On Monday, Goldman Sachs (NYSE:GS) adjusted its stance on Infosys (NSE:INFY) Ltd. (INFO:IN) (NYSE: INFY), downgrading the stock from Buy to Neutral and reducing the price target to INR1,530.00 from the previous INR1,790.00. The move comes after Infosys reported a quarter-over-quarter revenue decline of 3.5% in the fourth quarter of fiscal year 2025, which was approximately 300 basis points below both Goldman Sachs and consensus estimates. This performance marked one of the company’s weakest quarters since FY09. The technology giant, with a market capitalization of $70.32 billion, has seen its stock decline over 26% in the past six months, according to InvestingPro data.
The downgrade reflects Goldman Sachs’ concerns over the growth visibility for Indian IT companies, including Infosys. The firm has lowered its revenue growth estimates for Infosys for FY26 by 450 basis points to a year-on-year increase of 1.5%, resulting in an approximate 6% reduction in earnings per share (EPS) forecasts for FY26 and FY27. The revised 12-month target prices of Rs1,530 or $17.9 represent potential upsides of 8% and 11%, respectively, compared to the average 11% upside for Goldman Sachs’ India TMT coverage. Despite these concerns, InvestingPro data shows the company maintains strong fundamentals with a 30.46% gross profit margin and a healthy 2.27x current ratio.
Despite the challenging macroeconomic environment, Goldman Sachs anticipates Infosys could benefit from vendor consolidation. The management of Infosys has suggested that near-term revenue growth could outpace that of its peers. Additionally, Infosys management has indicated a directional decrease in third-party costs over time, which could support margin improvement.
Currently, Infosys trades at a 12% discount to its five-year average price-to-earnings (P/E) ratio and is largely aligned with its ten-year average. Goldman Sachs acknowledges the potential downside risks to estimates and multiples if project cancellations or delays become widespread. Conversely, there are also upside risks if the macroeconomic uncertainty resolves more quickly than anticipated. Goldman Sachs thus sees a balanced risk-reward profile for Infosys shares.
In other recent news, Infosys reported a 4.2% quarter-over-quarter revenue decline in USD terms, alongside a 3.5% drop in constant currency, which was below expectations. This has led to several analysts revising their outlook on the company. Investec (LON:INVP) upgraded Infosys from Hold to Buy despite reducing the price target to INR1,575, citing potential growth rebound as market conditions stabilize. BMO Capital Markets adjusted their price target to $18 from $25, maintaining a Market Perform rating, as Infosys’ fiscal year 2026 guidance indicated a modest 0-3% constant currency growth. Bernstein SocGen also lowered their price target to INR1,680 but retained an Outperform rating, acknowledging Infosys’s ability to provide guidance amid economic uncertainties.
UBS cut its price target to INR1,850 while maintaining a Buy rating, highlighting the potential for growth supported by smaller deals and revenue carryover. Stifel reduced its price target to $18, holding a Hold rating, and adjusted its revenue growth projection from 7.0% to 3.5% in constant currency for fiscal year 2026. The firm noted that Infosys’ earnings per share estimates for fiscal years 2026 and 2027 were slightly below consensus. Despite these adjustments, analysts remain cautiously optimistic about Infosys’s long-term fundamentals, noting potential contributions from recent acquisitions and the company’s strategic positioning in the market.
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