Upcoming expectations for Infosys: margins, deals, and attrition in focus

The outlook for Infosys points to modest sequential revenue growth at 0.6% in constant currency (CC). Year-on-year (YoY) growth may slow to a mere 0.5%. This is influenced by ongoing discretionary program streamlining, impacting growth.

 

Projections also indicate a 22 basis points (bps) quarter-on-quarter (QoQ) and 97 bps YoY decline in EBIT margin. This estimate doesn't consider wage revisions, with the margin decline primarily due to rising travel and other expenses.

 

Anticipate significant deal announcements with a total contract value (TCV) in the range of $5.5-6 billion.

 

Expect Infosys to maintain its existing revenue growth guidance of 1-3.5% in constant currency. EBIT margin guidance should also remain steady at 20-22%. Meeting the midpoint for revenue growth and slightly below for EBIT margin appears realistic.

 

The focus will shift to senior management attrition following several high-level departures.

 

Investors are likely to emphasize (1) the profitability of mega-deals, (2) insights on the timing of mega-deal ramp-ups to assure better second-half revenue growth, (3) margin strategies, particularly considering margin-dilutive large and mega-deals, (4) discretionary spending trends, especially in affected sectors, (5) reasons behind senior leadership changes, and (6) the effective date for wage revisions.

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