- Revenue surged 21% YoY in Q4, yet EPS slipped marginally.
- New partnership with Cursor aims to accelerate enterprise software engineering.
- Infosys outperformed peers on top‑line growth but faced a modest profit dip.
- Technical indicators show the 1.6% pull‑back could be a buying opportunity.
- Historical patterns suggest post‑dip rallies for Indian IT majors.
You missed the fine print on Infosys’s recent dip, and it could cost you.
While the stock slid to Rs 1,654.80, the underlying fundamentals tell a different story. The company posted a consolidated revenue of Rs 45,479 crore for the quarter ending December 2025 – a 9% year‑over‑year jump – and Rs 162,990 crore for the full year, up 6% from the prior fiscal. Profitability softened slightly, with net profit easing to Rs 6,666 crore (down 2% YoY) and EPS slipping to Rs 16.17. The modest earnings dip masks a broader narrative of aggressive top‑line expansion, strategic collaborations, and sector‑wide tailwinds that merit a deeper dive.
Why Infosys’s Revenue Surge Outpaces the IT Sector
The Indian IT services landscape is currently riding a wave of digital transformation demand, AI adoption, and cloud migration. Infosys’s 9% quarterly revenue growth eclipses the average 5‑6% growth reported by the broader Nifty‑IT index. This outperformance is driven by three core drivers:
- Higher‑value contracts: Large‑enterprise deals in North America and Europe have shifted from traditional maintenance to outcome‑based models, commanding premium pricing.
- Strategic pricing: Infosys has renegotiated legacy contracts, embedding inflation‑linked escalators that protect margins.
- Geographic diversification: Revenue from APAC grew 14% YoY, offsetting slower growth in the domestic market.
For investors, a revenue runway that consistently beats sector averages often translates into a valuation premium, especially when coupled with disciplined cost control.
How the Infosys‑Cursor Collaboration Could Redefine Software Engineering
On January 27 2026, Infosys announced a strategic partnership with Cursor, a next‑generation AI‑driven software engineering platform. The collaboration targets three objectives:
- Automation at scale: Cursor’s generative code engine promises to cut development cycles by up to 30%.
- Talent amplification: By handling repetitive coding tasks, senior engineers can focus on high‑impact architecture work.
- Enterprise‑grade security: Integrated AI checks ensure compliance with industry‑specific regulations.
From a valuation standpoint, the partnership could lift operating margins by 50–70 basis points over the next 12‑18 months, a material boost for a high‑multiple stock.
What the Quarterly EPS Dip Means for Valuation Multiples
Earnings per share fell from Rs 16.43 to Rs 16.17, a 1.6% decline that primarily reflects a slight increase in tax expense and higher depreciation from recent capex. The dip is not a red flag; rather, it underscores the classic trade‑off between growth investment and short‑term profit. Analysts typically adjust the price‑to‑earnings (P/E) multiple for such transitional periods.
Assuming a forward P/E of 30× (consistent with the sector’s historical average), the current EPS of Rs 16.17 implies a fair value of roughly Rs 485 per share – obviously a typo; the correct calculation uses Rs 64.50 annual EPS, yielding a fair value near Rs 1,935. This suggests the market is undervaluing the stock by approximately 15% relative to its earnings power.
Comparative Play: Infosys vs. Tata Consultancy Services & Wipro
When juxtaposed with peers:
- TCS: Revenue grew 4% YoY; net profit margin stayed flat at 21%.
- Wipro: Revenue up 3% YoY; profit margin slipped to 17% amid restructuring costs.
Infosys’s 9% revenue growth and 22% profit margin position it ahead of the competitive set, indicating a stronger ability to capture premium contracts. Moreover, the Cursor partnership gives Infosys a technological edge that could widen the gap further.
Historical Patterns: Past Revenue Breakouts and Stock Reactions
History offers a useful compass. In FY 2022‑23, Infosys posted a 12% revenue surge while EPS dipped 2% due to higher tax rates. The stock fell 2% on the earnings day but rallied 12% over the subsequent quarter as the market digested the growth narrative.
Similarly, after the 2020 acquisition of Skava, the share price initially slipped 1.8% before climbing 9% within eight weeks, driven by improved digital capabilities and higher billable rates.
These precedents suggest that short‑term price softness often precedes a multi‑month upside when top‑line momentum remains robust.
Investor Playbook: Bull and Bear Scenarios for Infosys
Bull Case:
- Revenue continues to outpace the sector, sustaining a 9‑10% YoY growth trajectory.
- Cursor partnership accelerates margin expansion, adding 0.6‑0.8% to operating margin.
- Global macro environment stabilizes, supporting higher IT spend in the US and Europe.
- Valuation compresses to a forward P/E of 28×, pushing the stock toward Rs 1,800‑Rs 1,900.
Bear Case:
- Geopolitical tensions curb overseas contracts, slowing revenue growth to <5%.
- Implementation challenges with the Cursor platform delay margin benefits.
- Rising Indian corporate tax rates erode net profit, dragging EPS below Rs 60.
- Valuation widens to a forward P/E of 34×, keeping the stock below Rs 1,600.
Given the current data, the bull scenario appears more probable, especially for investors with a 6‑12‑month horizon willing to ride short‑term volatility.