Infosys Ltd American depositary shares (Infosys ADR) rose on Thursday in NYSE trading, following the raising of FY25 guidance by the Indian IT major after its December quarter results. Infosys upgraded its FY25 revenue growth guidance to 4.5-5 per cent in constant currency (CC) terms from 3.75-4.5 per cent. It maintained its margin guidance at 20–22 per cent. IT firm said its large deal wins for the quarter stood at $2.5 billion, tracking which its ADRs rose 0.92 per cent to $23.10 in pre-market trade. The Infosys ADR closed at $22.89 on Wednesday.
Earlier at home, Infosys shares settled the day at Rs 1,920.05 on NSE, down 1.5 per cent. The IT major announced its results post market hours in India.
Analyst take: First cut
Emkay Global said Infosys revenue beat its estimates while the margins came inline with expectations. It sees a likely positive reaction on the counter on Friday. It said Infosys reported revenues of $4.94 billion, up 1.7 per cent CC, above its expectations of 0.3 per cent CC QoQ. This is against Q3FY25 revenues for TCS at $7.54 billion, up 0.2 per cent CC QoQ and HCL Technologies at $3.53 billion, up 3.8 per cent CC QoQ).
"Infosys raised its FY25 revenue growth guidance to 4.5-5 per cent YoY CC, implying a minus 2.5 per cent to minus 0.6 per cent growth for Q4FY25. It retained EBIT margin guidance of 20-22 per cent for FY25, Emkay said.
"Infosys reported healthy financials in Q3FY25, surpassing street estimates across all fronts. The company recorded impressive revenue growth, led by comprehensive growth across segments, offsetting the seasonal impact. The robust recovery in the BFSI segment was a key highlight during the quarter. An uptick in margins was primarily attributed to benefits from improving realization and scale. Strong emphasis on cash flow management resulted in a free cash conversion to net profits of 157 per cent in Q3, with free cash generation for 9MFY25 surpassing that of the entire FY24," said Sagar Shetty, Research Analyst, StoxBox.
"The notable revision of revenue growth guidance to 4.5-5 per cent from 3.75-4.5 per cent reflects an increase on both ends of the range scale, underscoring a potential bounce back in growth momentum. TCV stood at $2.5 billion (down 22 per cent YoY); however, the company remains confident going ahead, backed by an improved deal pipeline. The management’s view on the discretionary spending, deal conversion outlook, and commentary on deal wins and pipeline going ahead would be key to gauge changes in the dynamics of the demand environment," Shetty said.
Q3 highlights
The Salil Parekh-led IT major said its net profit for the third quarter grew 11.4 per cent year-on-year (YoY) to Rs 6,806 crore from Rs 6,106 crore in the corresponding quarter last year. Revenue for the second-largest domestic IT exporter grew 7.6 per cent YoY to Rs 41,764 crore compared with Rs 38,821 crore in the corresponding quarter last year. Ebit margin for the quarter came in at 21.3 per cent, up 80 basis points over 20.5 per cent in the same quarter last year.
“Our strong revenue growth sequentially in a seasonally weak quarter and broad-based year on year growth, along with robust operating parameters and margins, is a clear reflection of the success of our differentiated digital offerings, market positioning, and key strategic initiatives. We continue to strengthen our enterprise AI capabilities, particularly focusing on generative AI, which is witnessing increasing client traction”, said Salil Parekh, CEO and MD.
“Parekh said this led to another quarter of strong large deal wins and improved deal pipeline giving us greater confidence as his company looks ahead.
Infosys said its active number of clients rose to 1,876 in the December quarter from 1,870 in the Septemebr quarter. The 50 million-plus clients rose to 89 from 86, but 10 million-plus clients fell to 301 from 307. Its top 10 clients now contributes for 12.7 per cent of its revenues, down from 13.7 per cent in the September quarter.
The digital services and consulting firm said its dollar revenue for the quarter came in at $4,939 million. Sales in in constant currency (CC) terms grew up 1.7 per cent sequentially and 6.1 per cent YoY. Operating margin was up 0.2 per cent sequentially. Free cash flow for Q3 was highest ever at $1,263 million, growing 90 per cent year on year.
“We had another quarter of strong performance with revenue growth across segments and operating margin expansion, leading to 11.4 per cent EPS growth year on year in rupee terms. Our structured approach to operating margin expansion yielded more results in Q3, particularly due to benefits from improving realisation and scale benefits” said Jayesh Sanghrajka, CFO. “Our sharp focus on cash flow is reflected in Free cash conversion to net profits of 157% in Q3 with free cash generation for 9 months of FY25 surpassing that of entire FY24”, he added.
For the quarter, Manufacturing reported 10 per cent YoY growth, followed by Energy, Utilities, Resources & Services (8.6 per cent), Hi-Tech (8.5 per cent) and Life Sciences (6.5 per cent). In terms of geographies, India led the growth at 38.3 per cent, followed by Europe (11.9 per cent) and North America (11.9 per cent). Rest of the world reported a 11.7 per cent YoY decline.