Infosys Q4 results preview: Revenue expected to fall on weak discretionary spending, margin to remain flat QoQ

The IT major Infosys is expected to report tepid numbers in Q4FY24 amid weakness in discretionary spending. While revenue is estimated to drop sequentially, EBIT margin may remain flat on account of a slew of weak growth.

Infosys’ deal momentum has been strong with large deal total contract value (TCV) now touching $13.2 billion, up 70% YoY, during the first three quarters.

Infosys is expected to post a net profit of ₹6,142 crore in Q4FY24, registering a muted growth of 0.58% from ₹6,106 crore reported in the December quarter, as per average estimates of seven brokerages.

Also Read: Q4 results preview: IT sector likely to report muted revenue growth with stable margins; all eyes on FY25 guidance

The IT major’s Q4 revenue in USD terms is expected to fall 0.38% to $4,645 million from $4,663 million on a quarter-on-quarter (QoQ) basis, led by seasonal softness and expected lower pass-through sales. In rupee terms, revenue is estimated to decline 0.59% to ₹38,590 crore from ₹38,821 crore sequentially due to continued weakness in discretionary spending and weak seasonality.

“Revenue growth is expected to be weak at -0.1% QoQ CC, on account of ongoing macro challenges and delays in the ramp-up of large deals. The deal pipeline remains healthy, while closures are somewhat challenging due to slower decision-making processes and furloughs. Nevertheless, the conversion rate remains on track,” Motilal Oswal Financial Services said.

On the operational front, Infosys’ Earnings before Interest and Taxes (EBIT) during the quarter ended March 2024 is expected to fall 0.69% to ₹7,906 crore from ₹7,961 crore in the December quarter.

Also Read: TCS Q4 Results Highlights: Net profit at ₹12,240 crore, announces dividend of ₹28 per share

EBIT margin is estimated to remain stable at 20.5% QoQ as margin headwinds from the partial wage hike impact and visa costs could offset gains from the absence of one-offs and operational efficiency.

Infosys is expected to provide constant currency (CC) USD revenue growth guidance in the range of 2.5% – 5.5% with EBIT margin guidance of 20% – 22% for FY25.

Nomura expects EBIT margins to remain flat QoQ as there will be one month impact of salary hikes. Infosys will have visa costs in Q4 which will be compensated from the non-occurrence of one-time costs of Q3.

Also Read: Mukesh Ambani-led Reliance Industries to announce Q4 results, consider dividend on April 22

Going ahead, key things to watch out for in Infosys Q4 results are the commentary on cost takeout projects, banking vertical and outlook on client CY24 discretionary spend.

Nuvama Institutional Equities estimates steady deal-wins and conservative commentary on demand environment and expects Infosys to guide for 3–5% CC YoY revenue growth and margins in 20–22% range for FY25.

Infosys share price has failed to give any returns in the past one year. Infosys shares have fallen over 13% in one month and over 8% year-to-date (YTD).

On Tuesday, Infosys shares ended 3.65% lower at ₹1,414.75 apiece on the BSE.

Read all Q4 results here

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Published: 17 Apr 2024, 12:19 PM IST