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Infosys concall summary: What it means for the investors?

Oct 13, 2023

By: BlinkX Research Team

Infosys, one of India's leading IT companies, recently adjusted its revenue guidance for the fiscal year 2024. The company now expects revenue growth to be in the range of 1.0% to 2.5%, down from the previous 1.0% to 3.5%. This change suggests a potential decline in revenue in the upcoming quarter, mainly due to delays in decision-making.

Despite these challenges, Infosys reported strong large deal signings and a promising pipeline that should support growth in the medium-term. The third and fourth quarters are typically weaker for the company. However, Infosys maintained its operating margin guidance at 20% to 22%.

One of the bright spots is the Total Contract Value (TCV) of deals, which reached $7.684 billion, including a significant portion of new deals. These deals span various industries and regions, indicating Infosys is gaining market share in cost efficiency, automation, and artificial intelligence.

In terms of financial performance, Infosys reported revenue growth of 2.3% in constant currency terms. However, a higher share of third-party software packages sales influenced this growth. Excluding this, revenue would have met expectations. In US dollars, revenue reached $4.718 billion, marking a 2.2% increase quarter-on-quarter and 3.6% year-on-year.

The second quarter was affected by spending reductions in some large clients, but this was offset by the ramp-ups of large deal wins, particularly in areas like cost optimization and vendor consolidation.

Infosys secured 21 large deals in the quarter, including four mega-deals, spread across various industries and regions. The financial services sector remains uncertain, but opportunities exist in areas like infrastructure transformation and cost consolidation. In retail, clients continue to focus on budget consolidation, cost, and efficiency.

Infosys' headcount decreased by 2.2% to 328,000 employees, and attrition reduced to 14.6% compared to the previous quarter. The adjusted profit after tax (Adj. PAT) stood at Rs. 6,212 crore.

Infosys faces some challenges in the short term, however its strong deal signings, pipeline, and focus on efficiency and automation provide optimism for future growth. The stock is currently trading at a price-to-earnings (P/E) ratio of 23.5x FY24E earnings per share (EPS).