Leading IT firm Infosys faced headwinds in the third quarter, reporting a 7.3 per cent dip in its net consolidated profit for the October-December period.
The profit figure came in at Rs 6,106 crore, down from Rs 6,586 crore in the corresponding quarter of the previous fiscal year (FY23).
Notably, the company’s operating margin for the quarter experienced a sequential decline of 100 basis points (bps) compared to the previous year, settling at 20.5 per cent. Infosys adjusted its revenue guidance for FY24 to a range of 1.5-2 per cent in constant currency, while maintaining the operating margin guidance at 20-22 per cent. On a positive note, the attrition rate at Infosys improved to 12.9 per cent from 14.6 per cent.
In a strategic move, Infosys unveiled its intention to acquire InSemi, a semiconductor design and embedded services provider. The acquisition is anticipated to conclude in the fourth quarter of the ongoing financial year. This move aligns with Infosys’ broader strategy to enhance its Chip-to-Cloud capabilities, leveraging niche design skills at scale and synergizing with existing investments in AI, automation, and industry partnerships.
Salil Parekh, Infosys’ CEO and MD, applauded the company’s resilient performance in Q3, attributing it to substantial large deal wins totaling $3.2 billion. Impressively, 71 per cent of these deals were categorized as net new, showcasing the robustness and relevance of Infosys’ diverse portfolio. This portfolio spans generative AI, digital solutions, cloud services, and cost-effective automation.
Beyond financial metrics, Infosys showcased robust cash generation during the third quarter, with Free Cash Flow (FCF) witnessing a noteworthy 17 per cent YoY growth, amounting to Rs 5,548 crore.
On the human resources front, the attrition rate at Infosys saw a further decline, reaching 12.9 per cent on a 12-month trailing basis. This represents a significant improvement from 14.6 per cent in the September 2023 quarter and 24.3 per cent a year ago. The net employee headcount marginally decreased to 3,22,663 during the October-December period.
INFOSYS REPORT-2023
In a segment-wise analysis, the financial services vertical experienced a nearly 6 per cent YoY decline in constant currency terms, while the communications segment saw an 8 per cent drop in constant currency revenue. In contrast, the retail and manufacturing segments exhibited positive trends, with a 0.4 per cent rise and a substantial 10.6 per cent increase, respectively, during the reporting period. Despite challenges posed by the global economic landscape, Infosys remains optimistic about its strategic initiatives and continues to uphold its operating margin target of 20-22 per cent.
The company’s ability to secure large deals and strategically position itself for growth in semiconductor design services underscores its commitment to innovation and market leadership. As Infosys, India’s second-largest IT firm, prepares to unveil its financial results for the October-December period on January 12, it follows in the footsteps of its competitor Tata Consultancy Services (TCS), which recently reported a mixed set of quarterly earnings.
Insights from Zee Business research suggest that Infosys is poised to announce a net profit of Rs 6,580 crore for the three-month period, marking a robust 9.3 per cent increase compared to the preceding quarter. Anticipated sequential revenue growth stands at 3.8 per cent, reaching Rs 37,920 crore for the quarter ending December 2022. In dollar terms, revenue is projected to climb to $4614 million, reflecting a 1.3 per cent sequential rise from the previous quarter’s $4555 million, as per Zee Business research. The earnings before interest and taxes (EBIT), a key metric for assessing a firm’s operating income, are estimated at Rs 8,200 crore, reflecting a 4.2 per cent quarter-on-quarter increase.
This financial disclosure from Infosys comes at a time when IT companies are grappling with margin pressure, primarily driven by heightened employee expenditures attributed to persistent attrition rates. Despite a strong demand across various sectors and the rupee exhibiting weakness, the IT industry faces challenges.
It is worth noting that the depreciation of the rupee traditionally augments the profitability of export-oriented businesses, including the IT sector. The industry is keenly observing how Infosys navigates these dynamics and manages to sustain growth amid these challenging conditions.
