Infosys Stock Rallies 4% on Upgraded FY26 Revenue Guidance

Introduction

Shares of Infosys Ltd surged over 4% on Friday morning, reacting positively to the company's third-quarter earnings report for fiscal year 2026. The primary driver for the rally was an unexpected upgrade in its full-year revenue growth guidance, which overshadowed a year-on-year decline in net profit. The stock climbed 4.14% to ₹1,666.1 in early trade, reflecting strong investor confidence fueled by robust deal wins and optimistic management commentary.

Q3 Financial Performance

For the quarter ended December 31, 2025, Infosys reported a consolidated revenue of ₹45,479 crore, marking an 8.9% increase year-on-year. In constant currency terms, revenue grew 0.6% sequentially, outperforming market expectations which had anticipated flat growth. This resilience was attributed to strong execution and steady demand in key verticals.

However, the company's consolidated net profit saw a 2.2% year-on-year decline, falling to ₹6,654 crore. This dip was primarily due to a one-time provision of ₹1,289 crore related to new government labour codes. Investors appeared to look past this headline number, focusing instead on the underlying operational strength. The adjusted EBIT margin for the quarter stood at 21.2%, which was in line with estimates and within the company's guided range.

Upgraded Guidance Signals Confidence

The most significant development was the upward revision of the company's revenue guidance for FY26. Infosys raised its constant currency revenue growth forecast to a range of 3% to 3.5%, up from the previous 2% to 3%. This upgrade was a strong signal of improving demand visibility and management's confidence in securing and executing new projects. The company maintained its operating margin guidance for the fiscal year at 20% to 22%, indicating a continued focus on profitable growth.

Strong Deal Wins and Pipeline

Infosys's optimistic outlook is supported by its impressive performance in securing large deals. The company reported a Total Contract Value (TCV) of $1.8 billion for the quarter, a sharp increase from $1.1 billion in the previous quarter. A key highlight was that 57% of this TCV came from net new business, demonstrating the company's success in winning new clients and expanding its market presence. This strong deal activity is seen as an early indicator of a demand recovery.

Operational Highlights and Market Reaction

Operationally, Infosys reported its highest headcount in 11 quarters, adding 11,246 employees over the last two quarters. This hiring activity signals confidence in future growth. The market's reaction was overwhelmingly positive, further bolstered by a sharp rally in Infosys's American Depository Receipts (ADRs), which jumped about 8% over two trading sessions in the US following the results.

Brokerage Views Remain Bullish

Following the results, several brokerage firms reiterated their positive stance on Infosys, with many raising their target prices. The consensus view is that the upgraded guidance, strong deal wins, and stabilizing corporate sentiment in key markets outweigh the short-term margin pressures.

Analysis of the Results

Investors and analysts have focused on the forward-looking indicators rather than the reported profit decline. The decision to raise revenue guidance in a cautious macroeconomic environment suggests that demand for digital transformation and AI-led services remains robust. CEO Salil Parekh attributed the success to differentiated offerings in enterprise AI through the Infosys Topaz platform, stating that clients increasingly see the company as a preferred AI partner. While the stock has underperformed the Nifty 50 over the past year, this strong quarterly performance and positive outlook could act as a catalyst for a re-rating.

Conclusion

Infosys's third-quarter performance has effectively balanced a one-off financial impact with a strong and optimistic long-term outlook. The upgraded revenue guidance, backed by substantial deal wins and stable operational metrics, has reinforced investor confidence. The focus now shifts to the company's ability to execute on its robust deal pipeline and convert it into sustained revenue and profit growth, solidifying its leadership position in the IT services sector.