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Infosys March 2023 Quarter Results – Disappointing quarter; guides 4-7% growth in FY24

Actual vs. expectations

Operating performance misses expectations

Likely stock reaction

Negative

Key positives: LTM attrition moderated by 340bps QoQ; steady deal intake

Result Summary

· Infosys reported revenues of USD4.55bn, down 2.3%/+6.4% QoQ/YoY (CC -3.2%/+8.8% QoQ/YoY), below our expectations of USD4.71bn. (TCS Q4FY23 revenues was USD7.19bn, 0.6% CC QoQ).

· EBITM declined ~50bps QoQ to 21.0%, 70 bps below our expectations. (TCS IT services EBITM was flat QoQ at 24.5%).

· Adj. Profits at Rs61.3bn (-7.0% QoQ, +7.8% YoY), below our expectations of Rs65.3bn due to operating performance miss.

· FY24 outlook: Infosys has guided for 4-7% YoY CC revenue growth in FY24, implying a 1.7-2.9% CQGR in next 4 quarters. It has guided for 20-22% EBITM for FY24 (vs. 21.1% in FY23).

· TCV of deal intake stood at USD2.1bn vs USD3.3bn in Q3FY23.

· Company declares final dividend of Rs17.5/share.

Growth by Verticals (all in CC terms)

· Financial Services: 0.4%YoY ( V/s 5.5% YoY in Dec’22 quarter)

· Manufacturing: 26.5%YoY ( V/s 36.8% YoY in Dec’22 quarter)

· Retail:  12.6%YoY  ( V/s 12.7% YoY in Dec’22 quarter)

· ECS: 17.1% YoY( V/s 25.9% YoY in Dec’22 quarter)

· Communication: 0.3% YoY( V/s 12.7% YoY in Dec’22 quarter)

· Hi Tech: 3.7% YoY( V/s 10.4% YoY in Dec’22 quarter)

· Life sciences: 15.7% YoY( V/s 5% YoY in Dec’22 quarter)

Growth by Geographies (all in CC terms)

· US: 6.0%YoY ( V/s 10.5% YoY in Dec’22 quarter)

· Europe: 20.3%YoY ( V/s 25.3% YoY in Dec’22 quarter)

· ROW: 3.4% YoY( V/s 11.9% YoY in Dec’22 quarter)

· India: -7.1% YoY( V/s -5.4% YoY in Dec’22 quarter)

Manpower details

Total Headcount: 343,234, down 3,611 QoQ

LTM Attrition: 20.9%, V/s 24.3% in Dec’22 quarter and 27.1% in Sep’22 quarter.

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