Infosys Q1 FY25 Results: Robust Growth and Revised Revenue Guidance
In the first quarter of FY25, Infosys reported a 7.1% year-on-year increase in net profit, reaching Rs 6,368 crore, surpassing market expectations. The company’s consolidated revenue from operations for the April-June quarter rose by 3.6% year-on-year to Rs 39,315 crore. However, on a quarter-on-quarter basis, Infosys experienced a 20.1% decline in net profit, mainly due to a tax refund boost in the previous quarter.
Revenue Growth Guidance
Infosys has revised its revenue growth guidance for FY25 to a range of 3% to 4%. Analysts had earlier expected the company to maintain its FY25 revenue growth guidance in constant currency (CC) terms at 1-3%.
Dividend Announcement
Infosys did not announce a dividend with the Q1 results.
Attrition Rate
The voluntary attrition rate for Q1 FY25 was 12.7%, slightly higher than the 12.6% reported in Q4 FY24.
Management Commentary
Salil Parekh, CEO and MD of Infosys, stated, “We had an excellent start to FY25 with strong and broad-based growth, operating margin expansion, robust large deals, and the highest-ever cash generation. This is a testament to our differentiated service offerings, enormous client trust, and relentless execution. With our focused approach for generative AI for enterprises working with their data sets on a cloud foundation, we have strong traction with our clients. This builds on our Topaz and Cobalt capabilities.”
Jayesh Sanghrajka, CFO of Infosys, added, “Our relentless drive on cost optimization through Project Maximus, a comprehensive margin expansion program, is reflected in the all-around improvement in key operating metrics leading to 1.0% growth in operating margin in Q1. We had the highest ever FCF generation at $1.1 bn and ROE increased to 33.6% due to higher payouts to investors.”
Analyst Opinions and Market Reactions
Market expert Prakash Diwan commented, “These numbers are far better than what all of us had anticipated, particularly the constant currency growth is stupendous in this environment, especially when the likes of TCS and HCL Tech have been struggling. If you look at the change in the stock price in recent months, it’s kind of played a bit of catch up, but I think these numbers propel much more rerating.”
Analysts had earlier predicted a rebound in sequential revenue growth of 2-3 percent in constant currency (CC), driven by the ramp-up of significant deals secured during FY24. Nomura had forecasted that Infosys would experience a 3.0% quarter-on-quarter growth in constant currency (CC), fueled by the ramp-up of large contracts, the removal of the one-time 100 basis points (bp) impact from the BFSI client contract restructuring, and robust seasonal patterns. Regarding EBIT margins, Nomura had predicted an 80 basis points quarter-on-quarter expansion, driven by the absence of the one-time 100 basis points impact from the BFSI client contract restructuring and the exclusion of visa costs for the quarter.
Comparison with Other IT Giants
Last week, IT giants Tata Consultancy Services (TCS) and HCL Tech announced their earnings for the June 2024 quarter, both surpassing expectations, leading to a rise in their share prices.
| Company | Net Profit (YoY Increase) | Revenue (YoY Increase) |
|---|---|---|
| TCS | 9% | 5.4% |
| HCL Tech | 20.45% | 6.69% |
TCS, India’s largest IT services company, reported a 9% year-on-year increase in consolidated net profit, reaching Rs 12,040 crore for the first quarter of FY 2024-25, ending on June 30. The company’s revenue from operations during April-June 2024 rose by 5.4% year-on-year to Rs 62,613 crore. Analysts had anticipated a profit of Rs 11,999 crore and revenue of Rs 62,190 crore.
HCL Technologies recorded a substantial 20.45% year-on-year increase in net profit, amounting to Rs 4,257 crore for the first quarter of FY 2024-25. Its revenue from operations during April-June 2024 grew by 6.69%, reaching Rs 28,057 crore, compared to Rs 26,296 crore in the same period last year.