Infosys Q3 Results: Revenue Beats Estimates, Demand Recovery Gains Momentum

Infosys has delivered a stronger-than-expected performance for the December quarter, signalling a gathering pace in demand recovery for IT services. The Bengaluru-based giant reported a 1.2% sequential growth in constant currency revenue, surpassing market expectations.

Financial Performance at a Glance

For Q3 FY24, Infosys posted a consolidated net profit of ₹6,106 crore, marking a 7.3% decline year-on-year. Revenue, however, grew 1.3% to ₹38,821 crore. The company outperformed Bloomberg’s consensus estimate of 0.8% growth in constant currency terms.

In a positive revision, Infosys narrowed its full-year revenue growth guidance to 1.5-2% in constant currency, from the earlier 1-2% band.

“We saw good traction in large deals, with $3.2 billion worth of net new deals in the quarter, which is the highest in the last eight quarters. This gives us confidence that the demand environment is improving and that we are gaining market share,” said Salil Parekh, chief executive and managing director of Infosys.

Strategic Focus: AI, Cloud, and Efficiency

CEO Salil Parekh noted that while client caution persists on discretionary spending, investments are rising in core digital transformation areas. Clients are prioritising artificial intelligence, cloud, data, and automation to boost efficiency.

“We are seeing a lot of interest in generative AI, and we have now trained over 100,000 employees on AI skills. We have also launched our own generative AI platform, called Topaz, which has been well received by clients,” he said.

Margins, Attrition, and Operational Health

The operating margin for the quarter was 20.5%, reflecting sequential and annual declines. Despite headwinds from wage hikes and visa costs, the company maintained its FY24 margin guidance of 20-22%.

“We have been able to maintain our margin guidance despite the headwinds from wage hikes and visa costs, thanks to our focus on operational efficiency and automation,” said Nilanjan Roy, chief financial officer of Infosys.

In a significant operational positive, the attrition rate dropped to 12.9% from 14.6% in the previous quarter and is projected to fall further.

Industry Context and Peer Comparison

Infosys’s results follow a similar tone of cautious optimism from rivals. A day earlier, reported a 2% sequential constant currency growth, noting early recovery signs in BFSI.

On the same day, HCL Technologies reported strong 6.2% sequential growth but cut its FY24 guidance, citing weakness in telecom and manufacturing.

Analyst View: Well-Positioned for Recovery

Market analysts viewed Infosys’s performance positively, highlighting its positioning to capitalise on the demand uptick.

“Infosys has delivered a strong quarter, with better-than-expected revenue growth and large deal wins. The narrowing of revenue growth guidance also indicates that the company is seeing improved visibility in the second half of the year,” said Amit Chandra, analyst at HDFC Securities.

“The company’s focus on digital and AI is paying off, and it is gaining market share in these areas. We expect Infosys to outperform the industry in the coming quarters,” he added.

On the stock market, Infosys shares closed 0.6% higher at ₹1,531.85 on the BSE, ahead of the results announcement.