Core Viewpoint - Infosys has a lower P/E ratio compared to the IT Services industry average, suggesting potential undervaluation or weaker future performance expectations [5]. Group 1: P/E Ratio Analysis - The P/E ratio is a tool for assessing a company's market performance against historical earnings and industry standards [4]. - Infosys's P/E ratio is lower than the industry aggregate P/E of 31.25, indicating it may be undervalued [5]. - A low P/E ratio can imply either undervaluation or weak growth prospects, necessitating cautious interpretation [7]. Group 2: Investment Considerations - The P/E ratio should be evaluated alongside other financial metrics, industry trends, and qualitative factors for comprehensive analysis [7]. - Investors are encouraged to adopt a holistic approach to assess a company's financial health for informed decision-making [7].

Core Insights - Infosys raised its revenue forecast for the current fiscal year after reporting stronger-than-expected results for the July-September quarter [1] - The company is experiencing a slow revival in client spending despite facing challenges from global uncertainties and trade tensions [3][4] Financial Performance - Infosys reported a 13.19% year-on-year increase in net profit to 73.6 billion rupees ($837.7 million) for the July-September quarter, surpassing analyst expectations [4] - Revenue rose 8.5% year-on-year to 444.9 billion rupees, exceeding forecasts of 439.29 billion rupees [4] Revenue Outlook - The company now expects revenue growth of 2% to 3% on a constant-currency basis for the current financial year, up from the previous forecast of 1% to 3% [3][4] - Infosys continues to make strategic investments to ensure business resilience amid high uncertainty [5]

Core Insights - The article revisits Infosys Limited, an Indian IT services and consulting company, after a two-year interval, indicating a focus on providing objective, data-driven research primarily on small- to mid-cap companies while also considering large-cap firms for a broader market perspective [1] Company Overview - Infosys Limited is recognized for its IT services and consulting offerings, which are critical in the current digital transformation landscape [1] Market Context - The analysis reflects a trend where small- to mid-cap companies are often overlooked by investors, suggesting potential investment opportunities in these segments [1]

Core Insights - The article discusses Infosys Limited, an Indian IT services and consulting company, highlighting its performance and market position over the past two years [1]. Company Overview - Infosys Limited is noted for providing IT services and consulting, with a focus on small- to mid-cap companies, while also occasionally analyzing large-cap companies to provide a broader market perspective [1].

Core Viewpoint - Cognizant (CTSH) is currently viewed as a better value opportunity compared to Infosys (INFY) based on earnings outlook and valuation metrics [1][3]. Valuation Metrics - CTSH has a forward P/E ratio of 12.94, while INFY has a forward P/E of 21.19 [5]. - CTSH's PEG ratio is 1.39, indicating a more favorable growth expectation compared to INFY's PEG ratio of 2.80 [5]. - CTSH has a P/B ratio of 2.13, significantly lower than INFY's P/B of 6.13, suggesting that CTSH is undervalued relative to its book value [6]. Earnings Outlook - CTSH has experienced stronger estimate revision activity, indicating a more positive earnings outlook compared to INFY [7]. - The Zacks Rank for CTSH is 2 (Buy), while INFY holds a Zacks Rank of 4 (Sell), further supporting the conclusion that CTSH is the superior option for value investors [3][7]. Value Grades - CTSH has earned a Value grade of A, while INFY has a Value grade of C, reflecting the relative attractiveness of their valuations [6].

Financial Data and Key Metrics Changes - Company reported a revenue growth of 2.2% sequentially and 2.9% year-on-year in constant currency terms for Q2 FY 2026 [4][8] - Operating margins expanded by 20 basis points sequentially, reaching 21% [10][11] - Free cash flow stood at $1.1 billion, representing 131% of net profit, marking the sixth consecutive quarter above 100% [10][11] - Earnings per share (EPS) in rupee terms grew by 13% year-on-year to INR 17.6 [10] Business Line Data and Key Metrics Changes - Financial services and manufacturing verticals grew above 5% year-on-year in constant currency for both Q2 and H1 [9][13] - The company signed 23 large deals during the quarter, with significant contributions from financial services and manufacturing [12] Market Data and Key Metrics Changes - Europe experienced growth greater than 5% year-on-year in constant currency terms [9] - The company added 8,000 employees during the quarter, bringing total headcount to 332,000 [10] Company Strategy and Development Direction - The company announced a revenue growth guidance of 2%-3% for the financial year, with operating margin guidance remaining at 20%-22% [7][17] - Strategic focus on AI capabilities has positioned the company as a leading enterprise AI services provider, with over 2,500 generative AI projects [18][20] - The company is pursuing a joint venture with Versant in Australia, which is expected to close later this year [7][78] Management's Comments on Operating Environment and Future Outlook - Management noted strong client focus on deploying AI for growth and cost-efficiency programs [4][5] - The company anticipates seasonal factors impacting growth in H2, with lower working days and higher furloughs expected [88] - Management expressed confidence in navigating the changing visa landscape through localization and nearshoring strategies [52][54] Other Important Information - The company announced an INR 18,000 crore buyback through a tender route at INR 1,800 per share, expected to be completed in Q3 [12] - The board approved an interim dividend of INR 23, which is 9.5% higher than the previous year's interim dividend [12] Q&A Session Summary Question: Partnerships with companies building AI capabilities - Management confirmed ongoing partnerships with companies building AI capabilities, focusing on modernization as a significant growth opportunity [30][34] Question: Large deal margins and comfort level - Management stated that while they do not disclose margins separately, they maintain a disciplined approach to large deals to ensure margin profiles are preserved [36] Question: Changes in smaller deal activity - Management indicated no significant changes in smaller deal activity, with a consistent pipeline [39] Question: Impact of H1B visa changes on business model - Management noted that while there is no immediate change, the long-term model will adapt with increased localization and nearshoring [52][54] Question: AI's impact on revenue growth profile - Management highlighted that AI presents both growth opportunities and efficiency improvements, but the current focus is on cost reduction due to economic conditions [69][70]

