Infosys Q4 Results Preview: Muted Growth In Revenue Likely, Margins To See Gradual Rise

Tech giant, Infosys is scheduled to declare its Q4 earnings for FY24 on April 18. Accordingly, its share price will stay in focus on BSE and NSE during the trading session. Muted discretionary spending is likely to dull top-line parameters while operating profit margin is expected to expand in the quarter. Commentary on senior management exits, deal ramp-ups and growth guidance ahead are key factors to watch.

Ahead of Q4 earnings, Infosys share price ended at Rs 1414.75 apiece, down by 3.65% on BSE with a market cap of Rs 5,87,243.97 crore on April 16. The stock's 52-week high and low is at Rs 1,731 and Rs 1,215.45 respectively.

Infosys Q4 Preview:

Dolat Capital On Infosys:

Expect QoQ growth of 0.1% in CC due to muted discretionary spending. OPM to expand by 19bps QoQ. Key Monitorable: 1) Expect FY25 guidance (CC Growth 2%-5%, OPM 20%-22%), 2) Commentary on ramp-up timelines, Discretionary spend outlook & senior leadership exits.

JM Financial On Infosys:

We are building in -0.9% QoQ c/c revenue growth with ~20 bps cross currency tailwind translating into -0.7% QoQ USD rev growth.

We expect limited contribution from mega deals in Q4. We have not built meaningful contributions from the InSemi acquisition.

Margin tailwind: reversal of 60bps one-off expense due to McCamish cyber incident; Headwind: Visa Cost, Wage hike (one month).

Kotak Institutional Equities On Infosys:

We forecast a revenue decline of 1.5% on a sequential basis. The March quarter is seasonally weak for Infosys. Sequential decline will be on account of (1) lower revenues from the sale of third-party software and (2) weak discretionary spending. Adjusted EBIT margin stood at 21.1% in the December quarter (adjustment for malware attack impact). We forecast a 40 bps decline due to wage revision impact and a lack of leverage from growth. We expect a large-deal TCV of US$3 bn. In focus will be the translation of revenues of large deals signed in the earlier quarters into revenues.

We expect FY2025E revenue growth guidance to be in the range of 2-5%. We also expect Infosys to up the EBIT margin guidance band to 20.5-22.5% from 20-22%. We expect investor focus on (1) translation of mega-deals into revenues, (2) deal pipeline, (3) outlook in BFSI and manufacturing verticals, (4) discretionary spending environment, especially in the impacted verticals, (5) reasons for high senior management attrition and steps taken to backfill the same and (6) revised payout policy (earlier payout policy was for a 5-year period over FY2020-24).

Axis Securities On Infosys:

We expect Infosys to report a slight revenue growth of 0.3% QoQ. We also expect the management to give 4.5% to 6% of the company's revenue growth guidance for FY25E. Moreover, margins are likely to expand marginally because of lower operating expenses. Watch out for a) Deal TCVs and pipeline, b) Pricing scenario, c) Attrition, and d) Outlook on growth/margins/DSO day.

BOB Caps On Infosys:

US Fed's indication of a rate cut in CY24 provides a cushion to overall IT spending. We believe INFO will be one of the few Indian IT companies to benefit from the situation. The company focuses more on the margin on the back of Subcon, SG&A, utilisation, onshore/offshore mix and pyramid optimisation. We assume coverage on INFO with a HOLD rating with a TP of Rs 1,592 (P/E of 21.2x for FY26E, ~20% discount to TCS).

Earlier, Infosys reported a seasonally weak quarter in the period ending December 31, 2023. Infosys has revised its FY24 revenue growth to 1.5%-2.0% in constant currency and maintained its operating margin guidance at 20%-22%. Large deal wins were healthy at $3.2 billion. IT sector's Q3 is likely to be hit due to prevailing challenges in macro conditions. In the quarter, the consolidated PAT was at Rs 6,106 crore, registering a decline of 7.3 % year-on-year and 1.7% quarter-on-quarter. Consolidated revenue came in at Rs 38,821 crore in Q3FY24, registering a marginal growth of 1.3% YoY but slipped -0.4% QoQ.