Infosys Q3 Review: The Stage Is Set For A Liftoff In FY25

Infosys Ltd. is now set to deliver a “very strong” first half in fiscal 2025—one that may just lift Indian IT out of the funk it’s been under for more than a year.

However, all that comes down to is how dealmaking pans out over the next few months.

“We believe strong ramp-up deals will start from FY25, which will result in very strong H1 for the company, with the caveat that pass-through revenue remains in the current range,” Anmol Garg, IT analyst at Mumbai-based brokerage DAM Capital, said in a Jan. 12 note. “Incrementally considering the schedule of deal ramp-up, we believe Infosys can achieve 7.6% YoY CC growth in FY25.”

That, then, is a fair bit of a jump from what IT bellwether is guiding for in FY24.

Infosys has revised its revenue growth guidance to a tighter, narrower band of 1.5–2% in the fiscal ending March 31, 2024, from the 1-2.5% anticipated a quarter ago. The company still aims to achieve operational profitability of 20–22% in FY24, despite a margin erosion in Q3.

Revenue of India’s second-largest IT company fell 0.44% over the previous three months to Rs 38,821 crore in the quarter ended Dec. 31, according to an exchange filing on Thursday. That compares with the Rs 38,318 crore consensus estimate of analysts tracked by Bloomberg.

Infosys Q3 Results: Key Highlights (QoQ)

• Revenue down 0.44% at Rs 38,821 crore (Bloomberg estimate: Rs 38,318 crore)

• EBIT down 3.78% at Rs 7,961 crore (Bloomberg estimate: Rs 7,929.5 crore)

• EBIT margin at 20.50% versus 21.21% in Q2 (Bloomberg estimate: 20.50%)

• Net profit down 1.64% at Rs 6,113 crore (Bloomberg estimate: Rs 6,628 crore)

In dollar terms, revenue grew 0.1% year-on-year to $4,663 million. In constant currency terms, it was down 1% sequentially.

Here’s look at what analysts had to say about Infosys’ Q3 results:

Jefferies

• Net new order book impressive with growth guidance narrowed

• Headcount decline suggests demand unlikely to recover

• Margins healthy, FY24 guidance achievable

HSBC

• Q3 has not materially impacted FY25 EBIT estimates

• Minor cut in EPS estimate for Infosys on higher tax, lower other income

• Prefer Infosys on cheaper valuations, faster growth potential

DAM Capital

• Q3 marks third consecutive quarter of guidance cut

• Ramp-up in deals will start from FY25 with strong H1

• Increase in utilisation should further support margins in FY25

Motilal Oswal

• Q3 revenue better than expected, EBIT margin marginally ahead

• Large deal TCV momentum intact, strong traction in large deal pipeline

• Lower than expected wage hike and workforce reduction aided profit

• Margin should bottom out in FY24