Infosys shares a buy? IT major may beat peers in Q2, says HDFC Institutional Equities

Infosys Ltd is likely to outperform its peers in terms of the September quarter growth and that there is an upside risk to its 3-4 per cent FY25 guidance, HDFC Institutional Equities said, as it pegged revenue growth slightly above the upper range of the fiscal year guidance.

Positive markers include improved demand in segments of BFSI, market-share gains in deals -- notably within the communications vertical, deal pipeline replenishment, and better hiring trends, the brokerage said.

"The enterprise revenue growth trajectory shows a mild improvement, which may bolster recovery in discretionary spending. Even if quarterly new large deal bookings moderate to under $2 billion, we anticipate growth acceleration driven by the increasing contribution from sub-$50 million deals. Our revenue growth estimates for FY24-27E assume a similar incremental annual growth rate as the last five years' average," HDFC Institutional Equities said.

The recent re-rating of valuation multiples has ‘partially’ priced in these positives, the brokerage said adding that it maintained its 'ADD' rating on Infosys with a target price of Rs 2,010, based on 25 times estimated December 2026 earnings per share.

HDFC Institutional Equities said the recovery in discretionary will have a larger bearing on growth acceleration in the absence of mega deals. Growth can even accelerate even if quarterly new large deals moderate to below $2 billion average compared with an average of $2.5 billion over the past year.

"For instance, Infosys booked nearly similar large deal new bookings in FY22 and FY23, but the growth differential in FY23 and FY24 was 15 per cent and 2 per cent CC, which was also impacted by weakness in discretionary (

HDFC Institutional Equities said that the Enterprise client revenue is expected to recover mildly compared with Calendars 2023 and 2024, which may reflect in modest acceleration in spend towards legacy modernisation and GenAI initiatives.

"In addition, some recovery in discretionary spend may further add to the company’s growth. Infosys has gained deal market share vs. global peers over the past two years, which reflects the relative competitive strengths and will support growth in an improved discretionary spend environment. This is also to do with relative weakness in some of the global peers," it said.

HDFC Institutional Equities said discretionary spending is picking up in the Cards & Payments, Capital Markets, and Mortgage sub-segments within the BFSI vertical. Macro-led certainty has improved, with the deal pipeline and replenishment remaining strong — Q1 recorded the highest number of large deal wins, it said.

The communications vertical is expected to perform better in FY25E, supported by several large deals, including wins in Q2 with Proximus/TDC.

"Growth in the manufacturing vertical may normalise after earlier high growth as deals mature, despite a near-term lift from the In-Tech acquisition. The company maintained its guidance of 3-4% CC growth for FY25E, which does not factor in macro recovery and is expected to be front-loaded. Fresher hiring plans are set at 15-20k for FY25E, compared to ~11k in FY24, reflecting improved volumes and peak utilisation," HDFC Institutional Equities said.

The medium-term margin aspiration is to improve from the current 20-22 per cent range, driven by growth, pricing, and operational efficiency, the brokerage said.