Infosys reported a solid Q3 FY2025 with revenue rising 6.1% year-on-year in constant currency to approximately ₹41,000 crore, surpassing analyst estimates which ranged between ₹40,698 crore and ₹41,400 crore. The net profit soared by 11.4% to ₹6,840 crore, reflecting effective cost management and strategic pricing initiatives. Operating margins expanded by 20 basis points sequentially to 21.3%, despite headwinds such as increased employee compensation and third-party costs. Free cash flow reached an all-time high of $1.26 billion (~₹10,500 crore), underscoring strong cash conversion and operational efficiency. Employee strength increased by over 5,000 to 323,000, bolstering delivery capabilities for large digital transformation projects. Large deal wins totaled $2.5 billion, with net new wins up 57% quarter-on-quarter, highlighting Infosys's strong market traction, especially in the U.S. financial services and European markets. The company's focus on AI and automation is expected to drive further margin expansion by improving productivity and enabling premium pricing.

Infosys has leveraged AI and automation technologies to drive margin expansion and operational excellence. The company developed four proprietary small language models targeting banking, IT operations, cybersecurity, and enterprise functions, alongside over 100 AI agents enhancing client solutions. These AI initiatives contribute to productivity gains, reduced manual effort, and higher-value service offerings, enabling Infosys to command better pricing and improve margins despite inflationary pressures on compensation and third-party costs. Pricing improvements of 3.6% over nine months have also supported margin expansion by 30 basis points year-to-date. Additionally, Infosys's digital platforms and cloud services have accelerated client digital transformation journeys, unlocking new revenue streams in sectors like financial services, retail, and manufacturing.

To contextualize Infosys's performance, we compare key financial and valuation metrics with major Indian IT companies such as Tata Consultancy Services (TCS), Wipro, and HCL Technologies. Infosys maintains a competitive edge in margin profile, revenue growth, and free cash flow generation, supported by its AI investments and diversified client base.

Infosys's margin expansion and strong free cash flow generation support its premium valuation relative to peers. Its focused investments in AI and digital services underpin growth in high-margin segments like financial services and retail. Investors should weigh Infosys's slightly higher P/E against its margin leadership and growth prospects.

Based on Infosys's Q3 performance, strategic AI initiatives, and sectoral tailwinds, we project a medium-term price target of ₹2,750 over the next 12 months, reflecting approximately 15% upside from current levels. Over a 10-year horizon, the company is positioned for a compound annual growth rate (CAGR) of around 10%, supported by sustained digital transformation demand and AI-driven margin expansion. Key risks include macroeconomic slowdowns, currency fluctuations, and competitive pressures. Indian retail investors should consider Infosys for its blend of growth, margin resilience, and stable free cash flow generation, aligning with SEBI regulations and investment frameworks.