Infosys Q1 Results: Profit Beats Estimates, FY25 Forecast Raised
The company's net profit fell 20.1% sequentially to Rs 6,374 crore in Q1 FY25. However it was higher than estimates.
Infosys raised its revenue forecast for the financial year ending March 2025, citing significant large deals during the April-June period. The Bengaluru-based software services provider now anticipates a revenue increase of 3-5% for fiscal years 2024–25, up from its previous expectation of a 1-2% rise.
The country's second-largest technology firm also projects its operating margin to be between 20% and 22% for the ongoing financial year, according to a media statement issued to the exchanges.
A strong deal pipeline, improvements in key markets, and recent acquisitions are building the confidence for the company to up its guidance, Infosys' Chief Executive Officer, Salil Parekh told reporters on Thursday.
"We had an excellent start to 2024–25 with strong and broad-based growth, operating margin expansion, significant large deals, and the highest ever cash generation," Parekh said in a statement.
We had a strong performance in Q1 on volumes, financial services in US is seeing early signs of improvement, strong performance on large deals in Q1 which gives more visibility into this financial year and we completed that Intech acquisition which also helps us in this guidance.Salil Parekh, chief executive officer at Infosys
The Bengaluru-based software services provider's net profit fell 20.1% sequentially to Rs 6,374 crore for the three months ended June 30, compared to Rs 7,969 crore in the previous quarter. This was higher than the Rs 6,253 crore profit expected by analysts tracked by Bloomberg.
The decline in net profit was due to a one-time interest on an income tax refund included in 'other income' in the fourth quarter of the previous financial year, amounting to Rs 1,916 crore. Excluding this impact, profits were up 5.2% in the quarter ended June 30.
Revenue rose 3.7% sequentially to Rs 39,315 crore in the first quarter, exceeding Bloomberg analysts' projection of Rs 38,810.6 crore. In constant currency terms, Infosys reported a sequential revenue growth of 3.6%.
Infosys Q1 FY25 Result Highlights (Consolidated, QoQ)
Ebit up 8.8% to Rs 8,288 crore versus Rs 7,621 crore (Bloomberg estimate: Rs 8,024.6 crore).
Margin expanded to 21.1% versus 20.1% (Bloomberg estimate: 20.67%).
“We had 80 basis points coming from project maximus—margin expansion program—on the back of better pricing, value based selling, better benefits from efficiency, and 40 basis points from one-off benefit from one of the clients," said Jayesh Sanghrajka, chief financial officer of the company.
“Infosys has shown strong performance with improved guidance, indicating positive momentum in growth rates. sequential growth numbers are at multi-quarter highs," said Mahantesh Sabard, an independent analyst.
However, there are challenges ahead, notably with US election uncertainties causing delays in discretionary spending and impacting how new deals are structured, he said. "Despite these challenges, the upgraded guidance suggests confidence that better deal wins are expected later in the year, potentially leading to further improvements in guidance."
Record Deal Wins
The company secured 34 large deals between April and June, its highest ever, with a total contract value of $4.1 billion, 57.6% of which were net new.
Infosys is seeing strong demand in the European market, significant traction has been gained and large deals are scaling up, Parekh said in a media conference, adding that there is also a noticeable recovery in financial services, particularly in cards, payments, and capital markets in the United States.
While the other industry peers are calling out the revenue translation of artificial intelligence deal wins, the company is not at the stage of disclosing or quantifying externally our revenue from it, Parekh said.
"We are not combining GenAI revenue with AI revenue. AI has been going on for a while, and there is much more interest from clients in GenAI. Our focus is on enterprise GenAI."
Attrition And Headcount
The company's employee headcount decreased by 1,908, bringing the total to 3,15,332. Its 12-month attrition rate rose to 12.7% in the April-June period, up from 12.6% in the preceding quarter.
"Our utilisation is already at 85%. We have a little headroom left, so as we start seeing growth, we will look at hiring. We are looking at hiring 15,000–20,000 freshmen this year, depending on the growth," the CFO said.
The decrease in employee headcount suggests cautious optimism regarding future deal traction and execution ramp-up, Sabard said.
Commenting on Karnataka's move to mandate job reservations for locals, which is now on hold, Parekh said that the company will wait and watch how the policy develops.
The American Depository Receipts of Infosys Ltd. rose nearly 10% after the results announcement. Shares of Infosys on Bombay Stock Exchange closed 2.24% higher at Rs 1,761 apiece on the BSE, compared to a 0.78% advance in the benchmark Sensex.
