Explore Infosys Q3 FY24 results, revealing a 7% profit dip yet optimistic revenue guidance. Despite challenges, the focus on large deals, generative AI, and cloud capabilities positions Infosys for growth. Gain insights from leadership and understand the industry outlook. Stay informed about Infosys’ adaptability in a dynamic market.
In a significant development, Infosys, a leading IT major, announced its financial results for the third quarter of the fiscal year 2024 on January 11. The company reported a consolidated net profit of ₹6,106 crore, reflecting a 7% decrease compared to ₹6,586 crore in the corresponding period of the previous year. Despite this dip, Infosys remains optimistic about its future prospects, as evident from its revised fiscal year 2024 revenue guidance, now set at 1.5-2.0 percent, compared to the previous projection of 1-2.5 percent.
Overview of Q3 Performance
Financial Figures
The Q3FY24 results reveal that Infosys achieved a consolidated revenue of ₹38,821 crore, indicating a modest 1.3% increase from ₹38,318 crore in the same quarter of the previous fiscal year. Sequentially, the profit declined by 1.7% from ₹6,212 crore in Q2FY24, and revenue showed a marginal 0.4% decrease from ₹38,994 crore. The revenues in constant currency (CC) terms also experienced a 1% decline year-on-year and quarter-on-quarter, settling at $4,663 million.
Operational Margins
The operating margin for the quarter was reported at 20.5%, marking a 70 basis points (bps) decrease quarter-on-quarter and a 100 bps decrease year-on-year. Despite these challenges, Infosys has maintained its operating margin guidance for FY24 at 20-22%.
Key Metrics
Infosys secured significant large deals during the quarter, with a Total Contract Value (TCV) of $3.2 billion, 71% of which represented net new business. The company also observed a decrease in attrition, which now stands at 12.9%.
Insights from Leadership
Salil Parekh, CEO and MD of Infosys, expressed satisfaction with the Q3 performance, describing it as resilient. He attributed the strong large deal wins to the relevance and strength of Infosys’ portfolio, ranging from generative AI, digital, and cloud to cost efficiency and automation. Parekh highlighted the clients’ utilization of Topaz generative AI capabilities and Cobalt cloud capabilities to create long-term value for their businesses.
Nilanjan Roy, Chief Financial Officer of Infosys, emphasized the demonstration of strong execution capabilities in Q3, especially under ‘Project Maximus.’ He pointed out the improved operational efficiencies achieved despite a challenging business environment. Roy also noted robust cash generation, with Free Cash Flow (FCF) to net profit conversion for Q3 reaching an impressive 90.6%.
Industry Outlook
The broader Indian IT sector is anticipated to face subdued earnings for Q3 FY24 due to ongoing weakness in demand for IT services, exacerbated by unexpectedly high furloughs.
Nine-Month Performance
For the nine months ended December 31, 2023, Infosys reported a 1.7% year-on-year increase in net profit, reaching ₹18,264 crore compared to ₹17,967 crore in the corresponding period last year. Revenues for the nine-month period rose by 5.9% to ₹1,15,748 crore from ₹1,09,326 crore in 9MFY23. Operating margin for 9MFY24 was reported at 20.8%, indicating a marginal decline of 0.2% year-on-year.
Market Performance
Infosys shares, as of the latest trading session, closed at ₹1,495 on the Bombay Stock Exchange (BSE), registering a 1.62% decrease. The stock has witnessed a 12% gain in the last six months but only a 1% increase in the past year.
Conclusion
In conclusion, Infosys’ Q3FY24 results reflect a mix of challenges and resilience. While the dip in profit and revenue presents hurdles, the company’s strategic focus on large deal wins, generative AI, and cloud capabilities positions it well for future growth. The revision in revenue guidance indicates a proactive approach to navigating the evolving business landscape. As Infosys continues to adapt to industry dynamics, stakeholders will keenly observe its performance in the coming quarters.