Infosys Q2 Results Preview: Revenue growth seen at 3.7% on deal ramp-ups; PAT may rise 5.8% QoQ

Infosys, the second largest IT service company in India, is set to announce its earnings for the second quarter of FY25 on Thursday, October 17. The IT major is estimated to report a growth in revenue led by large deal wins, but margins are likely to be stable.

In the second quarter ended September 2024, Infosys’ revenue is expected to grow 3.74% to ₹40,785 crore from ₹39,315 crore in the previous quarter. In USD terms, Q2 revenue is estimated to rise 3.2% to $4,865 million from $4,714 million, quarter-on-quarter (QoQ), according to a Livemint poll of eight brokerages.

The IT major’s net profit in Q2FY25 is expected to see 5.86% growth to ₹6,741 crore from ₹6,368 crore in Q1FY25.

According to Kotak Institutional Equities, revenue growth is likely to be led by 90 bps contribution on in-tech acquisition, an auto-focused ERD firm, seasonal strength, residual ramp-up of mega-deals and marginally higher revenues from sale of third party software, after a sharp dip in June 2024 quarter.

Analysts expect a large deal TCV of $3 billion, a sharp sequential decline largely on normalization of deals after bumper announcements in earlier quarters.

Operational Performance

At the operational front, Infosys earnings before interest and tax (EBIT) during the quarter ended September 2024 is estimated at ₹8,636 crore, an increase of 4.20% from ₹8,288 crore in the June quarter. EBIT margin may improve by 7 bps to 21.17% from 21.1%, QoQ, helped by strong growth and operational efficiencies.

Guidance

Kotak Equities expects Infosys to raise FY2025 revenue growth guidance to 4-5% from 3-4% earlier. Guidance implies 0.5% decline at lower end and +0.8% CAGR at the upper end for the rest of FY2025E.

EBIT margin guidance band of 20-22% is estimated to stay unchanged.

Going ahead, investors will likely focus on the state of discretionary spending across verticals, especially in financial services, deal pipeline after strong last four quarters, senior management attrition, margin levers and wage hike announcement cycle and composition of revenues, i.e. revenues from sale of third party items.

Infosys Stock Price

Infosys share price has given decent returns this year as the IT stock has gained more than 11% in three months and over 24% year-to-date (YTD). Infosys stock price has risen over 33% in the past one year period.

This is against Nifty IT index’s 7.9% returns in three months and 19% gains YTD. The index has risen 33% in one year.

On Wednesday, Infosys shares fell 2.05% to close at ₹1,918.95 apiece on the BSE.

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