Five things to watch out for in Infosys’ Q4 results

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Following a good show in Tata Consultancy Services’ (TCS) fourth quarter earnings, all eyes are on India’s second-largest software exporter, Infosys. TCS’s 100 basis points quarter-on-quarter rise in earnings before interest and taxes (EBIT) margin, the highest in three years, surprised investors.

According to a CNBC-TV18 poll of analysts, the Salil Parekh-led company is expected to witness a revenue decline for the second quarter in a row, and its net profit will likely go up over a percent sequentially to ₹6,180 crore from ₹6113 crore earlier.

CNBC-TV18.com highlights five things to watch out for in Infosys’s fourth quarter results that will be declared on Thursday, April 18.

FY25 guidance

The guidance that Infosys will give for the financial year 2025 will be closely tracked by investors and analysts as it sets the tone for the entire fiscal.

Analysts at HDFC Securities expect Infosys to guide a 3-5% growth for FY25 estimates.

As per CNBC-TV18 poll of analysts, the software exporter is expected to guide conservatively after missing early forecasts in FY24. According to the poll projection, FY25 guidance is seen between 2% and 6% whereas the margin for the current fiscal year are seen in the 20-22% range, similar to FY24.

Revenue, EBIT margin

Infosys will likely report a slight revenue growth of 0.3% quarter-on-quarter on the back of delayed decision-making and deeper furloughs. Moreover, margins are likely to expand marginally because of lower operating expenses, according to a report by Axis Securities.

Sharekhan, meanwhile, expects Infosys to report a decline of 0.5% in constant currency (CC) revenue due to weakness in discretionary spends and lower contribution from large deals. The brokerage sees flattish EBIT margins for the March quarter. Margin headwinds due to wage hike (one-month impact) may be offset by the one-off impact from McCamish system Cyber incident as it reverses in Q4FY24, it noted.

As per CNBC-TV18 projections, Infosys’ revenue for the fourth quarter of FY24 is likely to dip 0.3% sequentially to $4,650 million from $4,663 million earlier. In CC terms, while the topline will likely decline half a percent from the previous quarter to ₹38,640 crore, analysts added.

Margins are seen going up modestly at 20.7% for the quarter under review compared to 20.5% in the December 2023 quarter. The poll also expects EBIT for the three-month period to come at ₹7,995 crore, down from ₹7,961 crore in the preceding quarter.

Deal wins

Nuvama Institutional Equities in its Q4FY24 IT sector preview said it estimates steady deal-wins and conservative commentary on demand environment.

Large deal Total Contract Value (TCV) stood at $3.2 billion in the December quarter and $7.7 billion in the second quarter of FY24.

Attrition and wage hike

The IT major’s hiring in the previous quarter and plans for the current financial year will also be keenly tracked given the decline in net headcount for the third straight quarter in the October to December period. Infosys had also announced an on-campus hiring freeze last year.

HSBC estimates that the full impact of wage hike will hit in the fourth quarter for Infosys, while it may get offset by cost cuts.

Dividend

The IT giant is expected to declare a dividend for the shareholders along with earnings for the period. Previously, Infosys declared an interim dividend of ₹18 per share in October last year, followed by a ₹17.5 final dividend on June 2023.

Other parameters that the Street is expected to track include Infosys’ outlook on spending and discretionary demand, its artificial intelligence (AI) deal pipeline and announcements related to buybacks or special dividends.

Shares of Infosys Ltd. settled 3.61% lower at ₹1,415.20 apiece on the NSE on April 16. The stock has fallen nearly 10% so far this year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow