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Steady revenue growth: Infosys reported increased in Q2FY25 constant currency revenue growth by 3.1%/3.3% QoQ YoY respectively. In rupee terms, revenue reached ?40,986 crore, marking a growth of 4.3% QoQ and 5.1% YoY. Dollar revenue stood at USD 4,894 million, up by 3.8% QoQ and 3.7% YoY. The growth was primarily driven by the manufacturing, energy, communications, financial services and high-tech sector. However, retail and life sciences sectors experienced a decline. Geographically, India and Europe showed strong growth, while North America remained flat.

Margins were in-line with management expectations: The Company’s EBIT stood at Rs 8,649cr which grew by 4.4% QoQ and 4.5% YoY while margins were in-line with management expectation at 21.1%, which grew by 2bps QoQ but declined 12bps YoY due to acquisition related expenses and higher variable pay, offset by Project Maximus and currency tailwinds. Going ahead, management focuses on growing margins in the similar range of 20-22% for FY25, driven by focus on Gen Al & Maximus models and increase in utilization levels. Its PAT stood at Rs 6,516 cr, an increase of 4.8% YoY and 2.2% QoQ with PAT margin at 15.9% a decline of 4bps YoY and 31bps YoY.

Order wins was subdued: Infosys secured large deals worth USD 2.4 billion for the quarter, a 69% decline compared to the same quarter last year. Of these deals, 41% were net new. Deal wins were led by seven deals in financial services, three each in communications, manufacturing, and others vertical. The company added 86 new clients during the quarter, bringing the total to 1,870. It also added one client in the USD 100 mn+.

Attrition remains low: LTM attrition increased slightly to 12.9% in Q2 from 12.7% in Q1FY25. The utilization rate is at a comfortable level, and moving forward, net hiring is expected to drive volume growth. Management plans to on-board 15,000 to 20,000 fresh graduates through both on-campus and off-campus placements during FY25.

Upgraded revenue guidance for FY25: Management has increased its revenue growth guidance for FY25 to 3.75%-4.5% in constant currency; up from the previous 3%-4%.This growth is expected to be driven by a focus on newer technologies and securing more large deals. However, they also mentioned that clients continued to be cautious for discretionary spending and signing new deals. Further, on the operating margin front they maintain similar guidance of 20%-22%

Outlook & Valuation: Infosys reported a mixed quarter overall with broad-based sequential growth of 3.3% YoY in CC. Company has increased its FY 2025 revenue growth guidance to 3.75-4.50% from 3-4%, earlier. We believe there are near term challenges in the demand environment as discretionary spending by clients remains weak. However, there are signs of improvement in the US BFSI sector. The growth is expected to be driven by demand for its Gen AI & Cloud as well as emerging technologies. Additionally, their focus remains on optimization and better utilization which will aid to drive margins. On a financial front, we expect revenue/EBIT to grow by 6.2%/10.1% CAGR over FY24-26E as we have incorporated management guidance for FY25. We have retained our rating to Accumulate on the stock by revising the target price to Rs 2,041 by assigning a P/E multiple of 26x (unchanged) on FY26E EPS.

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