Financial Data and Key Metrics Changes - Revenues for Q2 FY26 grew 2.2% sequentially and 2.9% year-on-year in constant currency terms, with quarterly revenues crossing $5 billion and $10 billion for the half year [3][6] - Operating margins expanded by 20 basis points sequentially to 21%, with H1 margins at 20.9% compared to 21.1% in H1 FY25 [7][9] - Free cash flow stood at $1.1 billion, representing 131% of net profit, marking the sixth consecutive quarter above 100% [8][9] - Earnings per share (EPS) in rupee terms grew by 13% year-on-year to INR 17.6 [8] Business Line Data and Key Metrics Changes - Financial services and manufacturing verticals grew above 5% year-on-year in constant currency terms for both Q2 and H1 [7][11] - The company signed 23 large deals during the quarter, with significant contributions from financial services, manufacturing, communication, and retail sectors [10][11] - The manufacturing segment faced trade and macro uncertainties, impacting discretionary spending, particularly in the automotive sector [11][12] Market Data and Key Metrics Changes - Four of the five large industry verticals and three of the four geographies grew year-on-year in constant currency terms [3] - Europe experienced growth greater than 5% year-on-year in constant currency terms [7] - The deal pipeline remains strong, with a focus on cost reduction and operational efficiency across various sectors [12][13] Company Strategy and Development Direction - The company has revised its revenue growth guidance for the financial year to 2% to 3% in constant currency terms, maintaining operating margin guidance at 20% to 22% [5][14] - Infosys is positioning itself as a leading enterprise AI services provider, with a focus on AI-driven initiatives and modernization projects [4][15] - The strategic approach includes a joint venture with Versent in Australia, aimed at enhancing service capabilities [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macro uncertainties and highlighted strong client demand for AI and modernization initiatives [11][14] - The company anticipates seasonal factors impacting growth in H2, with lower working days and potential furloughs [14][68] - Management noted that while there is uncertainty in the environment, the overall pipeline and signing remain strong [11][44] Other Important Information - The company added 8,000 employees during the quarter, with a total headcount of 332,000 [8] - Cash and investments totaled $6.2 billion at the end of the quarter, with a yield on cash balance of 6.98% [9] - The company announced an INR 18,000 crore buyback plan and an interim dividend of INR 23, reflecting a 9.5% increase from the previous year [10] Q&A Session Summary Question: Partnerships with companies building AI capabilities - Management confirmed ongoing partnerships with companies expanding AI capabilities, focusing on modernization as a significant growth opportunity [28][30] Question: Large deal margins and comfort level - Management stated that while they do not disclose margins separately, they maintain a disciplined approach to large deals to ensure margin profiles are preserved [31] Question: Smaller deal activity and average sizes - Management indicated no significant changes in smaller deal activity, with a consistent structure in deal sizes [33][34] Question: Impact of H1B visa changes on business model - Management noted that while there is uncertainty, they have been working on localization strategies to adapt to changes in the visa landscape [44][45] Question: AI's impact on revenue growth profile - Management highlighted that AI presents both growth opportunities and efficiency improvements, with a focus on cost reduction in the current economic environment [55][56] Question: Seasonal softness and employee additions - Management explained that the addition of employees was driven by demand visibility, despite anticipated seasonal softness in H2 [74]

