the headline number
Perhaps the most notable metric in JM Financial’s update is Infosys’ big deal win.
Infosys reported total large deal wins of $4.8 billion in Q3FY26, the highest figure in the five quarters tracked in the brokerage’s report.
Of this, $2.736 billion or 57% represents net new deals.
for comparison:
- Mega deals worth $2.495 billion signed in Q3FY25
- $3.797 billion signed in Q1FY26
The rapid growth highlights the growing interest in major transformational actions.
JM Financial said management described the deal pipeline as healthy, particularly in large transformation deals driven by vendor consolidation and cost-efficiency mandates.
Near-term growth is expected to come mainly from major transformation programs and cost-efficiency initiatives, while medium-term demand should be supported by:
- Modernization of legacy technology assets
- continuous enterprise digital transformation
- Adoption of artificial intelligence capabilities is increasing.
Margins intact, salary hike not imminent
On profitability, Infosys reiterated its operating margin guidance of 20-22% for FY26.
The company’s EBITDA margin stood at 20.9% in Q3FY26, down from 23.7% in Q2FY26, partly due to a one-time labor code charge of Rs 1,289 crore on employee benefit costs.
JM Financial said no decision has been taken yet on salary hike and a salary revision is unlikely in Q4FY26. The previous pay hike cycle was implemented in two phases, effective from January and April.
The absence of wage growth along with the depreciation of the Indian rupee against the US dollar provides a squeeze on near-term margins.
In the face of headwinds, JM Financial indicated:
- Absence of land sale profit booked in Q3FY26
- rising visa costs
- Lower than expected volumes in fourth quarter
- Shorter working days during this period.
The brokerage said Project Maximus, Infosys’ internal operational efficiency programme, along with automation in delivery and increased use of artificial intelligence, should help ease margin pressure over time.
Anthropic deal and artificial intelligence revenue trajectory
Infosys also announced strategic cooperation anthropicA leading artificial intelligence company.
The partnership will begin in the telecom sector, where Infosys will set up a dedicated human excellence center to create and deploy AI agents for industry-specific operations.
Over time, cooperation is expected to expand to financial services, manufacturing and software development.
According to JM Financial, AI-related revenue accounted for 5.5% of Infosys’ total revenue in 3QFY26 and is growing rapidly.
Management believes the global AI services opportunity could reach $300 billion to $400 billion by 2030 across six strategic pillars. Infosys expects this expansion pool to be large enough to offset potential pricing pressure from AI-driven automation.
The numbers behind the story
Infosys reported consolidated revenue of $5,099 million in Q3FY26, showing 0.5% sequential growth and 8.9% year-on-year growth in rupee terms.
Profit after tax for the quarter stood at Rs 7,621 crore, while adjusted earnings per share stood at Rs 18.5, up 4.3% sequentially.
The company’s active customer base rose to 1,949, the highest level in a five-quarter dataset tracked by JM Financial.
There was a significant improvement in customer base, which declined from 101 in 1QFY26 to 68 customers in 3QFY26.
The total number of employees at Infosys at the end of the quarter was 3,37,034.
Geographically, Europe remained the key growth driver with revenues of $1,667 million and year-over-year growth of 13.3%.
North America, which accounts for 55.9% of Infosys’ revenues, declined 1.2% year-on-year in dollar terms.
conclusion
JM Financial said stable demand conditions, improvement in discretionary spending across key sectors and strong large deal momentum support its ‘Buy’ rating on Infosys.
With the stock trading at around 17× FY27 consensus earnings per share, the brokerage believes valuations remain fair for one of India’s largest technology exporters, especially as enterprise spending gradually shifts towards AI-led digital transformation and large-scale vendor consolidation programs.
Other leading brokerage houses like Nuvema and Nomura have given buy ratings to Infosys in their recent reports.
Disclaimer: This article provides factual analysis only and should not be considered an offer, solicitation or recommendation to buy or sell securities. Investors should conduct their own independent diligence and seek advice from a SEBI-registered financial advisor.