Infosys has cut its annual sales outlook, triggering a wave of broker downgrades as cautious corporate spending and AI-driven pricing pressure cloud the recovery in India’s technology sector.
Infosys shares came under renewed pressure on Monday after the Indian software giant trimmed its annual sales outlook, prompting a wave of broker downgrades and reviving doubts about the pace of recovery in the technology sector. According to Bloomberg-compiled data cited by Business Standard, at least four analysts cut their ratings in a single day, adding to three more reductions over the weekend and dragging the stock’s consensus view to its weakest level since January 2024. The move has sharpened concern that artificial intelligence is not only reshaping demand, but also unsettling the pricing of traditional outsourcing work.
The company now expects revenue to rise 1% to 2% in constant currency in the year to March 2027, down from its earlier estimate of 1.5% to 3%. NDTV reported that the revision reflects clients’ reluctance to commit to discretionary technology spending while macroeconomic uncertainty persists, even though Infosys still posted a 6.2% rise in second-quarter net profit. Market reaction was immediate: Infosys ADRs fell about 7.5% in pre-market trading, according to Livemint and other market reports, while the stock slipped roughly 3% in early trading in Mumbai.
Among the firms cutting their calls were Axis Capital, Arihant Capital Markets and IIFL Capital Services, Business Standard said. The downgrades suggest investors are questioning whether the recent rebound in Indian technology shares can last if corporate IT budgets remain tight. The Nifty IT Index has still been heading for its strongest month since July, but analysts warn that the rally could stall if the sector’s largest names keep issuing cautious guidance.
The broader backdrop remains difficult. India’s software services industry, valued at more than $280 billion, has been dealing with slower decision-making by clients, geopolitical tensions, higher energy costs and elevated inflation, all of which have made companies more careful about spending. An industry note cited by iTechGuides said demand has not disappeared, but has become more selective, with spending continuing on cost-cutting, cloud, AI, automation and managed services while larger discretionary projects face delays and longer approval cycles.
Even so, the picture is not uniformly bleak. Wall Street Digest reported that Infosys chief executive Salil Parekh said AI is boosting some parts of the business quickly, even as it puts pressure on revenue and pricing in more conventional services. GeoBrowser said AI-related business rose 29% quarter-on-quarter and accounted for 10.5% of sales, while the company also secured $5.2 billion in large deal bookings, including a $2 billion mega deal. That points to an industry in transition rather than collapse, but investors appear to be pricing in a slower and less predictable path ahead.
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