Undervalued: Key factors why Infosys share might be undervalued and a good buy

Synopsis: Despite soft revenue guidance, Infosys is backed by 3.1 Billion dollars in wins, resilient margins and deep AI integration across its workforce. With its profits improving and some slight uptick in analyst expectations, the stock may be far more undervalued than investors assume.

Infosys, one of India’s earliest IT pioneers, has played a defining role in shaping the country’s global technology leadership. Founded at a time when India’s software industry was still nascent, the company helped lay the foundations of the nation’s IT export model, corporate governance standards, and large-scale global delivery capabilities over the years.

From a startup with a vision into a global technology powerhouse that continues to influence how Indian companies compete on the world stage, today, we will be looking at some future insights of the IT giant and how it expects to grow. With a market cap of Rs 6,71,271 Cr, on Friday Infosys Ltd. saw its stock hit an intraday low of Rs 1651 which is 0.6 percent lower than the previous close of Rs 1662.

Historic data and brokerage view

Up until now in FY26, the stock has been trading in the range of Rs 1,400- 1,600. Being supported by its strong Rs 6.49 lakh crore market cap it has a healthy 66.7 percent dividend payout that has been reinforcing its appeal to long term investors.

In FY25, Infosys used to mostly trade at Rs 1,800- 1,900 range, before dipping by 24 percent due to- tariff concerns, softer demand, and a weak outlook. However, recently the market sentiment has begun improving, with Motilal slightly raising the target price to Rs 2150 which provides an upside of 30 percent from current levels of Rs. 1655 per share.

Future Outlook of Infosys

Lately, Infosys guided for only a 2- 3 percent revenue growth in FY26, from the earlier 1- 3 percent, along with stating that a weaker macro environment could push the growth toward the lower end, while stable business conditions may support the upper end. The company’s near term pressures include fewer working days, employee furloughs, and slower calendar-year spending, which may affect quarterly revenue momentum.

Margins remain resilient, with Project Maximus-driven pricing gains and better business mix helping Infosys sustain EBIT margins within its 20- 22 percent target band, despite calendar and furlough impacts.

Even after downplaying its future outlook, Infosys’ robust order book remains a key growth driver. In the September quarter, the company reported large deal wins of US$3.1 billion, with a strong 67% coming from net new contracts rather than renewals, highlighting healthy demand momentum. This was further reinforced by a US $ 1.6 billion mega deal announced after the quarter, strengthening revenue visibility and long-term growth prospects.

A key growth driver is the company’s aggressive AI led transformation. Over 90 percent of its workforce is trained on AI tools, thousands of client projects are AI-enhanced, and developers have already produced 25 million+ lines of code with AI assistance. Infosys is also scaling internal small language models and strengthening global partnerships with Nvidia and Microsoft.

There was a net addition of 8000 employees in Q2 totalling to 3.32 lakh ,with the fresher plan reiterated: target  20,000 for FY26 and over 12,000 hired in H1, with Utilisation excluding trainees at 85 percent within comfort range.

While AI has reduced basic coding costs, Infosys has benefitted because demand has been shifting toward higher-value, complex services which includes cloud migration, data modernization, consulting, and systems integration. 

In today’s world businesses don’t struggle with writing code, instead they struggle with deciding what to modernize, how to- integrate legacy systems and securing data, along with maintaining compliance. This is where Infosys’ expertise and its AI capabilities could translate into stronger margins and provide a sustained long term revenue.

Share-Buyback 

Infosys Ltd. announced its largest-ever Rs 18,000 crore share buyback at Rs 1,800 per share with a record date of November 14, 2025 and a tender offer window from November 20 to November 26, 2025, repurchasing 10 crore shares ( 2.41  percent of equity) to return surplus cash to shareholders; the offer price of Rs 1,800 is approximately Rs 142–Rs 145 above the current market price of around Rs 1,655–Rs 1,658 as of December 26, 2025, highlighting a significant premium opportunity for eligible investors.

IT Industry

In the macro levels, Indian IT companies are witnessing a favourable demand environment driven by aggressive AI adoption by global clients, leading to higher inquiries, stronger order inflows and longer-duration contracts, as seen in the order books of large players like TCS and Infosys. AI-led execution is improving delivery timelines and reducing time-to-market, while short-term rupee depreciation is supporting margins. 

The December quarter has been largely positive for IT firms, with guidance remaining the key trigger ahead and valuations appearing reasonable with limited downside risk.

The broader Q3 earnings are expected to improve on the back of festive-led consumption, along with higher disposable incomes due to tax and GST relief, low interest rates and stronger growth prospects in banking, NBFCs, FMCG, auto and auto ancillary sectors.

Financial Overview  

The company has had a reasonably successful quarter(Q2FY26) when compared to majority of its peers, as the revenue increased 5 percent QoQ and 8.6 YoY and stood at Rs 44,490 Cr at the end of Q2FY26. Net Profit has also grown by 6.4 percent QoQ and 13.2 percent YoY and reached Rs 7,375 Cr at the end of Q2 FY26 . 

Also, EBIT Margin for the Company has remained stable around 21 percent. This indicates that the Company has been able to successfully operate efficiently and maintain its discipline over cost control.

The Bottom Line

Infosys’ future has very likely been undervalued with its guidance being conservative on the revenue growth and by not changing the margin expectations, despite the robust $ 3.1 billion order book and the rising deal momentum.

Its deep and accelerating AI penetration across delivery, workforce and client solutions positions the company to capture higher-value, complex transformation deals over the medium term. As AI-led efficiencies, large deal conversions and strong capital returns play out, the current valuation may not fully reflect Infosys’ long-term earnings and growth potential.

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