Why Infosys Stock Just Jumped 9%

Indian information technology giant Infosys (NYSE: INFY) exploded 9% higher through 1:10 p.m. ET Thursday after reporting strong earnings for its fiscal Q1 2025.

Heading into the report, analysts forecast Infosys would earn $0.18 per share on $4.65 billion in sales. Infosys nailed the earnings target, and reported sales of $4.71 billion, beating on the top line and meeting on the bottom line -- and promising even better results in the future.

Infosys' Q1 earnings

Infosys' financial results ranged from modest to downright terrific. Sales growth for the quarter was only 2.5% year over year in constant currency terms, but still better than expected. Infosys scored a 21% operating profit margin on its sales, resulting in much stronger earnings growth of 7% (in rupees) and 5% (in dollars).

Best of all, though, was growth in the all-important category of free cash flow . Infosys generated $1.1 billion in cash profits in Q1, an increase of 57% over one year ago -- and 43% better than reported net income.

Is Infosys stock a buy?

And the near-term news looks pretty propitious as well. Turning to guidance, Infosys guided for stronger growth in sales, up 3% or even 4% this year, with operating margins continuing to range from 20% to 22% -- so roughly equal to Q1. This implies that earnings growth this year should be respectable -- perhaps in the upper single digits.

Management didn't say whether its free-cash-flow growth can continue to outperform as it did in Q1, however -- and most analysts don't seem to think it will, forecasting a long-term profits growth rate of only 7%. Even with the stock currently looking cheaper on a free-cash-flow basis (26.4) than on P/E basis (27.2), I don't see the stock as particularly cheap based on that long-term growth rate.

Long story short: Enjoy today's profits if you earned them -- but at today's valuation, Infosys stock doesn't really look like a long-term buy to me.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .