Infosys Q4 results preview: Revenue to dip for second straight quarter, FY25 guidance to be conservative

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Tech behemoth Infosys will announce its results for the January to March 2024 quarter on April 18 after its peer Tata Consultancy Services (TCS) kicked off the Nifty 50 earnings last week.

A CNBC-TV18 poll of analysts suggests that India’s second-largest IT services company is likely to witness a revenue decline for the second quarter in a row while margin and profit shall increase marginally. The guidance it gives for the 2024-25 fiscal year will be key to track.

Infosys’ revenue for the fourth quarter of FY24 is likely to slip 0.3% sequentially to $4,650 million from $4,663 million earlier, as per projections. In constant currency terms, the top line is expected to decline half a percent from the previous quarter to ₹38,640 crore, analysts say.

Revenue trajectory in the past few quarters

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 earnings before interest and taxes (EBIT) for the three-month period to come at ₹7,995 crore, down from ₹7,961 crore in the preceding quarter.

However, in the previous quarter, the firm witnessed a one-time impact of 60 basis points on its margin due to provisions related to the BPO business, which will be partly offset by a full three-month impact of wage hikes compared to two months in 3Q as well as visa-related costs.

Margin trend in the past 7 quarters

Infosys’ profit after tax (PAT) is likely to go up over a percent sequentially to ₹6,180 crore from ₹6113 crore earlier, analysts polled by CNBC-TV18 have forecast.

Meanwhile, analysts expect the company to guide conservatively after missing early forecasts in FY24. According to the poll projection, FY25 guidance is seen between 2% and 6% whereas margins for the current fiscal year are seen in the 20-22% range, similar to FY24.

The IT giant’s hiring in the last quarter and plans for the current fiscal year will also be keenly tracked given the decline in net headcount for the fourth straight quarter in the October to December period. It had also announced a hiring freeze at campuses last year.

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

Infosys outperformed TCS from FY20-23 and will lag growth in FY24

It is also interesting to note that for four years, Infosys has outperformed TCS in terms of revenue growth, however, it shall lag in FY24.