Infosys Q1 Preview: Net Profit May Rise 6% YoY; Strong sequential revenue growth was observed

India’s second-largest IT services company Infosys Ltd is expected to post strong sequential revenue growth in the first quarter ended June 2024, driven primarily by a ramp up of large deals. The company will announce its results on July 18.

The average estimate of four brokerages sees first-quarter revenue rising 2.5% quarter-on-quarter. Meanwhile, the same is expected to grow by 2% annually. Constant currency revenue growth is estimated to be up to 3% quarter-on-quarter.

Net profit is likely to rise 6% year-on-year for the April-June 2024 period, the average estimate of four brokerages showed.

Key monitorables to watch include deal TCVs and pipeline, pricing scenario, attrition and growth, and outlook on margins.

In the previous March quarter, Infosys reported a 30% year-on-year growth in its consolidated net profit at Rs. 7,969 crore, while the revenue was Rs. 37,923 crore, up 1% year-on-year.

Here’s what analysts expect from Infosys Q1

Kotak Equities

We forecast sequential revenue growth of 2.5%, led by the ramp-up of multiple mega-deals, with a one-off impact of 100 bps on revenue from rescoping engagements with financial services clients in the March 2024 quarter. This provides a lower base and effectively a 1% kicker for the June 2024 quarter growth numbers.

We expect EBIT margin to grow by 80 bps quarter-on-quarter due to absence of one-off effect of 100 bps. At the same time, we expect normalization of ECL and post-sale client support provision leading to a speed of 50 bps. Net accruals benefit from 50 bps and lower visa and subcon charges and higher employee utilization rates.

Motilal Oswal

Revenue growth is expected to reach 2% quarter-on-quarter CC, due to ramp-up of large deals won in FY24. We expect deal TCV to remain strong in 1Q; However, deals should be geared toward cost-takeout initiatives.

Operating margins are expected to widen by 30bp due to growth and the absence of wage increases. We expect the company’s operating margin to be 20.4%.

Expect Infosys to maintain its 1-3% CC growth guidance for FY25.

Nomura

We expect CC growth of 3.0% quarter-on-quarter driven by ramp-up of large deals, one-time BFSI client contract restructuring impact of 100bp and strong seasonality for Infosys. We expect Infosys to maintain its FY25F revenue growth guidance of 1-3% in cc.

We expect EBIT margin to expand by 80bp qq 100bp excluding one-time BFSI client contract restructuring impact. Absence of visa costs will be a tailwind of quarter-on-quarter increases.

Key Points to Watch – Commentary on cost takeout projects, outlook on banking verticals and client discretionary spending.

Axis Securities

We expect Infosys to report strong revenue growth of 2.4% quarter-on-quarter, the highest among largecap peers. We also expect operating margin expansion, supported by moderate onsite costs.

We also expect management to maintain the company’s revenue growth guidance of 1% to 3% for FY25E.

(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)