Earnings Outlook
Infosys PAT seen up 4% QoQ; may up FY25 sales guidance
This story was originally published at 10:31 IST on 15 January 2025
Register to read our real-time news.Informist, Wednesday, Jan. 15, 2025
By Anjana Therese Antony
MUMBAI – Though the information technology industry was grappling with furlough headwinds, strong demand from the financial segment as well as the US market are expected to drive earnings of blue chip giant Infosys Ltd. during the December quarter.
Many broking firms expect the Bengaluru-based company to raise its revenue growth guidance for the current financial year, similar to what its US-based peer Accenture did, while a few anticipate this outlook to be retained. Also, analysts expect the margin growth guidance of 20-22% to stay unchanged.
Infosys' consolidated net profit is seen rising nearly 4% on quarter to INR 67.47 billion, according to the average of estimates from 15 broking firms. If Infosys achieves this growth, it would be the second-slowest bottom line growth seen in four quarters. In Jul-Sept, the metric had risen 2.2% sequentially after growing 7% in Apr-Jun and 30% the quarter before. The 4% growth would be similar to that reported by Tata Consultancy Services Ltd., but slower than the 8.4% growth HCL Technologies Ltd. clocked. Of the 15 research estimates, Nuvama Wealth Management has the highest net profit estimate of INR 68.93 billion and Elara Securities India has the lowest estimate of INR 64.38 billion.
Consolidated revenue may grow less than 1% from the previous quarter to INR 412.36 billion, according to the average of estimates. The slight sequential growth would be supported by higher revenue from the sale of third-party items for service delivery, Kotak Institutional Equities said in its earnings preview report. Motilal Oswal Financial Services has the highest top line estimate of INR 414.30 billion, while Elara Securities has the lowest estimate of INR 406.99 billion. A 1% revenue growth would be much slower than HCL Technologies' 3.6% sequential rise, but better than TCS' 0.5% sequential decline.
In dollar terms, the revenue is seen at $4.87 billion, as per the average of nine brokerage houses. "Dollar-denominated revenue growth for Infosys should sequentially drop due to furlough impact and unfavourable currency movements," Elara Securities said in its earnings preview report.
From the year-ago quarter, this would mean a slightly over 6% rise in the top line and 10.5% growth in the bottom line. In the September quarter, the company had posted a bottom line of INR 65.06 billion on revenue of INR 409.86 billion.
Infosys, India's second-largest information technology player in terms of market capitalisation, is scheduled to release its quarterly financial results Thursday. The post-earnings press conference with the management is due at 1630 IST on Thursday and its conference call with analysts will be at 1830 IST. Market participants will closely watch for management comments on the demand environment, deal pipeline and deal closure momentum, trends in discretionary spending, new policies under US President-elect Donald Trump, and expectations of US interest rate cuts.
FY25 GUIDANCE
It is widely expected that Infosys may raise its 2024-25 (Apr-Mar) revenue growth guidance in constant currency terms from 3.75-4.50%, though a few analysts anticipate no change to this outlook. Among those anticipating an upward revision to the revenue guidance, an increase of at least 25 basis points is expected on both the upper end and lower end of the current guidance.
In the previous quarter, Infosys had raised its revenue guidance to 3.75-4.50% from 3-4?rlier, which was lower than the much anticipated revision to 4-5%. This had pulled the company's stock price down 5% the very next day. The stock has still not fully recovered from that fall. At 1011 IST, the shares were up 0.4% at INR 1,948.25 on the National Stock Exchange. In December, Accenture had raised its 2024-25 (Sep-Aug) revenue growth guidance to 4-7% from 3-6?rlier on expectations global companies would spend more on IT projects.
On the earnings before interest and tax margin, broking firms expect the company's FY25 guidance of 20-22% will be retained. During the September quarter, the EBIT margin was unchanged sequentially at 21.1%. However, this time, views are divided on the growth of margin, with some anticipating a sequential decline in this parameter due to furloughs, while others forecast a rise due to operational efficiencies and the depreciation of the rupee. On Tuesday, the rupee was at a record closing low of 86.63 a dollar. The EBIT margin is seen at 20.5-21.4%, as per estimates from nine brokerage houses.
"EBIT margins are forecasted to decline by 30 basis points, primarily due to the impact of furloughs, partially offset by improved pricing and the benefits from Project Maximus," KR Choksey Research said in its report. Motilal Oswal Financial Services also forecast a 30-bps decline in the margin on the same grounds. The margin expansion program, Project Maximus, was announced in 2023 to absorb the headwinds from the fall in utilisation of staff.
On the other hand, Systematix Group anticipates a 30-bps jump in EBIT margin, which "would come from project Maximus-driven operational efficiency, partially offset by furloughs and ramped up investments in executing large deals." Meanwhile, broking firm Sharekhan and Kotak Equities said the EBIT margin would be flat sequentially.
Following are the Oct-Dec earnings estimates for Infosys based on reports from 15 brokerage firms in the descending order by the estimate of net profit:
| Broking Firm |
Net Profit (INR million) |
Net Sales (INR million) |
Revenue (mln $) |
EBIT margin in % |
| Nuvama Wealth Management Ltd | 68,931 | 412,461 | 4,893 | 21.4 |
| Indsec Securities and Finance Ltd | 68,800 | 413,400 | 4,800 | 21.2 |
| JM Financial Institutional Securities Pvt Ltd | 68,767 | 412,357 | -- | -- |
| Motilal Oswal Financial Services Ltd | 68,400 | 414,300 | 4,913 | 20.8 |
| Systematix Shares and Stocks (India) Ltd | 68,179 | 413,940 | 4,899 | 21.4 |
| Sharekhan Ltd | 68,160 | 412,050 | -- | -- |
| Prabhudas Lilladher Pvt Ltd | 68,000 | 411,900 | 4,879.70 | -- |
| HDFC Securities Ltd | 67,870 | 413,570 | 4,894 | 21.3 |
| Centrum Broking Ltd | 67,480 | 413,480 | -- | 21.3 |
| IDBI Capital Market Services Ltd | 66,929 | 410,606 | 4,865 | 21.2 |
| Nirmal Bang Equities Pvt Ltd | 66,789 | 414,158 | 4,877 | 20.5 |
| Emkay Global Financial Services Ltd | 66,687 | 411,962 | -- | -- |
| KR Choksey Research | 66,395 | 411,922 | -- | -- |
| Kotak Institutional Equities | 66,230 | 412,255 | -- | -- |
| Elara Securities (India) Pvt Ltd | 64,378 | 406,985 | 4,845 | 20.8 |
| Average | 67,466.33 | 412,356.40 | 4,873.97 | 21.1 |
End
US$1 = INR 86.52
Edited by Namrata Rao
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