A strong revenue expansion of 3.7% YoY during the period prompted the second-largest software exporter to forecast growth of 3-4% for FY25 against its earlier guidance of 1-3%. The sharp increase in outlook was fuelled by higher large deal closures, better performance of key verticals such as financial services as well as expected uptick from its $480- million acquisition of In-tech in April this year.
“We had a strong performance in Q1 on large deals and financial services in the US is seeing early signs of improvement,” said CEO and MD Salil Parekh.
The anticipated revenues from in-tech, expected to kick in from the ongoing quarter, also helped the company raise its guidance for growth, he added.
ETtechViewed sequentially, the Bengaluru company’s net profit in the first quarter showed a decline of 20.4%, blunted by the absence of the high one-time non-core income that it had declared at the end of the quarter ended March 2024.
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Parekh’s upbeat commentary about the demand environment contrasted with that offered by peers — Tata Consultancy Services and HCLTech — both of which sounded a more cautious note during their earning calls in the previous week.
The Infosys CEO said the company is seeing a higher volume in deals aimed at cost efficiencies and vendor consolidation. However, large projects aimed at digital transformation dubbed as discretionary spending are still elusive, he added.
Infosys’ revenue grew 3.6% sequentially to Rs 39,315 crore, helping the IT major beat ET’s estimate for Q1 at Rs 38,800 crore. The company reported the highest-ever large deal wins (34) with total contract value of $4.1 billion — over half of these are new contracts. Infosys’ margins improved by 1% in the quarter to reach 21.1%. It was partially driven by Project Maximus — a margin expansion programme initiated some time ago — according to chief financial officer Jayesh Sanghrajka.
This is the highest margin that Infosys has reported in the last three quarters. It also maintained its operating margin guidance at 20-22% for the full year and said it has now factored in the business from in-tech, whose annual revenue in FY23 was $170 million. Infosys shares closed 1.93% higher at Rs 1,759.15 apiece on the BSE. The earnings announcement came after market hours on Thursday. The American-listed shares of Infosys was up more than 9% at the time of going to press.
The in-tech acquisition will add an estimated 90 basis points (bps) of the 150 bps increase in the revenue guidance, as per Bryan Bergin, senior research analyst at TD Cowen’s Equity Research group.
