Infosys shares in focus after Rs 18,000 crore buyback announcement

On Friday, the Infosys shares soared 2.1 percent higher, touching a day’s high price of Rs 1,542.90 on NSE after the board of directors had approved a record buyback valued at Rs 18,000 crore, marking its largest-ever share repurchase and signaling strong management confidence amid turbulence in the IT sector. The buyback will be executed through a tender offer route at Rs 1,800 per share, representing a premium of approximately 19 percent over the previous closing price of Rs 1,509.70 per share on Thursday. This move enables the repurchase of 10 crore shares, amounting to approximately 2.4 percent of Infosys' equity capital. The company’s last buyback occurred in 2022, and this year’s programme is part of its broader capital-return policy. The record date for this corporate action will be revealed later.

Management has emphasized that the buyback demonstrates its commitment to delivering shareholder value and enhancing return metrics, particularly as Infosys’ shares have underperformed this year, declining by about 21 percent over the past year, compared to the broader market. The company’s cash and cash equivalents stood at Rs 27,459 crore at the end of Q1FY26, placing it in a strong financial position to support the Rs 18,000 crore outlay. Brokerages have mostly responded positively, suggesting that the buyback could provide near-term support to the stock price, but the sector-wide demand pressures remain intact. CLSA and Nomura have Outperform and Buy ratings on Infosys, noting the attractive risk-reward setup and highlighting the company's strong free cash flow generation.

In its latest guidance, Infosys has marginally raised its FY26 constant currency revenue growth outlook to 1 to 3 percent and maintained its operating margin forecast at 20 to 22 percent, despite persistent global headwinds. Consolidated Q1FY26 net profit rose 9 percent year-on-year to Rs 6,924 crore, while revenue increased by 8 percent to Rs 42,279 crore. Management expects AI-led initiatives to become accretive to both topline and margins, driven by improved pricing and lower pass-through costs. Infosys’ strategy positions generative AI as a core pillar, with the expectation that any savings achieved from AI will be reinvested into growth, rather than reducing overall tech budgets. The company also reported its highest-ever free cash flow of $4.1 billion in FY25 and plans to further increase dividends over the coming years.

Despite these positives, the broader Indian IT sector remains largely stagnant. Growth is constrained by tepid demand from Global Capability Centers (GCCs), lengthened deal cycles, and global macroeconomic uncertainty. While India remains a hub for GCC expansion, hosting over 1,600 active GCCs as of 2025 and experiencing a surge in AI/ML-focused workforce, this has not meaningfully accelerated topline growth for IT service majors. AI investments have mostly yielded internal productivity gains and discrete client wins but have yet to unleash a sector-wide revenue boom. Industry experts believe sustained AI innovation and rising reinvestment in digital transformation are necessary to break out of the current stagnation, even as sector leaders like Infosys continue to invest ahead.