Infosys is projected to disclose less robust results for the July-September quarter of the current financial year (Q2FY24), primarily due to a deceleration in demand within crucial markets. The IT giant is scheduled to unveil its Q2 earnings on Thursday, October 12. Analysts and brokerage firms anticipate Infosys to unveil single-digit year-on-year (YoY) revenue growth. Quarter-on-quarter (QoQ), revenue is likely to remain flat. The focus will be on management’s insights regarding deal pipelines and the implementation of recent deal victories.
Infosys Q2 Results Preview
Motilal Oswal Financial Services, a brokerage firm, foresees Infosys reporting a modest 0.8 percent QoQ revenue growth in constant currency terms, attributing it to a persistent demand slowdown, while the impact of recently signed mega deals may not be substantial at this point. Despite the subdued revenue growth, Motilal Oswal believes that Infosys’ Total Contract Values (TCVs) for deals will appear appealing due to multiple recent mega wins. As per Motilal Oswal’s projections, Infosys’ Q2 revenue may experience a 5.2 percent YoY growth in Indian rupee terms, accompanied by a 3.1 percent YoY rise in Profit After Tax (PAT). The EBITDA margin for the quarter could be 23.4 percent, in contrast to 24.4 percent in the same quarter last year.
Motilal noted that Infosys’ operating margin has largely remained steady due to weak topline growth, along with no wage hike during the quarter. “We would be closely monitoring the ramp-up of these wins and the formation of the deal pipeline. We expect the company to maintain its guidance on the back of healthy deal wins, which should provide a strong footing in the second half,” stated Motilal Oswal. According to Nuvama Wealth Management, another brokerage firm, it foresees a potential 6 percent year-on-year (YoY) increase in Infosys’ revenue for Q2FY24. The brokerage firm additionally projects a 1.2 percent quarter-on-quarter (QoQ) growth in revenue in constant currency terms and a 1 percent QoQ increase in USD terms.
Anticipating stable deal wins and a cautious commentary on the demand environment, Nuvama expects Infosys to uphold its revenue guidance (1-3.5 percent) and margin guidance (20-22 percent) for FY24. In the preceding quarter, Infosys adjusted its revenue outlook for FY24 while maintaining its operating margin forecast.
The company, in its official filing, emphasized a robust deal pipeline and substantial closures on major deals as factors positioning it favorably for future growth. Beyond Infosys, the prevailing challenges in key markets are expected to result in a softer financial performance for most Indian IT players in the second quarter of the current financial year (Q2FY24). Analysts anticipate a marginal dip in the EBIT margin of IT firms on a year-on-year (YoY) basis, influenced by cutbacks in discretionary programs, a growth slowdown, and escalated costs such as travel and back-to-office expenses, which could impact overall profitability.