Infosys is positioning itself at the epicenter of enterprise AI transformation. Following its Investor AI Day, management articulated a sweeping AI-first strategy designed to capture a USD 300–400 billion services opportunity by 2030. With over 4,600 AI projects underway and AI-first services already contributing 5.5% of Q3 revenues, Infosys is embedding artificial intelligence across strategy, modernization, orchestration, and governance layers. Legacy modernization, once a drag on growth, is now becoming the gateway to AI adoption. Emkay retains its BUY call, valuing the stock at 22x Dec-27E EPS, supported by resilient margins, strong free cash flows, and structural AI tailwinds.

AI-First Transformation: Infosys Moves Beyond Automation

Management has unveiled a two-pronged AI strategy:

AI-first services to generate new demand.

AI-augmented services to protect and expand wallet share in existing contracts.

The core premise is compelling: while AI may compress billing through productivity gains, the expansion of AI-led services should more than offset revenue pressures. Management estimates the global AI services opportunity at USD 300–400 billion by 2030.

Importantly, Infosys is already deeply embedded in client AI programs, engaging with 90% of its top 200 clients and executing over 4,600 AI initiatives. AI-first services contributed approximately 5.5% of Q3 revenue, a figure expected to scale meaningfully over the next three years.

Six AI-Led Value Pools: Structuring the Opportunity

Infosys has formalized six incremental service pools that will anchor future growth:

AI Strategy & Engineering – Agent building and orchestration

AI-Ready Data Foundations – Structured enterprise data layers

Process Reimagination via Agents

Agentic Legacy Modernization

Physical AI Integration

AI Trust & Governance

This framework represents a structural shift: AI is no longer a feature layer; it is becoming the enterprise operating stack.

Legacy Modernization: The Gating Variable

A critical insight from management: 60–80% of enterprise IT budgets remain tied to maintaining outdated systems.

Historically, modernization programs were deferred due to:

High capital intensity

Long implementation cycles

Questionable ROI

AI is changing that calculus. Agentic tools now accelerate:

Code comprehension

Reverse engineering

System migration

Automated testing

Without modern architecture, AI deployment remains superficial. Therefore, modernization becomes not optional—but foundational.

Enterprise AI Adoption: A Deployment Gap Emerges

While AI model capabilities are accelerating rapidly, enterprise adoption lags. Only ~1% of organizations have scaled AI fully across business functions, despite 15–50% task-level productivity gains in greenfield environments.

This deployment gap creates a consulting-led opportunity. Infosys, through its Topaz AI platform architecture, aims to bridge this gap by integrating:

Cloud infrastructure

Data platforms

Enterprise workflows

Governance frameworks

The company is effectively repositioning AI from a productivity enhancer to a full-fledged execution engine.

Financial Performance: Durable Margins, Strong Cash Flow

Below is a consolidated snapshot of financial projections:

EBITDA margins remain stable around 24%, even as AI investments accelerate. The company maintains net cash status, with projected net cash of over Rs 543 bn by FY28E.

Free cash flow conversion remains robust, with FCFF yield projected at 5–6% and dividend yield approaching 4% by FY28E.

Valuation Framework: Discounted AI Optionality

At CMP of Rs 1,391, Infosys trades at:

20x FY26E EPS

18.4x FY27E EPS

17x FY28E EPS

Emkay’s target price of Rs 1,750 is based on 22x Dec-27E EPS, reflecting confidence in AI-led acceleration and sustained RoIC expansion.

Given projected EPS of Rs 75.6 in FY27E, this multiple appears reasonable relative to:

RoE above 33%

RoIC exceeding 55%

Zero leverage balance sheet

Structural AI tailwinds

Risks to Monitor

Investors should watch for:

Slower-than-expected AI budget ramp-up

Macro headwinds in US and Europe

Execution complexity in large-scale modernization

Pricing compression in legacy services

AI adoption is not linear. Enterprise transformation remains complex and capital-intensive.

Investment View: Execution Is the Differentiator

Infosys is not merely adopting AI—it is redesigning its enterprise value proposition around it. The company’s ability to convert AI experimentation into scaled enterprise deployment will determine earnings acceleration.

Target Price: Rs 1,750
Current Price: Rs 1,391
Upside Potential: ~26%
Recommendation: BUY