Accumulate Infosys; target of Rs 1200: Prabhudas Lilladher

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Revenue growth slowdown: Infosys reported Q2 revenue growth of 1.2% QoQ (CC), with softer volumes, lower-than-anticipated pricing, and subdued discretionary spending.
  • AI services growth: AI revenue grew to 10.5% of revenues in Q2, up 29% QoQ, driven by clients prioritizing modernization and AI initiatives.
  • Deal wins momentum: Large deal wins stood at US$5.2bn, including a 7-year mega deal of over USD 2bn, which is expected to contribute over 1% of revenue growth in FY28.
  • Margin pressure: EBIT margin declined 10bps QoQ to 21.0%, due to higher SG&A expenses and pricing pressure.

Thesis Validation Checklist

  • Revenue growth trajectory: Watch for signs of revenue growth acceleration or deceleration, particularly in the FS, EURS, and Comms segments.
  • AI services revenue growth: Monitor the growth of AI services revenue as a percentage of total revenue.
  • Deal wins and conversion: Track the conversion of deal wins to revenue and the impact on revenue growth.
  • Margin trends: Observe the trend of EBIT margin and the impact of pricing pressure and cost discipline on profitability.