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Infosys Ltd. reported stellar Q1FY25 revenues at $4,714mn, up 3.6% QoQ and 2.5% YoY in cc terms driven by broad based growth across verticals and geographies. In USD terms, reported revenue was up 3.3% QoQ and 2.1% YoY. INR revenue for Q1FY25 stood at INR393.2bn, up 3.7% QoQ and 3.6% YoY. Q1FY25 TCV stood robust at $4.1bn (57.6% being net new) with 34 large deal wins, up 78% YoY. PAT for the quarter came in at INR63.7bn, up 7.1% YoY with EPS at INR15.4

* Revised revenue guidance to 3-4% cc for FY25E: Management sees early signs of improvement in Financial Services vertical in North America. Q1 reported strong volumes in the vertical after several quarters. Recovery is expected in cards, payments and capital markets space within the vertical. Company also saw strong growth in large deals and along-with the completion of in-tech acquisition, the visibility has improved and company has revised its revenue guidance to 3-4% cc. Revenue contribution from in-tech shall commence from Q2. The manufacturing segment is expected to grow less in FY25E when compared to FY24 as it grew materially last year. Retail and Communication verticals are expected to grow in similar lines as FY24 and Hi-tech vertical is expected to be softer. Geographically, the North America and European business is anticipated to see good growth on the back of ramp up in large deals and recovery in demand environment. The guidance is baked in after considering the macro-environment with focus on cost optimisation and vendor consolidation deals. Management is observing strong traction in GenAI programs by leveraging its Topaz and Cobalt capability.

* Discretionary type of deals still need to wait: Company mentioned that digital transformation type of deals would see a further delay as the environment has not changed much. Market sentiments and discretionary spends are similar to previous quarters and still lower except for recovery in Financial Services segment. Company is seeing strong traction from clients in GenAI with focused approach for enterprises working with data sets on a cloud foundation.

*Retained margins of 20-22%: Operating (EBIT) Margins came in at 21.1% for Q1FY25, up 99 bps sequentially and 28 bps YoY led by cost optimization drive through Project Maximus. Management identifies margin improvement levers as more off-shoring and value based selling amidst stable pricing environment. Company has retained their comfortable operating margin band of 20-22% for FY25E. The company is directing its attention towards GenAI initiatives which shall contribute to margin improvement as well.

Valuation: Company is seeing excellent traction on GenAI projects across software engineering, process optimisation, customer support, advisory services and sales and marketing. A broad-based growth, margin expansion, robust large deals and highest ever cash generation gives confidence for near term growth. We maintain BUY rating with a revised target price of INR1,885 implying a PE of 24x on FY26E EPS of INR78.5.

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