Most analysts had expected Infosys to maintain its forecast for 6-10 percent revenue growth for the current 2013/14 financial year, but Morgan Stanley raised doubts last week, saying the company would cut estimates to 4-6 percent.
Investors cheered the forecast, sending Infosys shares nearly 15 percent higher to their loftiest in almost three months.
"Generally you can conclude that the worst is over for them but it remains to be seen how quickly they can recover from here," said Phani Sekhar, fund manager at Mumbai-based Angel Broking, which holds shares in Infosys.
"We need to watch whether the management sees any air pockets going forward."
Infosys's revenue growth forecast still lags the 12-14 percent growth outlook for the sector made by local IT industry lobby National Association of Software and Services Companies, highlighting the challenges facing the company's management.
The company also has to regain investors' trust its ability to deliver strong earnings after almost two years of disappointing results.
Last quarter, Infosys forecast full-year sales growth that missed analyst expectations by a margin of up to 50 percent, sending its shares down as much as about 20 percent.
"Infosys has beaten our lowered expectations and its guidance has been maintained," said Sandip Sabharwal, CEO of Portfolio Management Services at Mumbai-based brokerage Prabhudas Lilladher which holds Infosys stock.
"One shouldn't be too euphoric though for the stock as there are a lot of management and structural changes that need to happen."
An attempt to earn a bigger share of revenue from proprietary software, at the expense of IT outsourcing contracts, saw Infosys losing out to rival Tata Consultancy Services.
Infosys brought back founder Narayana Murthy as executive chairman on June 1 to revive the company, and his efforts may get a boost from forecasts that 2014 will see the strongest demand for technology from U.S. government institutions and businesses since the 2008 global financial crisis.
On Friday, Infosys reported a 3.7 percent year-on-year increase in its consolidated net profit for the first quarter, in line with analysts' expectations.
"Despite facing an uncertain macro environment, changing regulatory regime and a volatile currency environment, we have done well in Q1 and are cautiously optimistic about rest of the year," CEO S.D. Shibulal said in a statement.
Infosys also said its margins may be affected in future quarters due to previously announced compensation increases. In June, the company had said it would raise salaries for all eligible staff.
At 0430 GMT, shares of the company were up 12 percent at 2,827 rupees after touching 2,905.60 rupees, their highest since April 11.
($1 = 59.7850 Indian rupees)
(Additional reporting by Sumeet Chatterjee and Abhishek Vishnoi; Writing by Aradhana Aravindan; Editing by Miral Fahmy)
By Harichandan Arakali