Infosys Q4 Results Review- Large Discretionary IT Spend Exposure Leading To Revenue Drawdown: ICICI Securities

ICICI Securities Report

Infosys Ltd. has reported revenue of $4,554 million, decline of 3.2% QoQ constant currency, much lower than our/consensus estimates of up 0.1%/0.3% QoQ CC. This resulted in miss in FY23 revenue growth at 15.4% YoY CC versus guidance of 16-16.5%.

Revenue decline was due to unplanned project ramp downs and delays in decision making which resulted in lower volumes. There was also one-time revenue impact due to a few project cancellations.

Ebit margin came in at 21%, down 50 basis points QoQ lower than our/consensus estimates of 21.5%/21.7%.

Decline in margin was due to dip in utilisation and unexpected fall in revenue. Profit after tax was lower by 4.6%/7.6% than our/consensus estimates on both revenue and margin miss.

Total contract value was muted at $2.1 billion, down 36.4% QoQ, down 7% YoY with low net new component at 21%. Demand remains uncertain with more weakness in U.S. than in Europe.

Large deal pipeline is healthy with higher vendor consolidation and cost optimisation deals including a few mega deals. However, pipeline to TCV conversion is getting delayed due to weak macros.

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