Kotak Institutional Equities named Coforge Limited as a preferred challenger pick, noting Coforge has performed well by passing on AI productivity gains to win volumes from incumbents, even as the brokerage expects 3-3.5% annual revenue deflation through FY2029.

UBS upgraded Coforge Limited to Buy from Neutral and raised its target price substantially to Rs 2,400 from Rs 1,505, as the brokerage said it prefers Tier-2 Indian IT firms over Tier-1 peers amid AI-led opportunities and deflation risks.

Coforge is gaining share as AI levels the playing field for smaller rivals and clients seek rapid pilots and flexible pricing. The company has posted double-digit dollar revenue growth for at least eight quarters, with sales jumping by about a third in April-June, compared with subdued 1% to 3% growth for Tata Consultancy Services, Infosys, Wipro and HCL Technologies.

Coforge Limited was named a preferred pick by Kotak Institutional Equities and retained a High Conviction Outperform rating from CLSA, which sees mid-tier vendors better placed amid AI shifts. Coforge shares fell 1.15 percent on Friday but are up 13.5 percent year-to-date.

Coforge Ltd plans to strengthen its middle layer and move toward a diamond-shaped employee structure, with CEO Sudhir Singh saying on its 5-May call it has no bloated delivery pyramid to manage. Coforge ended last fiscal with $1.87 billion in revenue, up 29% year-on-year.

Coforge said outcome-based contracts comprise about 6-7% of its total revenue on a run-rate basis, reflecting a small but growing shift from traditional time-and-material and fixed-price models as AI-led deals favour measurable outcomes.

Coforge Limited rose to an eight-month high of Rs1,887.70, up 31% in a month, as Axis Securities and ICICI Securities maintained Buy ratings with targets of Rs1,955 to Rs2,050 and Rs1,950 respectively, citing 86% revenue from AI-led engineering, cloud and data services, a record USD 2.23 billion executable order book and Encora synergies, while Choice Institutional Equities also highlighted strong FY27 earnings visibility.

Coforge Limited reported 22.3% QoQ CC revenue growth in Q1FY27, including 1.1% organic growth, the highest headline growth cited by Motilal Oswal Financial Services, and also delivered about 36% YoY TCV growth among Tier-2 players.