The softer FY27 growth guidance from Infosys has prompted brokerages to reassess the company’s near-term outlook, with analysts pointing to a mix of macro uncertainty, rising competition and AI-led disruption weighing on the broader IT services sector. The company’s projection of 1.5%–3.5% constant currency growth is being seen as a signal that discretionary spending remains under pressure and that recovery timelines may be pushed out, even as deal pipelines remain active.
Jefferies, which has a hold rating on the stock, said competitive intensity is beginning to alter pricing dynamics in deal-making. “Rising competition is resulting in unusual pricing which in turn has led to the firm walking away from deals in some cases,” the brokerage said, adding that reduced discretionary spending and visa-related issues are pushing more work offshore. This shift, it estimates, could shave off about 70 basis points from FY27 growth. While margin guidance of 20%–22% suggests stability at the mid-point, Jefferies cautioned that “while forex, offshoring and improved realisation will support margins, wage hikes and 70bps impact of acquisitions will be the margin drag”.
Pricing Wars
TD Cowen also flagged the guidance as weaker than expected, maintaining a hold rating with a price target of $15. The brokerage said that while Infosys has cited continued momentum in financial services, energy and utilities, and Europe, alongside growing AI demand, these positives are being offset by structural pressures.
Citigroup’s assessment pointed to a broader sectoral slowdown, stating that March saw slower decision-making by clients and intensifying competition for large deals. “We continue to be cautious on the sector given high competitive intensity, continued impact of AI on existing business, GCC impact on IT services,” it said. The brokerage added that recent large-cap IT performance indicates sluggish trends are persisting, with margins not seeing meaningful benefit despite currency movements. Even so, it expects Infosys to hold relative ground versus peers in FY27, given its deal pipeline and execution track record.
Bloomberg Intelligence described the company’s sales outlook as prudent in the current environment. “Sales outlook seems prudent given deterioration in macro conditions and the potential impact on discretionary and non-AI enterprise IT spending,” it said, underscoring that traditional IT budgets remain under strain as enterprises rebalance spends.
AI Deflation
Domestic brokerages echoed similar concerns. Motilal Oswal Financial Services said the subdued guidance reflects increasing pressure on legacy revenues as AI-driven efficiencies compress existing work. It expects Infosys to grow around the mid-point of its guidance, implying a slowdown from the 3.1% constant currency growth reported in FY26. The brokerage also highlighted sector-specific headwinds, including weak telecom demand and a potential 75–100 basis points drag from client-specific issues such as the Daimler ramp-down in manufacturing.
Across brokerages, there is a growing view that large deal total contract value will be a more relevant metric to track in the near term as traditional delivery models evolve. While analysts said the guidance was below expectations, it was not materially divergent from aggregate forecasts, suggesting that the sector’s challenges are now broadly priced in. The recovery in growth, they added, will hinge on a stabilisation in global demand and a clearer monetisation curve for AI-led services.