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Actual vs. expectations

Revenue above expectations, while EBITM was tad below our/consensus expectations

Likely stock reaction

Neutral to positive

Key positives: Revenue beat, large deal intake of USD3.3bn, FY23 revenue growth guidance increased to 16-16.5% CC, LTM attrition moderated by 280bps QoQ.

Result Summary

Infosys reported revenues of USD4.66bn, up 2.3%/9.6% QoQ/YoY (CC 2.4%/13.7% QoQ/YoY), above our expectations of USD4.59bn. (TCS Q3FY23 revenues was US$7.07bn, 2.2% CC QoQ).

EBITM was flat sequentially at 21.5%, 20 bps below our expectations. (TCS IT services EBITM grew ~50 bps QoQ at 24.5%).

Adj. Profits at Rs65.9bn (9.4% QoQ, 13.4% YoY), above our expectations of Rs63.7bn due to higher other income.

FY23 outlook: Infosys raised its revenue growth guidance to 16-16.5% CC (earlier 15-16% CC), implying -1.1% to 0.5% QoQ growth in Q4, and retained its EBITM guidance to 21-22%.

TCV of deal intake stood at USD3.3bn (strongest in last 8 quarters) vs USD2.7bn in Q2FY23.

Growth by Verticals (all in CC terms)

Financial Services: 5.5%YoY ( V/s 11.5% YoY in Sep’22 quarter)

Manufacturing: 36.8%YoY ( V/s 45% YoY in Sep’22 quarter)

Retail:  12.7%YoY  ( V/s 15.4% YoY in Sep’22 quarter)

ECS: 25.9% YoY( V/s 24.3% YoY in Sep’22 quarter)

Communication: 12.7% YoY( V/s 18.4% YoY in Sep’22 quarter)

Hi Tech: 10.4% YoY( V/s 9.9% YoY in Sep’22 quarter)

Life sciences: 5% YoY( V/s 10.3% YoY in Sep’22 quarter)

 
Growth by Geographies (all in CC terms)

US: 10.5%YoY ( V/s 15.6% YoY in Sep’22 quarter)

Europe: 25.3%YoY ( V/s 28.5% YoY in Sep’22 quarter)

ROW: 11.9% YoY( V/s 11.9% YoY in Sep’22 quarter)

 India: -5.4% YoY( V/s 36.4% YoY in Sep’22 quarter)

Manpower details

Total Headcount: 346,845, up 1,627 QoQ

LTM Attrition: 24.3%, V/s 27.1% in Sep’22 quarter and 28.4% in Jun’22 quarter. Management expects attrition to decline further in coming quarters.