PL Capital has reiterated its BUY rating on Infosys, assigning a target price of Rs 1,900 against a current market price of Rs 1,391.

In a world where enterprise technology is being re-architected around artificial intelligence, Infosys is positioning itself not as a passive beneficiary of productivity gains, but as an architect of the next services supercycle. Management believes AI is not merely a cost lever — it is a structural expansion of the addressable IT services market, potentially unlocking a USD 300–400 billion opportunity by 2030. With AI-led engagements already contributing approximately 5.5% of revenues and deep client penetration across its top accounts, Infosys is pivoting from digital transformation to AI-native enterprise reinvention.

Recalibrating the Narrative: AI as Structural Expansion, Not Disruption

The central thesis emerging from management commentary is clear: AI is expanding the IT services market rather than compressing it. While agentic workflows and automation may reduce traditional application maintenance revenue, they simultaneously catalyze higher-value transformation programs.

Management estimates a USD 300–400 billion services TAM by CY2030, driven by:

Enterprise workflow redesign

Legacy modernization

AI governance and compliance frameworks

Physical AI and embedded intelligence

Currently, approximately 60% of enterprise IT budgets are consumed by legacy system maintenance. AI-led operating models could structurally reduce this to 30–40%, freeing up capital for data, orchestration and AI-layer investments. This is not a cyclical shift; it is a reallocation of capital expenditure toward AI-centric infrastructure.

From Labor Arbitrage to AI Orchestration

Infosys acknowledges that the traditional labor-intensive outsourcing model will evolve — but not disappear. Roles will migrate from coding and infrastructure management toward:

AI model training and validation

Agentic orchestration layers

Governance architecture

Human-in-the-loop oversight

This shift increases services complexity and favors incumbents with deep consulting capabilities. AI deployment bottlenecks lie less in technology readiness and more in operationalization — governance, compliance, data readiness and change management. These are integration-heavy engagements, not plug-and-play software contracts.

Platform-Led AI Stack: The Topaz Architecture

Infosys has built a platform-led AI stack anchored on Topaz Fabric, integrating:

LLM and SLM models

Enterprise data layers

Agent orchestration engines

Governance modules

Industry accelerators

The company has already deployed 600+ proprietary AI agents across IT and domain workflows. Importantly, enterprise control over agent ownership determines billing power — and Infosys is positioning itself as the integrator of choice in this emerging stack.

Strategic partnerships, including collaboration with Anthropic, strengthen its model-layer access and multi-industry deployment capabilities.

Financial Outlook: Growth Acceleration with Margin Discipline

PL Capital projects a USD revenue CAGR of 6.6% and earnings CAGR of 10.2% over FY26E–FY28E.

Below is a snapshot of consolidated financial projections:

EPS is expected to rise from Rs 64.5 in FY25 to Rs 86.5 in FY28E, supported by margin resilience and operating leverage.

Return ratios strengthen meaningfully:

RoE improves from 29% in FY25 to 36.9% by FY28E

RoCE expands from 26.6% to 34%

Free cash flow remains robust at Rs 358 bn by FY28E, underpinning dividend visibility and balance sheet strength.

Sectoral AI Penetration: Vertical Momentum Builds

AI adoption is not uniform; it is vertical-specific:

Financial Services:
Historically constrained by regulation, the segment is now aggressively deploying AI across onboarding, fraud detection, advisory and core banking transformation.

Retail, CPG & Logistics:
AI-driven demand forecasting, personalization engines and supply-chain orchestration are linking AI adoption directly to revenue growth.

Communications & Media:
Automation of network operations and predictive triage are improving reliability amid muted revenue growth.

Manufacturing & Industrial:
Predictive maintenance, ERP modernization and smart factory systems are driving large modernization mandates.

Energy & Utilities:
AI is emerging as the operating backbone of grid optimization and autonomous asset management.

Valuation Framework: Re-Rating Potential

The stock currently trades at approximately 16x FY28E earnings.

PL Capital assigns a 22x multiple to FY28E EPS of Rs 86.5, arriving at a target price of Rs 1,900.

This implies:

Upside potential exceeding 35% from CMP

Multiple expansion driven by AI-led growth visibility

Structural margin durability

At 22x, the valuation aligns with a premium Tier-1 services franchise transitioning into an AI transformation partner.

Risks to Monitor

Faster-than-expected revenue compression from agentic automation

Delays in enterprise-scale AI deployments

Macro-driven IT spending slowdown

Competitive pricing pressure in AI integration

However, management remains confident that every cost-reduction cycle historically resulted in exponential demand acceleration, whether during cloud or digital waves. AI appears poised to follow a similar trajectory.

Investment View

Infosys is entering the AI era not as a reactive participant but as a systems integrator embedded at the heart of enterprise transformation. With 90% penetration across its top 200 clients and AI revenue contribution already at 5.5%, scalability appears credible.

At Rs 1,391, the risk-reward profile is favorable. With earnings visibility, improving return ratios and structural TAM expansion, the stock merits a BUY with a target of Rs 1,900.

For long-term investors seeking exposure to India’s Tier-1 IT franchise pivoting into AI-led services, Infosys presents a compelling entry point into the next technology supercycle.