Where the Street May Be Underestimating the Risks

The traditional IT services segment, represented by companies such as !Infosys , !Wipro , $TECHM and $MPHASIS faces increasing structural challenges as the industry evolves. Although these firms continue to benefit from established client relationships, strong execution capabilities and significant scale, their current market valuations appear to assume a stronger growth trajectory than fundamentals may support. Over the medium term, revenue growth is likely to remain moderate, while AI-driven delivery models could place pressure on operating margins and reduce demand for certain legacy maintenance and BPM services. In our view, these factors warrant a more conservative valuation framework, with fair value closer to 14–16x forward earnings rather than the premium multiples currently assigned by the market. Earnings expectations have already begun to soften, with several brokerages lowering FY27 estimates across this group. If upcoming quarterly results reinforce concerns around growth and profitability, further downward revisions to earnings forecasts and valuation multiples cannot be ruled out.