The IT sector stocks are in focus. Infosys is down over 1% intra-day, but the well-known domestic brokerage house, JM FinanciaI has reiterated its ‘Buy’ rating on Infosys after a recent interaction with the company’s investor relations team. According to JM Financial, the demand trends remained steady through the March quarter despite ongoing global macro uncertainty.
The brokerage said the IT major has held firm on its FY26 revenue growth guidance, while early signs of discretionary spending recovery in two large verticals and a strong large-deal pipeline worth $4.8 billion provide visibility into medium-term growth.
What JM Financial found after interaction with Infosys management
JM Financial’s analysts Rajiv Berlia, Nandan Arekal and Anushree Rustagi interacted with Infosys’s investor relations team ahead of the company’s fourth-quarter results.
The brokerage said the demand environment remains steady compared with the beginning of the quarter, with no deterioration observed so far.
Infosys management reiterated its constant-currency revenue growth guidance of 3% to 3.5% year-on-year for FY26.
According to JM Financial, the guidance implies a fourth-quarter growth range of –1.6% to +0.2%, with the lower end factoring in potential macroeconomic uncertainty.
The two verticals showing early spending recovery
One of the key signals from the interaction is that Financial Services and Energy, Utilities, Resources and Services (EURS) are both showing early signs of discretionary spending recovery.
These two segments together accounted for 41.4% of Infosys revenue in the third quarter of FY26.
JM Financial said both verticals are expected to perform better in FY27 than in FY26, a trend that management had also flagged in its January earnings call.
In Financial Services, Infosys is seeing sustained momentum with improved discretionary spending across banking, payments, mortgages and assets/wealth. Clients are increasingly shifting from compliance-driven projects toward business-growth initiatives and vendor consolidation, which is supporting a stronger strategic pipeline.
In the EURS vertical, demand is rising in utilities as companies invest in infrastructure, data platforms and artificial intelligence. The energy segment is seeing traction from decarbonisation initiatives and low-carbon priorities, alongside cost optimisation driven by enterprise adoption of AI.
Where the trouble spots are
Not all industry segments are seeing the same level of recovery.
In Manufacturing, tariff uncertainty is making clients hesitant to commit to longer-term transformation programmes. While industrial and aerospace segments remain relatively resilient, the automotive sector continues to face pressure, with companies prioritising cost discipline and operational efficiency.
In Retail and Consumer Packaged Goods, ongoing uncertainty around tariff negotiations and geopolitics has pushed clients toward cost-reduction programmes and AI-led productivity initiatives rather than fresh digital transformation investments.
The Hi-Tech vertical is also seeing pressure on spending as clients focus on cost optimisation. However, pockets of strength remain in areas tied to AI infrastructure and server build-outs.
The deal pipeline is the headline number
Perhaps the most striking metric in JM Financial’s update is Infosys’s large deal wins.
Infosys reported total large deal wins of $4.8 billion in the third quarter of FY26, the highest figure across the five quarters tracked in the brokerage’s report.
Of this, $2.736 billion or 57% represented net new deals.
For comparison:
- $2.495 billion in large deals were signed in Q3FY25
- $3.797 billion were signed in Q1FY26
The sharp increase highlights growing traction in large transformation engagements.
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 primarily from large transformation programmes and cost-efficiency initiatives, while medium-term demand should be supported by:
- modernisation of legacy technology estates
- continued enterprise digital transformation
- increasing adoption of artificial intelligence capabilities.
Margins holding, wage 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 labour code charge of Rs 1,289 crore on employee benefit costs.
JM Financial said no wage hike decision has been taken yet, and a wage revision in the fourth quarter of FY26 is unlikely. The previous wage hike cycle had been implemented in two stages, effective January and April.
The absence of a wage hike provides a near-term margin tailwind, along with depreciation of the Indian rupee against the US dollar.
On the headwind side, JM Financial flagged:
- absence of the land sale benefit booked in Q3FY26
- rising visa costs
- lower expected volumes in the fourth quarter
- fewer working days during the period.
The brokerage said Project Maximus, Infosys’s internal operational efficiency programme, along with increased use of automation and artificial intelligence in delivery, should help offset margin pressures over time.
Anthropic deal and the artificial intelligence revenue trajectory
Infosys also announced a strategic collaboration with Anthropic, a leading artificial intelligence company.
The partnership will begin in the telecommunications sector, where Infosys will establish a dedicated Anthropic Centre of Excellence to build and deploy AI agents for industry-specific operations.
Over time, the collaboration is expected to expand into Financial Services, Manufacturing and Software Development.
According to JM Financial, AI-related revenues accounted for 5.5% of Infosys’s total revenue in 3QFY26 and are 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 the third quarter of FY26, representing 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 diluted earnings per share came in at Rs 18.5, up 4.3% sequentially.
The company’s active client base rose to 1,949, the highest level in the five-quarter dataset tracked by JM Financial.
Client attrition improved significantly, falling to 68 clients in 3QFY26 from 101 in 1QFY26.
Infosys’s total headcount stood at 3,37,034 employees at the end of the quarter.
Geographically, Europe continued to be the key growth driver, with revenue of $1,667 million and year-on-year growth of 13.3%.
North America which accounts for 55.9% of Infosys’s revenue recorded a 1.2% year-on-year decline in dollar terms.
Conclusion
JM Financial said steady demand conditions, improving discretionary spending in key verticals and strong large-deal momentum support its ‘Buy’ rating on Infosys.
With the stock trading at roughly 17× FY27 consensus earnings per share, the brokerage believes the valuation remains reasonable for one of India’s largest technology exporters, particularly as enterprise spending gradually shifts toward AI-led digital transformation and large-scale vendor consolidation programmes.
Other key brokerage houses like Nuvama and Nomura have Buy ratings on Infosys in their recent reports.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.