Infosys slips over 3% after Q1; brokerages flag slowing growth, AI productivity drag despite strong deal wins

Shares of Infosys fell as much as 3.19% on Friday after the IT services major reported June-quarter earnings and lowered its FY27 revenue growth guidance, prompting brokerages to turn more cautious on the company's near-term growth outlook despite maintaining confidence in its long-term fundamentals.

The stock was trading at ₹1,031.40 in afternoon trade, down 1.53%, after hitting an intraday low of ₹1,013.90. It had declined as much as 3.19% during the session.

Brokerages broadly agreed that while Infosys continues to execute well on large deals and artificial intelligence (AI), macro uncertainty, softer discretionary spending and AI-driven productivity gains are likely to weigh on revenue growth over the coming quarters.

Growth concerns outweigh strong deal pipeline

Motilal Oswal retained its Buy rating on Infosys but said the June quarter was "disappointing" and that the outlook had worsened following the cut in FY27 growth guidance. The brokerage said weaker-than-expected volumes, prolonged client decision-making and selective discretionary spending could weigh on growth, and now expects Infosys to underperform its large-cap peers on this metric.

"Despite healthy deal TCV ($3.6 billion) and a strong 61% net new mix, productivity pass-throughs continue to knock growth off. We expect this to continue, and hence believe deal TCV will become a less reliable indicator of revenue growth going forward," Motilal Oswal said.

It also cautioned that AI-led productivity improvements are beginning to alter the economics of outsourcing deals.

AI remains a long-term positive

Axis Direct struck a relatively balanced tone, saying the quarter reflected "stable performance" but that "near-term challenges persist."

The brokerage retained its Hold rating while trimming its FY27 and FY28 revenue, EBIT and profit estimates following the earnings.

It, however, remained constructive on Infosys' long-term prospects, citing a healthy large-deal pipeline and rising AI adoption.

"Infosys continues to demonstrate strong deal execution, with Q1FY27 large deal TCV of $3.6 billion, of which 61% was net-new business," Axis Direct said, adding that vendor consolidation opportunities and continued client mining provide healthy long-term revenue visibility.

Axis Direct also added that Infosys' AI strategy is gaining traction, with AI-first revenue accounting for 8.2% of total revenue, though it said the reduction in FY27 guidance reflects softer client volumes, one-off client exits and a higher offshore delivery mix rather than any structural execution issue.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)