Infosys Q1 Results: FY25 revenue growth guidance raised to 3-4 %; net profit beats estimate

“We are looking to hire 15,000-20,000 freshers this year depending on how we see the growth,” Jayesh Sanghrajka, CFO of Infosys, said without divulging the number of freshers on boarded in Q1.

In a surprise, Infosys raised its revenue growth guidance for the financial year 2024-25 on July 18, with the metric being raised in the range of 3 percent to 4 percent. Analysts had anticipated Infosys to maintain its FY25 revenue growth guidance at 1-3 percent in constant currency (CC) terms.

Net profit rose 7.1 percent on-year to Rs 6,368 crore, beating Street estimates. India’s second-largest IT company’s consolidated revenue from operations for the April-June quarter rose 3.6 percent on-year to Rs 39,315 crore, according to the stock exchange filing.

A Moneycontrol poll of 10 brokerages had estimated Infosys fiscal first quarter net profit to rise 5.1 percent on-year to Rs 6,248 crore, and revenue to rise 2.4 percent to Rs 38,850 crore.

On a quarter-on-quarter basis, the IT company’s bottomline fell 20.1 percent, mainly due to a tax refund boost in the preceding quarter.

The company revised its annual revenue growth guidance five times in the previous five quarters. The latest was in the March quarter when it slashed guidance to 1-3 percent as weakness continued in discretionary and digital projects. In January, it lowered the full-year guidance to 1.5-2 percent for FY25.

The EBIT (earnings before interest and tax) margin or the operating margin was up 30 basis points (bps) to 21.1 percent.

Infosys retained its operating margin at 20-22 percent for the financial year.

The company's utilisation level, excluding trainees, went up by 180 percentage points to 85.3 percent in Q1 from 83.5 percent in the previous quarter. Offshore, too, went up to 76.1 percent from 75.8 percent.

Both these factors may have helped improve the company's margins. Nonetheless, Infosys retained its operating margin guidance of 20-22 percent for the current financial year.

Infosys large deal wins were highest-ever at 34 with TCV of $4.1 billion, with 57.6 percent being net new.

“We had an excellent start to FY25 with strong and broad-based growth, operating margin expansion, robust large deals, and highest ever cash generation. This is a testimony to our differentiated service offerings, enormous client trust, and relentless execution," Salil Parekh, chief executive officer and managing director, was quoted as saying in the release.

He added that the focused Generative AI approach for enterprises is finding strong traction with clients. "This is building on our Topaz and Cobalt capabilities” Parekh added.

Nonetheless, Parekh said discretionary spending is still low from where it was several quarters ago. "We don't have a view... what will happen at the end of the financial year," he added. Further, the company will update as and when it sees any changes at the end of the second quarter ending September 30.

Discretionary spending, which depends on the macroeconomic environment, is still the same as in the past quarter, Parekh said.

On headcount, the company's headcount said this metric is down for the sixth straight quarter by 1,908 in Q1. The total headcount of Infosys now stands at 3,15,332.

In geography-wise performance, only the India region grew by 90 bps to 3.1 percent of the total revenue share. Meanwhile, the North American region declined by 70 bps, and accounted for 58.9 percent of the total revenue share. Europe's share declined by 20 bps to 28.4 from 28.6 percent.

“Our relentless drive on cost optimisation through Project Maximus, a comprehensive margin expansion program, is reflected in the all-round improvement in key operating metrics leading to 1.0 percent growth in
operating margin in Q1," chief financial officer Jayesh Sanghrajka was quoted as saying in the release.

Sanghrajka added that the company has generated its highest ever free cash flow at $1.1 billion and return on equity increased to 33.6 percent, due to higher payouts to investors.

In vertical play, financial services was the only major one to grow, increasing by 110 bps sequentially to 27.5 percent from 26.4 percent.

On the other hand, retail, communication, energy, utilities, resources & services, and hi-tech vertical revenue share decreased. The manufacturing sector remained flat for the quarter.