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Inline performance: Increases revenue growth guidance to 3.75%-4.5% cc for FY25

Infosys reported robust performance for the quarter. Both revenue and EBIT margin were inline with estimates. Reported revenue of Rs 409.8bn, up 4.3% QoQ in INR terms, up 2.5% QoQ in USD terms. Segment-wise, in cc terms, Financial services grew by 2.3% YoY, Energy and Utilities grew by 10.9% YoY, Manufacturing grew by 12.3% YoY and Communication grew by 7% YoY. While, Retail was soft, down 9.6% YoY. EBIT margin was flat QoQ at 21.1%. Large deal TCV of $2.4bn vs $4.1bn in Q1FY25. Headcount grew by 2,456 employees QoQ to 317,788 employees. Attrition increased by 20 bps QoQ to 12.9%. Utilization increased by 60 bps QoQ to 85.9%. Added(gross) 86 clients during the quarter vs 87 in Q1FY25. Increased its FY25 revenue growth guidance to 3.75%-4.5% in cc terms with EBIT margin of 20%-22%. It is seeing signs of improvement in the demand environment in the BFSI space. However, the discretionary tech spending remain muted. We expect Revenue/EBITDA/PAT to grow at 11.5%/14.1%/12.6% over FY24-FY27E. We have revised our FY25E/FY26E/FY27E EPS by 0.2%/1.5%/NA. We roll over to Sep’26E for valuation and maintain ADD Rating on the stock with revised target price of Rs 2,122 (vs Rs 1,864 earlier) at PE of 25x on FY26E. We have increased target PE multiple from 24x to 25x to account for increased guidance for FY25E and certain green shoots in demand environment.

Revenue growth for the quarter was above expectation

Revenue grew by 4.3% QoQ in INR terms, up 2.5% QoQ in USD terms. Segment-wise, in cc terms, Financial services grew by 2.3% YoY, Energy and Utilities grew by 10.9% YoY, Manufacturing grew by 12.3% YoY and Communication grew by 7% YoY. While, Retail was soft, down 9.6% YoY. Large deal wins at $2.4bn remain strong and provide visibility about medium term outlook. The 3.75% to 4.5% revenue growth guidance for FY25 takes into account improving deal momentum as demand environment gets better. It is witnessing strong traction for its generative AI solutions.

Operating margin improved sequentially on better revenue growth

EBIT margin was flat QoQ at 21.1%. Going ahead, there are margin levers such as improving employee pyramid, higher realization and near shoring that will help to support EBIT margin. It maintained its EBIT margin guidance of 20-22% for FY25E. It is working on margin improvement program to drive higher margin in medium term

Maintain ADD Rating on the stock with target price of Rs 2,122.

The near term demand environment is getting incrementally better as there is material uptick in the BFSI segment. The demand for AI solutions to drive productivity is increasing with every passing quarter. The increase in revenue growth guidance to 3.75%-4.5% also implies certain improvement in demand environment. We expect Revenue/EBITDA/PAT to grow at 11.5%/14.1%/12.6% over FY24-FY27E. We have revised our FY25E/FY26E/FY27E EPS by 0.2%/1.5%/NA. We roll over to Sep’26E for valuation and maintain ADD Rating on the stock with revised target price of Rs 2,122 (vs Rs 1,864 earlier) at PE of 25x on FY26E. We have increased target PE multiple from 24x to 25x to account for increased guidance for FY25E and certain green shoots in demand environment.

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