Infosys Q2 net profit rises 4.7%; lifts FY25 revenue guidance

Consolidated net profit of Rs 6,506 crore in July-September -- the second quarter of current 2024-25 fiscal year -- was 4.7 per cent higher than the year-ago earnings and 2.2 per cent more than the net profit in the preceding quarter, according to a company statement.

Infosys ADRs, however, slid over two per cent in pre-market session on US bourses as the company's Q2 results trailed market expectations.

Technology services bellwether for the second consecutive quarter raised its revenue guidance for the full fiscal.

It now expects constant currency revenue growth between 3.75 per cent and 4.5 per cent for the financial year April 2024 to March 2025, higher than its earlier guidance of 3 per cent to 4 per cent.

Infosys CEO and MD Salil Parekh termed it a "huge upward movement" in growth guidance. The upward revision comes on the back of a ramp-up of mega deals.

The company had raised its guidance in the June quarter from the 1-3 per cent range it started the year with.

Infosys said it is on track to onboard 15,000-20,000 freshers in FY25 and many of them have been onboarded in the first half itself.

The company emphasised it will onboard all the freshers it had committed to, in the past.

Notably, Infosys, after six consecutive quarters of drop in employee strength, added about 2,500 employees on a net basis in the September quarter.

Attrition rate stood at 12.9 per cent versus 12.7 per cent quarter on quarter, and 14.6 per cent in the year-ago period.

For the full year, Infosys however maintained its margin guidance.

It expects operating margins for the fiscal to be between 20 per cent and 22 per cent.

Revenue from operations increased over 5 per cent year on year to Rs 40,986 crore.

"We had strong growth of 3.1 per cent quarter-on-quarter in constant currency in Q2.

“The growth was broad based with good momentum in financial services," Parekh said.

"Our large deals at USD 2.4 billion in Q2 reflect our differentiated position."

Revenue in US dollar terms stood at $4.894 billion, registering a growth of 3.8 per cent from the June quarter.

Earnings Before Interest and Tax (EBIT) stood at Rs 8,649 crore, up 4.4 per cent sequentially.

EBIT margin for the quarter remained flat at 21.1 per cent.

On deal outlook, Parekh said the pipeline on large deal "is still quite robust" although the contract-type are more about cost and efficiency than digital transformation.

Shares of Infosys ended 2.8 per cent higher on Thursday at Rs 1,974.55, ahead of the results announcement, which came after market hours.

Growth in earnings was led by manufacturing, energy and financial services.

Growth was projected to be driven by the ramp-up of large deals, increasing traction in generative AI deals, and cost optimisations.

The large deals' TCV (total contract value) was at $2.4 billion.

"We continue to focus on accelerating revenue growth with a sharp focus on margin performance.

“Operating margins for the quarter was at 21.1 per cent, driven by continued benefits from value-based pricing and utilisation despite higher employee payouts.

“Our focus on cash generation resulted in another quarter of over 100 per cent free cash flow conversion to net profits," said Jayesh Sanghrajka, CFO.

Infosys declared an interim dividend of Rs 21 per share, and fixed October 29 as the record date and November 8 as the payout date. In the previous fiscal, the company had paid a total dividend of Rs 46 per share.

Explaining the increase in full year outlook, Parekh said: "We look at it based on what we have done in the quarter, then we look at pipeline and what we anticipate and based on all those factors as we sit today and looking at Q3 and Q4 we have increased our revenue growth guidance."

Among sectors, while financial services is looking "strong and stable" on discretionary spends, especially in capital markets, cards and payments space, in Europe the automotive segment is showing signs of weakness.

The discretionary spends in retail, hitech or telco are still constrained with cost and efficiency discussions in focus.

Newer growth markets like Japan and Middle East are showing traction although they are still small in scale.

Sub-USD 50 million deal pipeline have also increased in double digit this quarter, which has also contributed to the company lifting its guidance.

Infosys said wage hike in Q4 will be in a phased manner with bit of it to be effective in January, and balance in April.

The company is working on different industry applications for the small language model.

"We are deploying enterprise generative AI platforms, building our own small language model, and developing multi agent solutions for our clients," Parekh said.