- Infosys aims to capture a slice of the $300‑$400B enterprise AI market by 2030.
- Anthropic partnership unlocks custom AI agents for multiple sectors.
- IT services revenue may compress, but AI‑driven contracts could outpace the loss.
- Current AI contribution sits at ~5.5% of revenue, with 90% of top 200 clients already engaged.
- Target price of ₹1,900 implies a 22x FY28E earnings multiple – a significant upside from today’s levels.
You’re overlooking the AI shift at Infosys, and it could cost you.
Ramco Cements Breaks Out: Buy For Rs 1,100 Target
How Infosys' AI Strategy Targets the $300‑$400B Enterprise AI Market
Infosys' management painted a picture of a future where traditional labor‑intensive IT services give way to “agentic workflows.” In plain terms, an agentic workflow is a semi‑autonomous software entity that can make decisions, execute tasks, and learn from outcomes without constant human supervision. The firm estimates the global enterprise AI spend will balloon to $300‑$400 billion by calendar year 2030. If Infosys can secure even a modest 1‑2% share, that translates to $3‑$8 billion of incremental revenue – enough to offset any compression in its legacy services.
What the Anthropic Partnership Means for Infosys' Competitive Edge
Earlier this year Infosys inked a strategic partnership with Anthropic, a leading creator of large language models (LLMs). The collaboration is designed to embed Anthropic’s foundation models into bespoke AI agents that can be deployed across banking, manufacturing, telecom, and other high‑touch industries. By offering a “turnkey” AI agent platform, Infosys moves from a pure services provider to a product‑oriented vendor, capturing recurring licensing fees and higher margin upside.
Competitors such as Tata Consultancy Services (TCS) and Wipro are also racing to secure LLM alliances—TCS with Google Cloud’s Gemini, Wipro with Microsoft’s Azure AI. However, Infosys’ early‑stage partnership with Anthropic gives it a differentiated stack that can be white‑labeled for clients who prefer a third‑party AI provider rather than building their own models from scratch.
Potential Revenue Compression vs. Growth: Decoding the IT Services Trade‑off
Management warned that “agentic workflows will compress IT service revenue.” The logic is simple: if an AI agent can autonomously monitor infrastructure, the hours billed for routine monitoring shrink. Yet the same AI layer creates new demand for model‑training, orchestration, and governance services—areas where Infosys already has deep consulting expertise.
Historically, every wave of cost reduction (mainframe outsourcing, cloud migration, digital transformation) sparked a surge in demand for the next‑generation service. The pattern repeats: as cloud adoption slashed data‑center CAPEX, Infosys captured billions in cloud migration contracts. Similarly, AI‑driven automation should spawn a new consulting revenue stream that exceeds the lost “hands‑on” hours.
Sector Landscape: AI Adoption Across Indian IT Giants
Across the Indian IT sector, AI adoption is moving from pilot projects to enterprise‑wide rollouts. TCS reported a 6% YoY increase in AI‑related contracts, while Wipro’s AI services grew 9% in the last quarter. The common denominator is a shift in talent requirements—from pure code development to “AI model stewardship.” Companies are upskilling engineers to become “AI trainers” who curate datasets, fine‑tune models, and implement governance frameworks to meet emerging regulatory expectations.
Regulatory guardrails are emerging, especially in data‑privacy‑sensitive industries like banking and healthcare. Infosys has pre‑emptively built an AI governance layer that helps clients comply with forthcoming AI‑specific regulations, positioning the firm as a low‑risk partner.
Valuation Snapshot: 22x FY28E EPS and the Path to ₹1,900 Target
Prabhudas Lilladher’s research values Infosys at 22 times FY28E earnings, arriving at a target price of ₹1,900. At current trading levels, that implies roughly a 30% upside. The multiple may appear lofty, but it reflects the market premium for AI‑enabled growth. The key drivers are:
- Projected AI‑related revenue CAGR of 25% over the next five years.
- Margin expansion from higher‑margin AI licensing versus low‑margin traditional services.
- Retention of ~90% of the top 200 clients—indicative of deep‑rooted relationships that facilitate AI cross‑selling.
Fundamentally, Infosys remains a cash‑generating machine with a strong balance sheet, giving it the flexibility to invest heavily in AI talent and infrastructure without compromising dividend stability.
Investor Playbook: Bull vs. Bear Cases
Bull Case
- AI revenue share climbs to 12% of total earnings by FY28, driving double‑digit EPS growth.
- Anthropic partnership scales globally, delivering recurring licensing income.
- Regulatory compliance services become a new high‑margin line item.
Bear Case
- AI adoption stalls due to client budget constraints, leaving revenue compression unchecked.
- Competitors out‑innovate with more advanced LLM integrations, eroding Infosys’ first‑mover advantage.
- Unforeseen regulatory hurdles increase compliance costs, squeezing margins.
Given the upside potential and the company’s strong cash position, the research maintains a BUY stance, with the 22x FY28E multiple serving as a disciplined entry point.