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Published: July 18, 2024
Updated: July 18, 2024

Infosys Q1 Results: FY25 Revenue Growth Guidance Raised, Net Profit Surpasses Expectations

Boost in Revenue Growth Guidance

Infosys has surprised the market by raising its revenue growth guidance for the fiscal year 2024-25. On July 18, the company announced an increase in its growth forecast to 3-4 percent, up from the previously anticipated 1-3 percent in constant currency (CC) terms. Analysts had expected Infosys to maintain the lower range, making this adjustment a significant positive signal for the company’s future performance.

Strong Financial Performance

Infosys reported a 7.1 percent year-on-year rise in net profit, reaching Rs 6,368 crore for the April-June quarter, surpassing market expectations. The company's consolidated revenue from operations grew by 3.6 percent on-year to Rs 39,315 crore. This performance outperformed a Moneycontrol poll of 10 brokerages, which had estimated net profit to be Rs 6,248 crore and revenue to be Rs 38,850 crore.

Quarterly Variations and Revised Guidance

Despite a robust year-on-year performance, Infosys's net profit saw a quarter-on-quarter decline of 20.1 percent, primarily due to a tax refund boost in the previous quarter. Notably, this quarter marks the fifth revision of Infosys's annual revenue growth guidance in the last five quarters. In the March quarter, the guidance was cut to 1-3 percent due to continued weakness in discretionary and digital projects. Earlier, in January, the full-year guidance was lowered to 1.5-2 percent for FY25.

Operating Margins and Utilization

Infosys's EBIT (earnings before interest and tax) margin improved by 30 basis points to 21.1 percent. The company has maintained its operating margin guidance at 20-22 percent for the current financial year. The utilization level, excluding trainees, increased to 85.3 percent from 83.5 percent in the previous quarter, while offshore utilization rose to 76.1 percent from 75.8 percent. These improvements have positively impacted the company's margins.

Record Large Deal Wins

The quarter saw Infosys achieving its highest-ever large deal wins, with 34 deals amounting to a total contract value (TCV) of $4.1 billion. Of these deals, 57.6 percent were net new, highlighting the company's strong market position and client trust. CEO and Managing Director Salil Parekh attributed this success to the company’s differentiated service offerings and the growing traction of its Generative AI approach for enterprises, building on its Topaz and Cobalt capabilities.

Headcount and Regional Performance

Infosys's headcount decreased for the sixth consecutive quarter, dropping by 1,908 employees, bringing the total to 3,15,332. Geographically, the India region showed growth, increasing by 90 basis points to account for 3.1 percent of total revenue. However, the North American region's share declined by 70 basis points to 58.9 percent, and Europe's share decreased slightly by 20 basis points to 28.4 percent.

Financial Efficiency and Vertical Performance

CFO Jayesh Sanghrajka highlighted the success of Project Maximus, a comprehensive margin expansion program that contributed to a 1.0 percent growth in operating margin. The company also generated its highest-ever free cash flow at $1.1 billion and saw a return on equity rise to 33.6 percent. Financial services was the only major vertical to grow, increasing its revenue share to 27.5 percent from 26.4 percent. Other verticals like retail, communication, energy, utilities, resources & services, and hi-tech saw declines, while the manufacturing sector remained stable.

Infosys’s Q1 results reflect a strong start to FY25, with significant improvements in revenue guidance, profitability, and large deal wins. The company's strategic initiatives and operational efficiencies are driving positive outcomes, positioning it well for future growth. Despite some challenges in specific sectors and regions, Infosys’s overall performance and outlook remain robust, underpinned by strong client trust and innovative service offerings.