Target: ₹2,270

CMP: ₹1,925.30

Infosys led the revenue growth in constant currency (CC) for tier-1 IT service companies in Q2FY25 driven by broad based participation across verticals, and a 2.3 per cent y-o-y growth in CC in its key financial services vertical. The company is seeing improved traction in the financial services vertical with discretionary spending rising in certain pockets of the vertical.

The US rate cut cycle in the US is likely to further improve the discretionary spending across other streams within the financial services vertical in the medium term. With the uncertainty on rate cuts and elections in US settling down, the plaguing concerns are expected to wane providing a gradual uptick in discretionary spend across other verticals as well.

Infosys raised its FY25 revenue growth guidance to 3.75-4.5 per cent in CC from 3-4 per cent earlier, reflecting a better outlook. The company is also confident of achieving the guided margin guidance of 20-22 per cent for FY25 despite potential headwinds such as wage hike, seasonal softness, furloughs, and fewer working days in H2FY25. The company has indicated its aspiration to increase margins in the medium term aided by project maximus which has been able to arrest the margin decline since it was launched in FY24.

We reiterate Buy with unchanged price target of ₹2,270.