Why Infosys shares plunged 6% today despite Q3 beat, FY25 guidance upgrade

Infosys Ltd delivered a strong set of December quarter results, which led the company to revise upward its FY25 revenue growth guidance, beating analyst projections. Yet the stock plunged 6 per cent today.

This is because tepid large deal wins -- the absence of mega deal wins in Q3, bring uncertainty over whether the IT firm may see double-digit growth in FY26. Besides, despite the FY25 revenue guidance upgrade, the ask rate for Q4 suggests a de-growth ahead, thanks to seasonality and a reversal of third-party sales-led business. Many brokerages are just not ready for upgrading the IT stock to 'Buy' from "Hold'.

The Infosys stock plunged 5.71 per cent to hit a low of Rs 1816.10 on BSE. The stock is up 10 per cent in the past one year.

"Infosys: Though the FY25 revenue guidance has been revised upward, it implies minus 2.2 per cent to minus 0.2 per cent QoQ growth in CC for Q4, indicating a potential revenue decline due to seasonality, fewer working days and drop-in third-party revenue seen in Q3," said Sharekhan said.

Infosys Ltd ADR shares had dropped 5.77 per cent to $21.57 apiece overnight due to the same reason.

The Infosys management said clients are still focusing more on cost-takeout deals than on discretionary spends. They continue to see signs of a pickup in discretionary spends and a recovery in the BFSI and retail verticals in the near term, it noted.

Nirmal Bang expects FY26 to be better than FY25. However, it trimmed its revenue estimates by 1 per cent and margin by 30 bps for FY26.

"Led by this our EPS estimates cut by 3 per cent for FY26E but increased by 0.7 per cent for FY27E. We maintain HOLD with target price of Rs 2,199 (against Rs 2,191 earlier)," it said.

Antique Stock Broking Infosys is witnessing an improvement in demand, with discretionary spending in Financial Services in the US recovering strongly and there being visible signs of revival in Europe during the quarter. Additionally, the retail and consumer businesses in the US are experiencing easing of discretionary pressure.

"We reiterate HOLD rating while we marginally reduce our revenue and EPS estimates foreseeing weaker Q4 revenue. Our target price remains unchanged at Rs 2,025. The valuation target multiple of 25 times is consistent with HCL Tech and reflects a 5 per cent discount to TCS," it said.