Infosys: growth slowed to 2.9%, but margin holds and valuation is below its own history

27 июля Infosys раскрыла результаты за первый квартал 2026 финансового года. Выручка выросла на 2,9% год к году, до 5 082 млн долл., EBITDA – на 3,6%, до 1 203 млн долл., чистая прибыль – на 1,2%, до 819 млн долл. При этом акции торгуются с мультипликатором EV/EBITDA 9,2, что заметно ниже трёхлетнего среднего 12,5, и мы считаем их привлекательными на текущем уровне.

Key takeaways

— Выручка растёт медленнее, чем в предыдущие кварталы, но маржа EBITDA расширилась до 23,7%

— Чистая прибыль почти не выросла из-за роста налогов и прочих расходов

— Свободный денежный поток остаётся сильным, capex умеренный

— Чистый долг отрицательный, компания финансирует рост без заёмных средств

— Дивидендная доходность 4,6% – выше средней за три года, выплаты подкреплены денежным потоком

— Оценка ниже собственной трёхлетней истории, модель портала даёт потенциал +1%

Attractiveness

Key figures, USD bn

Revenue grows slower than in previous quarters, but EBITDA margin expanded to 23.7%

In the first quarter of fiscal 2026, Infosys revenue reached $5,082 million, up 2.9% year-on-year. This is a noticeable slowdown compared to previous quarters: in Q2 FY2025 growth was 3.7%, in Q3 – 3.2%, in Q4 – 6.6%. The company did not disclose reasons for the slowdown, but the trend points to cooling demand for IT services.

At the same time, EBITDA grew 3.6% year-on-year to $1,203 million, and the EBITDA margin expanded from 23.5% to 23.7%. This suggests Infosys is managing costs well even as revenue growth decelerates. Operating profit rose 4.3% to $1,072 million, confirming operational efficiency.

Net profit barely grew due to higher taxes and other expenses

Net profit in Q1 FY2026 was $819 million, up only 1.2% year-on-year. Operating profit grew 4.3% and EBITDA 3.6% over the same period. The gap is explained by higher tax and other expenses, which absorbed part of the operating growth.

Net margin declined from 16.4% to 16.1% year-on-year. This is not a critical drop, but it shows profit growth lagging operating metrics. In previous quarters net profit grew faster, for example in Q4 FY2025 it rose 13.6% year-on-year.

Free cash flow remains strong, capex moderate

Operating cash flow in Q1 FY2026 was $1,036 million, up 5.4% year-on-year. Capital expenditures were moderate at $81 million, resulting in free cash flow of about $955 million for the quarter. Over the last twelve months, operating cash flow reached $4,000 million, confirming high earnings quality.

Strong cash flow allows Infosys to fund dividends and share buybacks without increasing debt. Capital expenditures remain low relative to revenue – about 1.6% per quarter, typical for IT services companies.

Net debt is negative, the company finances growth without borrowing

At the end of Q1 FY2026, Infosys net debt was -$1,364 million, meaning cash exceeded debt. The net debt to EBITDA ratio for the last twelve months is -0.29, indicating financial stability. Over the year, net debt increased by $1.1 billion but remains negative.

Negative net debt means the company does not rely on borrowed financing and can direct cash flow to dividends and investments. This is an important risk factor, especially amid uncertainty in the IT services market.

Dividend yield of 4.6% is above the three-year average, payouts backed by cash flow

Over the last twelve months, Infosys paid dividends providing a yield of 4.6% at the current price. This is above the three-year average dividend yield, which we estimate at about 3.5–4.0%. Payouts are backed by strong operating cash flow: over the last twelve months it reached $4,000 million, covering dividend payments with a comfortable margin.

We expect the company to maintain or increase dividends in the current fiscal year, given high return on equity (ROE 33.8%) and negative net debt. However, the payout size will depend on profit growth and board decisions. If revenue growth continues to slow, the company may adjust its dividend policy.

Valuation below its own three-year history, portal model gives +1% upside

The current EV/EBITDA multiple is 9.2, significantly below the three-year average of 12.5. P/E for the last twelve months is 13.3, which also looks moderate for a company with ROE of 33.8%. The stock trades at a discount to its own history, creating potential for growth.

According to our portal model, based on EBITDA growth and target multiple, the upside potential is +1% to fair value. This means the current price is close to our fair value estimate, but given the dividend yield of 4.6%, total shareholder return could be higher.

Valuation on the latest reported figures

Bottom line

Infosys reported Q1 FY2026 with moderate revenue and EBITDA growth, but nearly flat net profit. Strengths include EBITDA margin expansion to 23.7%, negative net debt, and stable cash flow. Weaknesses are slowing revenue growth and pressure on net profit. At the same time, the stock trades at a discount to its own three-year history, and the dividend yield of 4.6% looks attractive. Our verdict is 'attractive': the current price offers reasonable returns given dividends and potential for growth recovery.