Fri Jan 16 04:20:00 UTC 2026: ### Infosys Shares Rally Despite Profit Dip Following Positive Q3 FY26 Results
The Story:
Shares of Infosys Ltd experienced a significant surge on Friday, rising over 5 percent, as investors reacted favorably to the IT major’s Q3 FY26 results. Despite a reported 2.2 percent year-on-year decline in consolidated net profit, attributed to a one-time labor code-related charge, the market responded positively to raised revenue growth outlook, upbeat brokerage commentary, and strong performance of its US-listed American Depository Receipts (ADRs).
The buying interest was spurred by Infosys raising its FY26 revenue growth guidance to 3-3.5 percent in constant currency terms, citing improved demand visibility and strong execution. Furthermore, large deal wins, amounting to $4.8 billion during the quarter, including two mega deals, bolstered medium-term revenue visibility. Brokerages such as CLSA and HSBC reiterated bullish views, further contributing to the positive sentiment.
Key Points:
- Infosys stock climbed 5.14 percent to a high of Rs 1,682.1 in early trade.
- Q3 FY26 net profit declined by 2.2 percent year-on-year due to a one-time labor code-related charge.
- FY26 revenue growth guidance raised to 3-3.5 percent in constant currency terms.
- Large deal wins totaled $4.8 billion, including two mega deals.
- Infosys ADRs jumped approximately 8 percent over two US trading sessions.
- Brokerages CLSA and HSBC maintained ‘Outperform’ and ‘Buy’ ratings, respectively.
Critical Analysis
The surge in Infosys’ share price, despite the reported profit decline, highlights the market’s forward-looking perspective. Investors are seemingly willing to overlook short-term setbacks, such as the labor code-related charge, in favor of stronger revenue growth projections and substantial deal wins. This suggests that the market perceives the underlying strength of Infosys’ business model and its ability to capitalize on future opportunities, particularly in areas like AI, which was specifically mentioned by HSBC.
Key Takeaways:
- The market is prioritizing revenue growth and deal wins over short-term profit fluctuations.
- Positive sentiment from US investors, as reflected in the ADR performance, is a significant driver.
- Brokerage upgrades and positive outlooks can significantly influence investor behavior.
- Labor code charges can negatively impact the performance of the company.
- Infosys performance is still underperforming the Nifty 50
Impact Analysis
The rally in Infosys shares could signal a broader positive trend for the Indian IT sector. It indicates investor confidence in the industry’s ability to navigate challenges and capitalize on emerging opportunities. This could encourage other IT companies to focus on securing large deals and improving revenue growth, potentially leading to further investment and job creation within the sector. The maintained operating margin outlook provides stability, while the large deal wins, including mega deals, suggest continued future growth.
First Piper 