Infosys Grabs AI Implementation Contract: How to Play the Stock?

Infosys INFY shares have gained 26.9% in the year to date period, outperforming the Zacks Computers - IT Services industry’s return of 10.7%.INFY stock has also outperformed the Zacks Computer and Technology Sector and the S&P 500 index’s return of 24.2% and 20.7%, respectively, in the year to date period.This outperformance reflects investors’ confidence in INFY’s financials, innovative product launches and steady flow of customer wins. Recently, Old National Bank has extended its agreement with Infosys for four years.Infosys and Old National Bank have been working together to improve the latter’s digital operations since 2020. In the extended contract, Infosys has been tasked with projects where INFY will use automation and artificial intelligence (AI) to improve operations and digitize processes.Infosys YTD PerformanceImage Source: Zacks Investment ResearchInfosys Gains From Its AI ExpertiseSo far this year, Infosys has gained numerous clients and many of them have embraced Infosys’ AI offerings through these collaborations. So far this year, INFY has served clients, including Sally Beauty Holdings, Inc., Posti, Metro Bank, LIC India and First Abu Dhabi Bank, with INFY’s AI solutions.Infosys has been expanding its presence in the AI market by forging partnerships with industry leaders and by acquiring AI-based companies. Its acquisition of InSemi enhanced its R&D capabilities in the fields of AI, 5G, hyperconnectivity and high-performance computing. To expand its AI capabilities, Infosys has also collaborated with industry leaders, including NVIDIA NVDA, ServiceNow NOW and Intel INTC.Infosys partnered with NVIDIA and integrated its Topaz with the latter’s NIMs to deliver solutions like TOSCA Network Service Design, one generative AI-powered smart networking operating center and Infosys Cortex.ServiceNow and Infosys developed a product by integrating the Now Platform and the Infosys Enterprise Service Management Cafe to improve the operations of enterprise business services. Infosys collaborated with Intel for using Intel Xeon processors, Intel Gaudi accelerators and Intel Core Ultra Processors in Infosys Topaz.INFY’s persistent focus on enhancing its AI capabilities and continuous flow of contracts is likely to continue driving its top line despite the current macroeconomic uncertainties. In the last reported results for first-quarter fiscal 2025, its revenues grew 2.1% year over year. The Zacks Consensus Estimate for fiscal 2025 depicts a further improvement in sales growth. The consensus mark for INFY’s fiscal 2025 revenues is pegged at $19.3 billion, indicating year-over-year growth of 3.7%.Near-Term Challenges for InfosysInfosys is currently grappling with macroeconomic challenges. The protracted inflationary pressure and still-high interest rates have been a substantial headwind for the company due to expense reduction among its enterprise customers. Moreover, slow decision-making processes at organizations and weakness in digital transformation programs in the current uncertain macroeconomic environment is hurting Infosys’ volumes.INFY’s business is highly prone to currency volatility between the Indian Rupee and the U.S. dollar, as the majority of its revenues are derived from the U.S. markets. However, the recent rate cuts by the Federal Reserve might benefit Infosys in the coming quarters.What Should Investors Do?INFY’s steady flow of contracts and expanding AI expertise reflects solid top-line growth potential. However, the stock has a stretched valuation, as reflected by the Zacks Value Score of F, suggesting that investors should wait for a better entry time. Infosys currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Intel Corporation (INTC): Free Stock Analysis Report American Noble Gas Inc. (INFY): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report ServiceNow, Inc. (NOW): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks