Infosys Braces for Tough FY26

Discretionary spend pause set to weigh heavier than its peers

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INFOSYS HAS ISSUED a weak guidance with a widened range of 0-3% y-o-y constant currency (CC) for FY26 is due to (i) weak exit growth rate of -1.1% y-o-y CC, (ii) heightened uncertainty due to global tariff war and (iii) lack of mega deals reflected in muted total contract value (TCV) of $11.6 billion, down 34% y-o-y in FY25. While TCS and Wipro acknowledged deferrals of projects in the latter half of Q4FY25, Infosys did not call out project ramp downs. However, management mentioned that client decision-making has slowed down, likely impacting pipeline to TCV conversion. Total bookings came in at $11 billion, with 56.5% net new, down 34% y-o-y in FY25 due to mega deals in the base year. We cut EPS by 5%/7% for FY26/27E due to a cut in revenue estimates. We continue to value Infosys at 21x on Q4FY26-Q3FY27 EPS of ₹70 to arrive at a revised target price of ₹1,470. We maintain a Hold rating. A pause in the recovery of discretionary spends is likely to have a higher impact on Infosys versus peers.