Seeing early signs of improvement in US BFSI especially with regard to mortgage and payments
Discretionary tech spending by clients remains weak
Retail vertical continues to face challenges
Sequential improvement in margin was led by better realization and continued focus on operational efficiency
Yet to take a call on timing of wage hike for the FY25.
3-4% revenue growth guidance for FY25 takes into fact that H1FY25 would be better than H2FY25.
Margin levers include improving employee pyramid, better realization and near shoring
Seeing strong interest among clients with regard to adoption of Gen AI based solutions
"On Europe, so what we are seeing is different things in different places. In the Nordic countries we've had good traction over the last few quarters and even a little bit before in how we've engaged with clients and we've seen some good expansion of our large programs. We've seen some of that in continental Europe broadly," the CFO said.
"We've seen a different type of a positive traction in Germany, where we are seeing some of our local Europe competitors are having more constraints and where we are benefiting from those constraints as we are expanding," he added.
"We are seeing some recovery in US financial services, specifically in the areas like. Mortgages, capital markets, and card payments, you know, and the larger clients there. So we are seeing some volumes coming in and some recovery, some early signs of recovery in those areas."
Infosys Q1FY25 earnings call has started. CEO and MD Salil Parekh, CFO Jayesh Sanghrajka and Sandeep Mahindroo, Head of Investor Relations, are speaking to analysts.
The American Depository Receipt or ADR of Infosys listed in the US opened 0.58% lower after the quarterly results.
"Large deals are converting as per expectation. Deals are in the cost efficiency, consolidation, no appetite yet for transformation deal."
"We are not combining GenAI revenue with AI revenue. AI has been going on for a while, there is much more interest of clients on GenAI. Our focus is on enterprise GenAI."
"India business is doing well for us in terms of growth. It is a small part of our business."
Infosys CFO said value-based selling, offshoring, nearshoring are the levers to expand margin further.
"We are planning to work with all regulations of the government. We support whatever regulations and guidelines that come in."
"We are not at the stage of disclosing or quantifying revenue from GenAI. We are making huge strides in GenAI. The focus is on what enterprises are doing. They are working on their own data sets," CEO Parekh said.
Infosys CFO says the company will hire 15,000-20,000 freshers in this fiscal year.
Infosys CFO said 80 bps margin improvement from 'Project Maximus', which is a margin improvement plan across five pillars and over 20 tracks.
"All geographies and most industry groups saw sequential growth. Volume growth turned positive after several quarters. There are early signs of improvement in financial services, in the US," Chief Executive Officer and Managing Director Salil Parekh said.
Free cash flow for the IT major rose to Rs 9,155 crore during the quarter under review against Rs 7,032 crore a quarter ago.
The consolidated cash and investments declined to Rs 35,943 crore against Rs 39,005 crore in the previous quarter.
The number of clients worth $100 million or more fell to 38 from 40 a quarter ago.
Top five clients accounted for 13.4% of the business during the period under review, as against 13.6% in the previous quarter.
Voluntary attrition for Infosys stood at 17.3% during the period under review, compared with 12.6% in the March quarter, and 12.7% in the year-ago period.
Tata Consultancy Services saw attrition dip to 12% in Q1 as compared to 12.5% a quarter ago.
HCL Technologies Ltd.'s attrition stood at 12.8% for the last 12 months, marginally higher than the 12.4% recorded in the fourth quarter of the previous financial year.
Infosys Q1 Results: Profit Beats Estimates, FY25 Forecast Raised
Number of large deal wins for Infosys was the highest ever at 34 with a total contract value of $4.1 billion, 57.6% of which were being net new contractss.
Total number of employees has declined 6.4% year-on-year at 3,15,332. It has also declined sequentially by 0.6%.
Relentless drive on cost optimization through Project Maximus is reflected in the all-around improvement in key operating metrices leading to 1.0% growth in operating margin in Q1, according to Jayesh Sanghrajka, CFO.
"We had the highest ever FCF generation at $1.1 bn and ROE increased to 33.6% due to higher payouts to investors.”
The company had an excellent start to FY25 with strong and broad-based growth, operating margin expansion, robust large deals, and highest ever cash generation, according to Salil Parekh, CEO and MD. "This is a testimony to our differentiated service offerings, enormous client trust, and relentless execution.”
“With our focused approach for generative AI for enterprises working with their data sets on a cloud foundation, we have strong traction with our clients. This is building on our Topaz and Cobalt capabilities,” he added.
Infosys Q1 Results: Profit Beats Estimates, FY25 Forecast Raised
Financial services: 0.1% decline
Retail: 3% decline
Communication: 5.2% advance
Energy, Utilities, Resources & Services: 5.2% advance
Manufacturing: 6.4% advance
Hi-Tech: 1.5% advance
Life Science: 2.7% advance
Others: 1.7% advance
North America: 1.2% decline
Europe: 8.6% advance
Rest of the world: 0.6% advance
India: 18.4% advance
Infosys raised the revenue guidance to 3-4% for FY25 from 1-3% earlier.
The revenue of the tech major rose by 3.7% to Rs 39,315 crore against the previous quarter. This compares to a bloomer estimate of Rs 38,810.6 crore.
The revenue in constant currency terms rose 3.6% sequentially.
For the previous financial year, the IT major issued a final dividend of Rs 20 per share with an additional special dividend of Rs 8 apiece. During FY23, Infosys gave a total dividend of Rs 35.5 per share, including a final dividend of Rs 17.5 apiece.
For the financial year 2022, the IT firm issued a total dividend of Rs 32.5 per share, while for the previous fiscal, shareholders received a total of Rs 30 per share.
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Infosys top-line during the fourth quarter of fiscal 2024 missed street estimates, while it forecasted its revenue to grow 1-3% in the ongoing financial year.
The revenue of India's second-largest IT services firm fell 2.1% sequentially to Rs 37,923 crore in the three months ended March 31. That compares with the Rs 38,576-crore consensus estimate of analysts tracked by Bloomberg.
For FY25, the management gave a revenue growth guidance of 1%-3% in constant currency terms. The IT firm expects the FY25 operating margin at 20%-22%.
To know more, read here.
Market watchers expect the discretionary demand in the tech space to recover in the financial year 2025. For now, the sector is celebrating the lower revenue leakage on the book, however, a bigger recovery is more likely in 2025, Investec said in a report.
"We highlight that discretionary demand is unlikely to worsen further based on our proprietary G2000 database," said Nomura.
Large deal activity in the Banking, Financial Services, and Insurance sector is down and the general expectation is that this sector will improve in 2025, according to the brokerage. The easing of policy can stoke spending in a significant manner, Investec said.
To know more, read here.
The deal pipeline for the IT bellwether, 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.
IT companies are on a spree to bag deals related to generative artificial intelligence, which is the bright spot in an otherwise muted environment. The management commentary on the demand environment, deal-win momentum, outlook for key markets and verticals will be closely watched.
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Information technology majors, Tata Consultancy Services Ltd. and HCLTechnologies Ltd., reported first-quarter earnings were in-line with estimates, meaning the earnings downgrade is over after a prolonged cycle, according to HSBC.
This could also indicate a turnaround in demand softness that the industry has been reeling in.
To know more, read here.
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