Core Insights - Infosys reported strong financial performance with Q2 revenues reaching $5,076 million, reflecting a year-on-year growth of 2.9% and a sequential growth of 2.2% in constant currency [1][5][26] - The company achieved a total contract value (TCV) of large deal wins at $3.1 billion, with a net new win rate of 67% in Q2 [1][4] - Free cash flow (FCF) generation was robust at $1.1 billion, representing 131.1% of net profit [1][5] Financial Performance - For Q2, operating margin stood at 21.0%, showing a slight decline of 0.1% year-on-year but an increase of 0.2% sequentially [5][6] - Basic earnings per share (EPS) for Q2 was $0.20, marking a growth of 7.9% year-on-year [5][6] - For the first half of FY26, revenues grew by 3.3% year-on-year in constant currency, with reported revenues at $10,018 million, a growth of 4.3% year-on-year [2][5] Guidance and Strategic Focus - The revenue guidance for FY26 has been revised to a growth range of 2%-3%, while the margin guidance remains at 20%-22% [1][8] - CEO Salil Parekh emphasized the company's unique market positioning and relevance to clients, particularly in delivering value from AI [3] Client Engagement and Collaborations - Infosys has engaged in multiple strategic collaborations, including partnerships with ABN AMRO, Mastercard, and Telstra, focusing on enhancing operational efficiency and digital transformation [7][9] - The company is actively involved in AI integration and IT transformation projects, showcasing its commitment to innovation and client-centric solutions [9] Awards and Recognitions - Infosys received several accolades, including recognition as one of the World's Best Companies 2025 and various awards for sustainability and employee satisfaction [13][19] - The company was also acknowledged as a leader in multiple categories by Gartner and IDC, highlighting its capabilities in digital transformation and AI services [19]

Financial Data and Key Metrics Changes - The company reported a revenue growth of 2.2% sequentially and 2.9% year-on-year in constant currency terms for Q2 [2][3] - Operating margin was reported at 21% [3] - The revenue growth guidance for the financial year was revised to 2% to 3% in constant currency terms, while the operating margin guidance remains at 20% to 22% for the full year [4] Business Line Data and Key Metrics Changes - Large deals amounted to $3.1 billion, with 67% being new or net new work [3] - The company added 8,000 employees during the quarter [3] Market Data and Key Metrics Changes - Strong performance was noted in manufacturing and financial services, while retail continues to face constraints [10][21] - The company has seen good traction in its client base, particularly in financial services and manufacturing [21] Company Strategy and Development Direction - The company is focusing on deploying AI across enterprises for growth and cost efficiency [3][16] - There is a strong emphasis on scaling the team of forward-deployed engineers to support AI initiatives [3] - The company is actively looking at further acquisitions to enhance capabilities in various sectors [14][60] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the uncertain global environment but expressed confidence in the guidance due to good traction observed [9][21] - The company is adapting to changes in the macroeconomic environment, with a focus on cost optimization and automation [29] Other Important Information - The company is strengthening its nearshore centers and local hiring strategies in response to stricter H-1B visa norms [44][46] - The recent mega deal worth $1.6 billion is with the UK NHS, focusing on a complete transformation supported by AI technologies [44] Q&A Session Summary Question: Insights on guidance and industry recovery - The management explained that the guidance reflects a typical seasonal pattern, with the second half of the year being slower than the first half, and noted good performance in manufacturing and financial services despite constraints in retail [9][10] Question: H-1B visa concerns - The management stated that the majority of employees in the U.S. do not require Infosys immigration support and emphasized a focus on local hiring and nearshore strategies [11][12][64] Question: AI revenue quantification - The management acknowledged the interest in AI projects and indicated that they are scaling up efforts in enterprise AI, but did not provide specific revenue figures [16][20] Question: Project Maximus impact - The management reported that Project Maximus has continued to deliver margin expansion despite headwinds, contributing positively to the operating margin [26] Question: Client contribution changes - The management noted that changes in client contributions are marginal and attributed them to project ramp-ups and ramp-downs [32] Question: Acquisitions and growth outlook - The management confirmed ongoing interest in acquisitions to fill capability gaps and enhance growth, particularly in sectors like digital and AI [14][60] Question: Voluntary attrition increase - The management acknowledged an increase in voluntary attrition compared to the previous year but did not provide specific reasons [71] Question: Nearshore strategy - The management highlighted the success of nearshore centers and local hiring initiatives, which are expected to scale further [46][44]

Core Insights - Indian IT firms Infosys, Wipro, and LTIMindtree exceeded quarterly revenue estimates, indicating improving demand as clients are more willing to invest in AI projects [1][2][4] - The positive results from these firms follow strong performance by Tata Consultancy Services, suggesting a recovery in the $283 billion IT sector after recent struggles due to reduced discretionary spending [2][5] Company Performance - Infosys reported better-than-expected profit and revenue for the second quarter, projecting full-year revenue growth of 2-3%, an increase from the previous forecast of 1-3% [4] - Wipro anticipates a revenue range of a 0.5% decline to a 1.5% increase for the third quarter, benefiting from clients' increasing interest in AI projects [4][5] - LTIMindtree also reported strong second-quarter revenue, particularly driven by the banking sector [6] Market Trends - There is a notable shift in client priorities towards AI and digital acceleration, with companies looking to implement AI solutions rather than just testing concepts [3][5] - Analysts view the recent quarterly results as a sign that the IT sector is stabilizing and regaining traction, particularly due to increased spending from financial services firms [5][6]