IT firm Infosys will announce its financial results for the June quarter (Q1 FY25) on Thursday, July 18, and is expected to post strong sequential revenue growth driven by an increase in large deals.
According to an average estimate from four brokerages, Infosys is expected to see a 2.5% increase in revenue quarter-on-quarter. On a year-on-year basis, the revenue is likely to jump by 2%.
In constant currency terms, revenue growth is predicted to be up to 3% quarter-on-quarter.
For the April-June 2024 period, analysts expect Infosys to report a 6% year-on-year increase in net profit, based on the average estimate from four brokerages.
Key things to watch
Deal TCVs and pipeline: The total contract value of deals and the deal pipeline will be critical indicators of future growth.
Pricing scenario: Changes in pricing strategies and their impact on revenue.
Attrition: Employee turnover rates and their impact on operations.
Growth and margins outlook: Insights into the company’s growth prospects and profit margins.
In the preceding March quarter, Infosys posted a 30% year-on-year growth in its consolidated net profit at Rs 7,969 crore. The revenue for the same period stood at Rs 37,923 crore, which was a 1% increase year-on-year.
Kotak Equities – Kotak Equities forecasts a sequential revenue growth of 2.5%, driven by the ramp-up of multiple large deals.
The March 2024 quarter had a one-off impact of 100 basis points on revenues from rescoping of engagement with a financial services client, providing a low base and effectively a 1% boost to the June 2024 quarter growth numbers.
Kotak also expects an 80 basis points quarter-on-quarter increase in the EBIT margin, benefiting from the absence of the previous one-off impact and normalisation of certain provisions, with a net benefit accrual of 50 basis points and lower visa and subcontractor charges alongside higher employee utilisation rates.
Motilal Oswal – Motilal Oswal predicts a 2% quarter-on-quarter constant currency revenue growth, owing to the ramp-up of large deals won in FY24. They expect the deal total contract value (TCV) to be strong in Q1, though deals are likely to focus on cost-takeout initiatives.
The operating margin is expected to improve by 30 basis points due to growth and the absence of wage hikes, with an expected operating margin of 20.4%. Motilal Oswal anticipates Infosys will maintain its growth guidance of 1-3% in constant currency for FY25.
Nomura – Nomura expects a 3% quarter-on-quarter constant currency growth, driven by the ramp-up of large deals and the absence of a one-time restructuring impact from a banking, financial services, and insurance (BFSI) client. They also foresee strong seasonality benefiting Infosys.
EBIT margins are expected to expand by 80 basis points quarter-on-quarter due to the absence of the previous one-time restructuring impact and lower visa costs. Nomura highlights the importance of commentary on cost takeout projects, the banking vertical, and client discretionary spending outlook.
Axis Securities – Axis Securities expects Infosys to report strong revenue growth of 2.4% quarter-on-quarter, which would be the highest among large-cap peers. They also anticipate an expansion in operating margins, aided by moderated onsite expenses.