Infosys Q3 results: Net profit rises 11.4% to Rs 6,806 crore; FY25 guidance raised; key highlights

The Salil Parekh-led Infosys Ltd on Thursday reported a 11.4 per cent year-on-year (YoY) rise in net profit at Rs 6,806 crore for the December quarter compared with Rs 6,106 crore in the same quarter last year. Revenue for the second-largest IT exporter grew 7.6 per cent YoY to Rs 41,764 crore for the third quarter 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. 

The revenue growth beat Street estimates while the margins came inline with market expectations.

FY25 guidance raised

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.

What CEO says

“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.

“This has led to another quarter of strong large deal wins and improved deal pipeline giving us greater confidence as we look ahead”, he added

Analyst take

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% 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.
 

Deal wins at $2.5 billion

Infosys said its total contract value (TCV( of large deal wins stood at $2.5 billion, with 63 per cent net new growing at 57 per cent sequentially. Headcount increased for the second consecutive 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.

Margin expansion

“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.

Growth drivers
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. 

Client breakup
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.

Infosys earlier settled the day at Rs 1,920.05 on NSE, down 1.52 per cent.  

Attrition at 13.7%

Voluntary attrition for the quarter stood at 13.7 per cent compared with 12.9 per cent each in September and the year-ago quarter. Total employee stood at 3,23,379 against 3,17,788 in September and 3,22,663 in the year-ago quarter.