Infosys Fair Value Cut 6% as Jefferies Warns AI Could Reshape IT Services Business Model

Infosys is facing a narrative shift as Wall Street and Dalal Street grapple with the dual-edged sword of Artificial Intelligence. While the company is aggressively integrating AI into its core offerings, a wave of institutional caution has hit the stock, leading to multiple price target cuts and rating downgrades.

Infosys (NSEI:INFY) now carries a fair value estimate of ₹1,492.25, down from ₹1,592.15, according to updated models that assume slower revenue growth, a lower P/E multiple, and a slightly higher discount rate. The stock has held up better than the revised fair value suggests, but the narrative is clearly shifting.

Why analysts are Cutting Infosys targets on AI concerns

The primary driver behind the recent caution is a perceived shift in how IT services generate cash. Jefferies recently moved Infosys from a “Buy” to a “Hold” stance, slashing its price target to $14.31 from $20.82. The firm’s thesis suggests that AI will move revenue away from traditional, recurring “managed services” and toward one-off consulting and implementation tasks.

As reported by Yahoo Finance, this transition adds significant business model risk. Several other firms, including Stifel, TD Cowen, and BMO Capital, have also lowered their growth assumptions. Analysts are specifically looking at how AI-driven productivity might lead to pricing pressure, as clients expect faster delivery at lower costs. Consequently, the future P/E multiple for the stock has been reduced from 26.63x to 24.84x.

Can strategic partnerships help Infosys reignite revenue growth?

To counter the narrative of slowing growth, Infosys is positioning its Topaz and Cobalt platforms at the center of the enterprise AI ecosystem. The company is moving beyond simple pilot programs and into scaled, governed AI deployment through several major alliances:

• OpenAI & Anthropic: Collaborations involve using Codex and Claude to automate legacy modernization and claims processing.
• Intel Integration: Infosys is pairing Topaz Fabric with Intel Xeon processors and Gaudi accelerators to provide “right-sized” AI architectures for large enterprises.
• Harness Automation: A new partnership with Harness aims to standardize software delivery from code to production using AI, specifically for highly regulated environments like finance and manufacturing.

Infosys fair value cut as analysts lower growth expectations

The updated fair value model for Infosys reflects several tweaks that together explain the 6.3% cut:

• Revenue growth assumption was lowered from 5.30% to 4.11% for the forecast period.
• Net profit margin was slightly raised from 16.22% to 16.38%, a small offset.
• Future P/E multiple was reduced from 26.63x to 24.84x, reflecting less enthusiasm for valuation expansion.
• Discount rate moved up from 15.62% to 15.75%, a modest increase that lowers present value.

These are not dramatic changes individually, but together they signal that analysts are marking down expectations for the entire Indian IT sector, not just Infosys.

Conclusion

Infosys is at a critical juncture. The transition from a traditional IT outsourcer to an AI-first consultant is necessary but fraught with valuation hurdles. While the 10% revenue growth days may be in the rearview mirror for now, the company’s ability to move clients from AI “pilots” to “production” will be the ultimate test.

Investors should watch the upcoming quarterly commentary for updates on deal consolidation and whether the high-margin Finacle platform can offset the headwinds in North American and European spending.