Infosys Q1 Results Preview: Will This Tech Giant Report Strong Revenue Than Largecap Peers HCL, TCS?

India's second largest tech player, Infosys is going to announce its first quarter earnings for FY25 later on July 18. Accordingly, its share price will be in focus. It will be keenly watched if there is any dividend announcement on cards as well. Coming to earnings, Infosys is expected outperform large-cap peers like TCS and HCL Tech by reporting strong revenue. Eventually, Infosys is seen as top performer of Tier-1 IT companies. Additionally, the company's margins are also expected to expand.

Ahead of the earnings, Infosys share price was at Rs 1725.80 apiece, up by 1.09% on July 16 with market cap of Rs 7,16,557.07 crore. During this day, Infosys had also touched a new 52-week high of Rs 1,737.50 apiece.

A global leader in the next-generation digital services and consulting, Infosys will announce results for the first quarter ended June 30, 2024 on Thursday, July 18, 2024 around 3:45 p.m. Indian Standard Time (IST) (6:15 a.m. ET; 3:15 a.m. PST; 11:15 a.m. London time; 6:15 p.m. Singapore/Hong Kong time).

In its preview report, Axis Securities expects Infosys to report strong revenue growth of 2.4% QoQ, highest among the Largecap peers. The brokerage also expects operating margins to expand, aided by moderated onsite expenses.

While Infosys management is expected to retain 1% to 3% the company's revenue growth guidance for FY25E, cited Axis Securities.

BOBCAP also in its report stated that Infosys revenue growth guidance for FY25 of 1-3% CC will be maintained, alongside keeping the margin guidance also same at 20-22%. This brokerage also said, Infosys is "likely to report the best among Tier-1 revenue growth of 2.5% QoQ in CC terms."

BOBCAPS expects TCV to be around $3-4 billion in Q1FY25 for Infosys.

Meanwhile, Kotak Institutional Equities said, "We forecast sequential revenue growth of 2.5%, led by--(1) ramp-up of multiple mega-deals, (2) March 2024 quarter had one-off impact of 100 bps on revenues from rescoping of engagement with a financial services client. This provides a low base and effectively a 1% kicker to June 2024 quarter growth numbers."

Kotak's note added, "We expect a 80 bps qoq increase in EBIT margin on the back of--(1) the absence of a 100 bps one-off impact. At the same time, we expect normalization of ECL and post-sale client support provision leading to a headwind of 50 bps. Net accrual of benefit of 50 bps and (2) lower visa and subcon charges and higher employee utilization rate."

Furthermore, Kotak expects Infosys arge deal TCV at $3 billion. As per the brokerage, in focus will be the translation of revenues of large deals signed in the earlier quarters into revenues. Kotak also expects Infosys to retain revenue growth guidance of 1-3% and EBIT margin guidance of 20-22%.

Investors should focus on --- (1) translation of megadeals into revenues, (2) deal pipeline, (3) outlook on BFSI, an underperforming vertical, (4) discretionary spending environment especially in impacted verticals and (5) senior management attrition, as per Kotak.

In Q4FY24, Infosys posted a consolidated net profit of Rs 7,975 crore, before minority interest, registering a growth of 30% YoY and 30.5% QoQ. However, 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. While operating margin stood at 20.1%, declining by 0.9% YoY and 0.4% QoQ.

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.

For the financial year 2024-25 guidance, Infosys estimates revenue growth of 1%-3% in constant currency, while operating margin is at 20%-22%.