Infosys Q4 Results: FY24 Guidance Slashed As Revenue, Profit Decline

Infosys Ltd. has lowered its revenue growth guidance for fiscal 2024, after a banking crisis in its largest market roiled its biggest revenue generator.

Revenue of India’s second largest software services firm fell 2.28% over the previous three months to Rs 37,441 crore in the quarter ended March 31, according to an exchange filing on Thursday. That compares with the Rs 38,770-crore consensus estimate of analysts tracked by Bloomberg.

Infosys Q4 Results: Key Highlights (QoQ)

• Revenue declines 2.28% to Rs 37,441 crore, as against an estimate of Rs 38,770 crore.

• EBIT down 4.42% at Rs 7,877 crore, as compared with an estimate of Rs 8,263 crore.

• EBIT margin at 21.03% versus 21.5%, Analysts had estimated it at 21.6%.

• Net profit down 6.86% at Rs 6,134 crore, as compared with an estimate of Rs 6,582 crore.

The software services provider has guided for 4%-7% revenue growth in FY24. That compares with an average analyst estimate of 10.6%. The operating margin is likely to come in at 20%-22% in FY24.

In dollar terms, Infosys’ revenue fell 3.2% quarter-on-quarter in constant-currency terms in the January-March period. For the full year, the IT firm clocked 15.4% revenue growth in constant currency terms to $18.2 billion. That was lower than the 16%-16.5% guidance in January. The EBIT margin rose 21% in the fiscal ended March 31, 2023.

The U.S. banking crisis impacted decisions across the board, Infosys CEO Salil Parikh said in a post-earnings press conference in Bengaluru.

“During the quarter, we saw unplanned project rampdowns in some of our clients, and delays in decision-making, which resulted in lower volumes,” he said. “While we saw some signs of stabilisation in March, the environment remains uncertain.”

"We are working closely with clients. Their connect will help us massively," Parekh said. “As the environment has changed, we see strong interest from our clients for efficiency, cost and consolidation opportunities, resulting in a strong large deal pipeline."

For the quarter ended March 31, 2023:

• Revenue in CC terms grew by 8.8% YoY and declined by 3.2% QoQ.

• Revenue came in at Rs 37,441 crore—a growth of 16% year-on-year.

• Digital rose 15% in CC terms, making up 62.9% of total revenue.

The Bengaluru-headquartered company clocked large deal wins worth $2.1 billion in the fourth quarter and $9.8 billion for the full year, according to its earnings statement. The company added 115 new clients in the March quarter, increasing its tally of active accounts to 1,872.

Revenue in Infosys' BFSI vertical fell 3.7% sequentially to Rs 10,818 crore in the March quarter, as the banking crisis in the U.S. impacted its client base of regional banks.

• Retail business revenue rose 1.04% sequentially to Rs 5,537 crore.

• Communications revenue fell 6.34% sequentially to Rs 4,411 crore.

• Manufacturing revenue was flat at Rs 5,078 crore.

• Hitech revenue growth fell 3.42% to Rs 2,989 crore.

Geographically, North America contributed 61% to Infosys’ revenue in the March quarter, followed by Europe at 27% and the rest of the world at 9.4%. The Europe business grew the fastest at 13.9% as compared with 5.7% in North America.

Attrition at Infosys eased from the previous quarter, even as the company ended the full year with fewer employee additions.

As on March 31, 2023, the IT firm's attrition rate stood at 20.9% as against 24.3% on a trailing 12-month basis. The company's headcount stood at 3,43,234 in FY23 as compared with 3,14,015 in FY22. On a consolidated basis, Infosys earned $53,400 per employee in the year gone by.

The utilisation level, including trainees, stood at 76.9% in the March quarter as against 77.1% in the October-December period.

The Infosys board has recommended a final dividend of Rs 17.50 per share for FY23. Together with the interim dividend of Rs 16.50 per share announced earlier, the total dividend stands at Rs 34 per share. The total outgo for the company, by way of dividend, stands at Rs 14,200 crore.

"Our continued focus on cost optimisation and operational efficiencies have helped in achieving operating margin of 21% in FY23," Nilanjan Roy, chief financial officer at Infosys, said in a statement. "Executing our capital allocation policy, we successfully completed our share buyback and proposed a final dividend of Rs 17.50 for FY23."

On Thursday, shares of Infosys Ltd. fell 2.79% to Rs 1,388.60 apiece on the BSE, even as the benchmark Sensex ended the day 0.06% higher at 60,431 points. The quarterly results were declared after market hours.