5 Bonus, Rs 28/Sh Dividend: IT Giant Infosys Beats Estimates In Q4FY24, But ADR Falls Sharply; Here's Why!

Tech player, Infosys has surprisingly reported better-than-expected earnings in Q4FY24. Further, the company also declared hefty final dividends for FY24, which will be paid by June month. But despite its Q4 numbers, Infosys American Depository Receipts (ADRs) looked unimpressed as they fell over 7% in the pre-market of April 18, and continue to trade lower.

The reason behind the sharp fall in Infosys ADRs is due to the company trimming its FY25 revenue growth guidance, indicating that upcoming quarters could continue to be challenging.

Infosys ADRs ended at $16.52, down by 2.57%. The day's range stood at $16.04 - 16.90.

Infosys ADRs have been broadly bearish throughout 2024 due to the challenging conditions of the technology sector globally. The IT sector suffers through moderation in new large deals, coupled with dull discretionary spending, continuation of furloughs and soft trends in demand. FY24 has so far seen bleak quarters, guidance cuts, and growth under pressure in segments like BFSI, and CPG among others.

The ADR of Infosys has dipped by 8% in a week, while its monthly performance is also down by 12.4% so far. YTD, ADR plunged by 10.1%. However, in a year, ADR is up by 11.5%.

An ADR is a security that represents shares of non-U.S. companies that are held by a U.S. depositary bank outside the United States ("U.S."). ADRs allow U.S. investors to invest in non-U.S. companies and give non-U.S.-companies-easier-access to the U.S. capital markets. Many non-U.S. issuers use ADRs as a means of raising capital or establishing a trading presence in the U.S.

During the fourth quarter, Infosys' bottom-line came in upbeat. The company reported a consolidated net profit of Rs 7,975 crore, before minority interest, registering a growth of 30% YoY and 30.5% QoQ.

On the other hand, consolidated revenue dipped by 2.3% sequentially but marginally up by 1.3% YoY to Rs 37,923 crore. In constant currency, revenue dipped by 2.2% QoQ and was flat on a year-on-year basis. Also, operating margin stood at 20.1%, declining by 0.9% YoY and 0.4% QoQ.

Moreover, Infosys revenue in the financial services and retail segment declined in Q4, which also played a role in cautioning investors in the ADR price. In Q4FY24, Infosys revenue declined by 8.5% in constant currency in financial services, and down by 3.7% in retail business.

Further, Infosys went on to cut the lower case of FY25 revenue growth guidance to 1-3% in constant currency. While the tech player estimates an operating margin of 20%-22%.

Going ahead, Infosys is likely to stay focused on expanding its generative AI. Salil Parekh, CEO and MD said, "Our capabilities in Generative AI continue to expand. We are working on a client programs, leveraging large language models with impact across software engineering, process optimization, and customer support."

For the full year 2023-24, Infosys delivered $18.6 billion in FY24 revenues with a growth of 1.4% in constant currency and an operating margin of 20.7%. Free Cash Flow was strong at $2,882 million, an increase of 13.7% over FY 23. Large deal TCV for FY24 was the highest ever at $17.7 billion, with 52% being net new.

Meanwhile, Infosys' share price on the Indian stock market will react to Q4 earnings on Friday. On April 18, Infosys' share price ended at Rs 1420.55 apiece, up by 0.41% with a market cap of Rs 5,89,651.48 crore.