Infosys beats Q4 profit estimates, posts tepid revenue forecast for FY25

Workforce declines in fifth consecutive quarter.

Bengaluru: India’s second largest software exporter Infosys on Thursday trumped Dalal Street estimates to post a 30% year-on-year jump in its net profit at Rs 7,969 crore for the fourth quarter of financial year 2023-24. However, the tepid revenue growth guidance for FY25 at 1-3% in constant currency terms, has left industry watchers disappointed.

“In some of the industries, we see some changes. For example (in) financial services, we are seeing a slightly better buying situation in the current financial year compared to the past one. Whereas, in manufacturing, while it will still be growing, we see a slightly slower growth in the next financial year,” Infosys Managing Director and Chief Executive Salil Parekh said, elaborating on prevailing business trends.

The IT major’s topline during the January-March period grew 1.3% year-on-year at Rs 37,923 crore to take the full financial year revenue to Rs 1.5 lakh crore marking a 4.7% annual increase. 

“The company’s recent performance has been disappointing, resulting in a downward revision of its revenue guidance for FY25,” Nirav Karkera, who heads research at financial services provider Fisdom, said, adding that the adjustment highlights the uncertainty in demand that the company expects in the future. 

This marked the company’s fifth revision in revenue guidance over the past five quarters. “Moreover, the absence of expected revenue improvement from the North American region, which contributes significantly to the overall revenue, raises concerns from a geographical perspective,” Karkera said.

Operating margin dipped annually to 20.7% during FY24, while the forecast for FY25 stood at 20-22%. Among verticals, the financial services and retail segments featured as laggards during the March quarter.

The Benagluru-headquartered IT services company also inked 52% net new large deals during the year to post its best ever full financial year large deal orderbook at $17.7 billion in FY24. “However, a notable concern arises due to the noticeable delay between the successful closure of substantial deals and the subsequent realisation of tangible revenue growth,” Karkera underscored.

Acquires stake in German firm

Infosys also announced the acquisition of in-tech, an engineering research and development services provider focused on the German automotive industry. The deal is expected to close in the first half of the ongoing financial year.

The company’s board has recommended a final dividend of Rs 20 per share alongside a special dividend of Rs 8 apiece.

Going forward, “securing significant deals remains crucial for Infosys’ growth strategy,” said Biswajit Maity, senior principal analyst at global management consulting firm Gartner.

Headcount decline continues

For the fifth consecutive quarter Infosys reported a decline in workforce with the sequential drop at 1.7% during the fourth quarter of FY24. The total workforce of the company included 3,17,240 employees, as of March 31, 2024.