India’s IT major Infosys, which will announce its first-quarter results on July 18, 2024, is likely to post robust sequential revenue growth for the first quarter ending June 2024, primarily due to a ramp-up of large deals.
According to brokerages, the second-largest IT services company is likely to report constant currency revenue growth higher than that of its peers, TCS and HCLTech.
Expectations for the financial performance of Infosys and other IT sector companies have remained subdued. The consensus is that growth in the Information Technology services sector will be moderate in Q1 FY25, primarily due to reduced discretionary spending driven by macroeconomic uncertainty. Additionally, the upcoming US elections are impacting the near-term outlook.
PAT and revenue growth
The IT major is likely to report a consolidated net profit between 3-6 per cent for the June quarter 2024, as per brokerage estimates.
According to Kotak Institutional Equities, the revenue is likely to grow 2.5 per cent, driven by the ramp-up of multiple mega-deals. The March 2024 quarter experienced a one-time 100 bps revenue impact due to the rescoping of an engagement with a financial services client, creating a low base, and effectively adding a 1 per cent boost to the growth figures for the June 2024 quarter.
In the previous March quarter, Infosys reported a 30 per cent year-on-year increase in its consolidated net profit, reaching ₹7,969 crore. Revenue for the same period was ₹37,923 crore, reflecting a 1 per cent year-on-year growth.
EBIT margin and guidance
The brokerage firm further anticipates an 80 basis points quarter-on-quarter increase in EBIT margin due to the absence of a previous 100 basis points one-off impact. However, it also expects the normalisation of ECL and post-sale client support provisions to create a 50 basis points headwind. This will be offset by a net benefit accrual of 50 basis points, lower visa and subcontractor charges, and a higher employee utilisation rate.
Kotak analysts anticipate that Infosys will maintain its FY2025 revenue growth guidance at 1-3 per cent. Infosys is also likely to secure substantial deal wins with a Total Contract Value (TCV) exceeding $3 billion.
