Infosys Q3 Results: FY24 revenue guidance revised to 1.5-2%; PAT down 7% YoY to ₹6,106 crore. All you need to know

Infosys Q3 earnings: IT major Infosys declared its December quarter (Q3FY24) results on January 11. The firm posted a consolidated net profit of ₹6,106 crore, down over 7 percent from ₹6,586 crore in the year-ago period. Its consolidated revenue was flat, up just 1.3 percent to ₹38,821 crore versus ₹38,318 crore in the same period last year.

On a sequential basis as well, the company's profit fell 1.7 percent from ₹6,212 crore in the September 2023 quarter and revenue was down 0.4 percent QoQ from ₹38,994 crore.

Its revenues in constant currency (CC) terms also declined 1 percent YoY as well as QoQ to $4,663 million. Operating margin for the quarter came in at 20.5 percent, down 70 bps QoQ and 100 bps YoY.

Read here: TCS Q3 earnings: Board approves dividend of ₹27 per share

The firm has revised FY24 revenue guidance to 1.5-2.0 percent as against 1-2.5 percent earlier. Meanwhile, it kept operating margin guidance unchanged at 20-22 percent.

The Bengaluru-based IT major reported a consolidated net profit of $734 million, down 2.3% sequentially and 8.2% year-on-year. A survey of 23 analysts polled by Bloomberg predicted net profit to be $741.3 million, with Infosys clearly missing street expectations. Its quarterly revenue of $4.66 billion was largely in-line with Bloomberg’s estimate of $4.65 billion for the period.

Large deal TCV for the quarter was $3.2 billion, with 71 percent being net new. Meanwhile, attrition declined further to 12.9 percent. 

“Our performance in Q3 was resilient. Large deal wins were strong at $3.2 billion, with 71 percent of this as net new, reflecting the relevance and strength of our portfolio of offerings ranging from generative AI, digital and cloud to cost, efficiency and automation” said Salil Parekh, CEO and MD. 

“Our clients are leveraging our Topaz generative AI capabilities and our Cobalt cloud capabilities to create long-term value for their businesses,” he added.

Read here: HDFC AMC Q3 results: Company reports net profit of ₹488 core

Basic EPS for the quarter under review came in at ₹14.76, a decline of 6.1 percent YoY. Also, Infosys' free cash flow (FCF) was at ₹5,548 crore, up 17 percent YoY.

“Q3 performance is a demonstration of our strong execution capabilities reflected in improved operational efficiencies achieved under ‘Project Maximus’, despite a challenging environment,” said Nilanjan Roy, Chief Financial Officer. “Cash generation remained robust with FCF to net profit conversion for Q3 at 90.6 percent,” he noted.

The overall Indian IT sector is expected to report subdued earnings for the third quarter of FY24 as the ongoing weakness in IT services demand has worsened due to unexpectedly high furloughs.

For nine months ended December 31, 2023, the IT major's net profit rose 1.7 percent YoY to ₹18,264 crore versus ₹17,967 crore in the same period last year. Its revenues rose 5.9 percent to ₹1,15,748 crore in 9MFY24 as against ₹1,09,326 crore in 9MFY23. Meanwhile, revenue in CC terms grew by 1.8 percent YoY. Also, its operating margin came in at 20.8 percent for 9MFY24, a decline of 0.2 percent YoY.

Expert Take

Omkar Tanksale, equity research analyst at brokerage firm Axis Securities, said that the significant number of senior executive exits from Infosys is likely to affect the company’s “deal ramp-up and execution capabilities.”

“When so many senior-level exits happen from a well-established company, this affects clients’ confidence in the company’s sustained ability to offer competitive solutions. TCS, operating at a valuation of over ₹2.5 trillion, is navigating the bearish market sentiments much better in this regard,” Tanksale added.

Tanksale, as well as Apurva Prasad, vice-president of institutional equity at brokerage firm HDFC Securities, both agreed that Infosys’ quarterly results are largely in-line with analyst expectations. “Large deal renewals also looks to be at the negative end—if you look at their past quarterly trends, this is among their lowest deal bookings in the December quarter. Discretionary spend is on the lower side too, as demand in the quarter was lower,” Prasad said.

Despite the weak December quarter, not everyone believes that Infosys could be at its wits’ end. A senior official at a Mumbai-based brokerage firm, requesting anonymity, said that Infosys’ fundamentals remain strong.

“An improvement in market headwinds and overall complicated global economy should see Infosys return to better days in the year to come. A double-digit recovery could well be on the cards for Infosys, but it’ll need to be careful to hold on to the senior executives that remain in the company. Stability at India’s top IT firms is imperative for it to cash in on bull markets, and tech spends are unlikely to remain low for too long,” the official said.

Earlier today, Infosys shares closed at ₹1,495 on BSE, down 1.62 percent. The IT stock has gained 12 percent in the last six months and just 1 percent in the last one year.