Infosys Q3FY25 preview: Modest growth expected, analysts predict improvement in revenue guidance
Infosys reported Q3FY25 revenue of Rs 41,370 crore, up 0.9% QoQ from Rs 40,986 crore in Q2FY25. Dollar revenue grew by 0.3% QoQ, to Rs 4,911 crore as against Rs 4,894 crore in the previous quarter. EBIT increased by 1.2%, standing at Rs 8,750 crore, while margins improved marginally to 21.2%, from 21.1%. Profit after tax (PAT) rose 4.1% QoQ to Rs 6,770 crore from Rs 6,506 crore.
The research team of Zee Business estimated these figures, with continuous revenue growth at 0.9% QoQ and dollar revenue growth at 0.3%. They foresee margins improving due to the depreciation of the INR and plan for the TCV deal to remain strong. The team expects FY25 revenue guidance of 3.75%-4.5% YoY currency growth to be upgraded to 4.0%-4.75%, with EBIT margin guidance remaining unchanged at 20%-22%.
Margins and cost optimization
Earnings before interest and tax (EBIT) margins are estimated at 21.3-21.5 percent, in line with Q2’s 21.1 percent. While Motilal Oswal Financial Services (MOFSL) predicts a 30-basis-point (bps) collapse in margins due to the limited time and few working days, the price benefits and cost effectiveness from “Project Maximus” are expected to overcome these challenges. In contrast, Emkay Global Financial Services expects a 20-bps margin expansion due to operational efficiency and currency fluctuations.
TCV deal activity and trends
During the quarter, Infosys won contracts with Kardex, StarHub, and RheinEnergie. However, leveraged deals for the broader IT sector remain low due to weak spending visibility and the absence of major deals. The gross contract value (TCV) of Infosys declined from $4.1 billion in Q1FY25 to $2.4 billion in Q2FY25. Analysts expect takeovers and deals to strengthen retailers to dominate the channel.
Employment updates and suspensions
The value of Infosys increased by 2,456 to 3,17,788 in Q3FY25, compared to 3,15,332 in Q2. Voluntary attrition rose slightly to 12.9 percent, up from 12.7 percent in Q1FY25, but improved year-on-year from 14.6 percent in Q2FY24. The wage increase that was scheduled for Q3 may now be pushed back to Q4.
An idea of the direction of growth
Analysts suggest Infosys may revise its growth guidance to 4-4.5 percent in cc terms, marking the eighth revision in nine quarters. This comes amid a challenging demand environment, although opportunities in productive AI and cost optimization initiatives may provide catalysts for recovery.
