Q1 Preview: Infosys to lead IT-pack, may see profits rise up to 10% YoY

Infosys, the second biggest information technology Indian company is set to report its financial performance for the April-June quarter of fiscal year 2024-25 (Q1FY25) on Thursday, July 18. 

Infosys is expected to lead the tier 1 Indian IT universe with the strongest growth, led by ramp-ups of multiple mega-deals, and a low base effectively providing one per cent kicker to June 2024 quarter growth, analysts said. 

According to brokerages, Infosys will likely register a revenue increase of 2-3 per cent year-on-year (YoY) between Rs 38,800 crore to Rs 39,138 crore. Similarly, sequentially revenues can move up by 2-4 per cent. The company registered revenues of Rs 37,923 crore in Q4FY24 and Rs 37,933 crore in Q1FY24. 

Further, the IT major may report a net profit in the range of Rs 6,200 crore to Rs 6,551 crore for the June quarter, against Rs 5,945 crore in Q1FY24. This means an increase of 4-10 per cent YoY for Q1FY25. 

On a quarterly basis, profits could jump by 3-9 per cent. The company reported profit after tax (PAT) of Rs 5,998 crore in the March quarter of FY24. 

Key monitorables: The street will watch out for  updates on panning out of Liberty deal, any tweak on FY25 revenue growth guidance, update on inSemi acquisition and enterprise discretionary spending.

Moreover, here’s what top brokerages expect from Infosys Q1 results:

Kotak Institutional Equities: Analysts believe that Infosys will report a sequential revenue growth of 2.5 per cent. They expect a 80 basis points (bps) QoQ increase in earnings before interest, tax (Ebit) margin on. 

Furthermore they expected a large deal total contract value (TCV) of $3 billion. In focus will be the translation of revenues of large deals signed in the earlier quarters into revenues. The brokerage contends that Infosys will retain revenue growth guidance of 1-3 per cent and EBIT margin guidance of 20-22 per cent.

Meanwhile investors can look out for translation of megadeals into revenues, deal pipeline, outlook on BFSI, discretionary spending environment in impacted verticals and senior management attrition.

Nomura: The brokerage said that Infosys may see constant currency (CC) growth of 3.0 per cent QoQ driven by large deals ramp-up, nonoccurrence of one-time BFSI client contract restructuring impact of 100bp and strong seasonality for Infosys.

“We expect Infosys to retain its FY25F revenue growth guidance of 1-3 per cent in CC. We expect Ebit margins to expand 80 bps QoQ with non-occurrence of onetime BFSI client contract restructuring impact of 100 bps. Absence of visa cost will be an additional tailwind QoQ,” analysts wrote in a report. 

Nuvama Research: Those at Nuvama, too, anticipate a revenue growth of over 2.5 per cent QoQ in CC terms and over 2.2 per cent QoQ in dollar terms. Ebit margin is likely to improve 70 bps due to operating leverage and exceptional items in Q4. They also say that Infosys will maintain its revenue growth guidance and margins in the 20–22 per cent range for FY25.

Motilal Oswal: Analysts at MOSL expect Infosys to report relatively strong 2.0 per cent QoQ CC revenue growth with margin to improve slightly by 30 bps as gains from its cost-benefit programs are offset by visa and other seasonal costs with no wage hikes.

ICICI Securities: They build in 2 per cent  CC QoQ revenue growth and see traction in Hi-tech, BFSI vertical and liberty deal ramp up. They further expect 3.5 per cent YoY dollar growth for FY25; with 100 bps inorganic revenue contribution from in-semi.