Infosys INFY shares have gained 25.8% on a year-to-date (YTD) basis, outperforming the Zacks Computers - IT Services industry’s return of 16.1%. 

This outperformance reflects Infosys’ continued strength and distinction in the market on the back of its artificial intelligence (AI) offerings, which are assisting clients in increasing productivity and growth throughout their businesses. Infosys’ continued efforts in collaborating with customers to establish a solid database is a major positive. INFY's consistent contract flow and growing AI know-how demonstrate strong top-line growth potential.

To differentiate itself in the market and expand its AI portfolio, INFY recently partnered with Google Cloud to create a Google Cloud center of excellence powered by Infosys Topaz and boost enterprise AI innovation.

Both Google Cloud and Infosys have a long history of providing cutting-edge AI and data analytics solutions that propel client success. More than 60,000 workers have already been made available on Google Cloud by Infosys.

By combining Google Cloud's generative AI technology with Infosys’ Topaz and Cobalt cloud capabilities, the center of excellence will use cutting-edge enterprise AI solutions to help solve complex problems in both the business and technology domains. To maximize efficiency and business performance, the partnership will allow businesses to co-create customized solutions in fields like contact center AI, software development lifecycle, agentic AI, speech-to-speech, text-to-image and application modernization.

Deal Wins and Partnerships to Aid INFY’s Prospects

With more than four decades of expertise in overseeing the operations and systems of multinational corporations, INFY skillfully guides clients through its cloud and AI-powered digital transformation.

Infosys Compaz, a subsidiary of Infosys, recently joined forces with StarHub to propel the latter's digital transformation. StarHub will integrate generative artificial intelligence (AI) technologies with Infosys Topaz and streamline its cloud capabilities with Infosys Cobalt. The two businesses will also work together to develop AI models using data unique to StarHub's telecoms.

Infosys recently revealed that it has partnered with RheinEnergie, a top energy service provider in Germany, to support businesses in advancing their sustainability and energy transition goals. The partnership will make use of Infosys Energy Cloud, a component of Infosys Cobalt, a suite of platforms, services and solutions that help businesses accelerate their cloud journey, and Infosys Topaz, an AI-first product that uses generative AI technologies. INFY will work with RheinEnergie to deploy state-of-the-art cloud, data, artificial intelligence and Industry 4.0 solutions.

Infosys Ltd. Price and Consensus

Infosys Ltd. price-consensus-chart | Infosys Ltd. Quote

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 Faces Macroeconomic Challenges

At the moment, Infosys is facing macroeconomic difficulties. Protracted inflationary pressure and still-high interest rates have posed a significant challenge for the business as its enterprise clients have reduced their spending. Furthermore, in the current uncertain macroeconomic environment, INFY has been dealing with weak digital transformation programs and slow decision-making processes, which are having an impact on volumes.

Since the majority of INFY's revenues come from the U.S. markets, the company's operations are extremely vulnerable to fluctuations in the value of the Indian Rupee relative to the U.S. dollar.

Conclusion: What Should Investors Do?

Although, INFY's consistent contract flow and growing AI know-how and clientele demonstrate its strong growth potential. However, the stock has a stretched valuation, as reflected by the Zacks Value Score of D, which may not bode well for investors.

INFY currently carries a Zacks Rank #4 (Sell), implying that existing investors should sell the stock and new investors should stay away from accumulating it. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

Microsoft Corporation (MSFT) : 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 Report

To read this article on Zacks.com click here.

Zacks Investment Research