After Tata Consultancy Services Ltd (TCS), it is Infosys Ltd that is set to report its quarterly results, along with HCL Technologies. Unlike TCS, shares of this Bengaluru-based IT firm have faced a challenging year, witnessing a 2 percent decline in contrast to TCS’s 11 percent rise and HCL Tech’s 20 percent increase. This dip can be attributed to a downgrade in the FY24 guidance during the previous quarter. The question now looms: can Infosys turn the tide?
Analyst estimates paint a relatively subdued picture for this quarter, with projections of mid-single-digit growth for both top-line and bottom-line figures. However, there is the potential for Infosys, the second-largest IT company, to secure robust deal wins, estimated to be around $5.5-6 billion. This figure significantly surpasses the average of $2.4 billion over the past eight quarters.
Of particular interest will be any announcements regarding employee compensation hikes, which have faced delays. Investors are also closely monitoring whether the recent substantial order wins will lead to diminished margins for the IT firm under the leadership of Salil Parekh in the coming quarters.
It’s worth recalling that Infosys had previously revised its constant currency (CC) growth guidance for FY24 from 4-7 percent down to 1-3.5 percent. Analysts don’t anticipate any deviations from this restrained guidance and are eager to see if Q2 CC revenue growth aligns with the upper end of this guidance.
For the September quarter, Nirmal Bang expects a revenue growth of 1.7 percent quarter-on-quarter (QoQ) in CC terms, with no cross-currency impact. This brokerage foresees flat profits at Rs 5,971 crore with a 6.5 percent year-on-year (YoY) increase in sales to Rs 38,899 crore. The Ebit margin is projected at 21.5 percent, with deal wins exceeding $5 billion, a significant contrast to the $2.3 billion in deal wins during the June quarter.
IIFL Securities anticipates Infosys will report 1.3 percent CC QoQ revenue growth amid subdued volumes and discretionary spending. Profit is expected to reach Rs 6,375 crore, a 5.9 percent YoY increase, and revenue is projected to rise by 5.5 percent to Rs 38,564 crore. The Ebit margin is forecasted at 21 percent.
On the other hand, Emkay Global envisions a 4.1 percent YoY profit increase to Rs 6,267 crore, with a 5.4 percent rise in revenue to Rs 38,517 crore. Emkay Global advises investors to focus on the management commentary regarding the effective date of the wage hike, the flow of smaller deals, and discretionary spending. Meanwhile, HDFC Institutional Equities estimates a 2.7 percent YoY profit growth and a 5.4 percent sales growth.