Infosys Q1 Results Preview: Revenue Growth, Margin Expansion Likely
Infosys is expected to see margin expand on the back of moderated onsite expense and better cost optimisation.
Infosys Ltd., which is set to announce its earnings for the first quarter of the current financial year on Thursday, is expected to see a growth in revenue and margin expansion.
The IT services firm's net profit may fall 22% sequentially to Rs 6,253.1 crore in the quarter ended June, according to a consensus of analysts' estimates tracked by Bloomberg.
Infosys Q1 FY25 Earnings Estimates (Consolidated, QoQ)
Revenue may rise 2.3% to Rs 38,810.6 crore.
Profit may fall 22% to Rs 6,253.1 crore.
EBIT margin may expand 57 basis points to 20.67%.
Brokerages expect Infosys to report a constant-currency growth of 2.5% on the back of large-deal ramp-ups and positive seasonality. The company's revenue growth rate is expected to be the highest among the large-cap peers.
Infosys' margin may expand 60–99 basis points, aided by moderated onsite expense and better cost optimisation, according to Axis Securities and Jefferies India Pvt. In the fourth quarter of the last fiscal, the margin stood at 20.1% — at the lower end of its set band of 20–22%, which was retained for the current fiscal as well.
In the previous quarter, Infosys had guided conservatively, revising the band from 1.5–2% to 1–3%. In the June quarter, the same band of 1–3% growth in the fiscal is expected to be retained. The margin guidance of 20–22% is also likely to be unchanged, according to CLSA and Citi Research.
The deal pipeline, which was at $4.5 billion in the March quarter, is expected to get better, with the ramp-up of large deals starting to show results and reflecting in revenue, according to brokerages. The management commentary on the demand environment, deal-win momentum, outlook for key markets and verticals will be closely watched.
IT companies are actively bagging deals related to generative artificial intelligence, which are the bright spot in an otherwise muted environment. Tata Technologies Ltd. has said recently that its AI pipeline grew to $1.5 billion from $900 million in the March quarter. It remains to be seen if Infosys also releases AI revenues this quarter as it has solutions like Infosys Aster and Infosys Topaz are gaining ground.
After a lull in hiring, the IT industry has started to increase headcount and ramp up hiring plans. Both TCS and LTIMindtree Ltd. have seen headcount additions in the June quarter.
In the March quarter, Infosys had seen a decline of 5,423 employees, bringing the total headcount to 3.17 lakh. This quarter, its employee headcount and commentary on hiring plans are likely to be positive.
