Infosys Q2 result preview: Quarter may be muted but big deals to aid revenue in 2nd half of FY24, say analysts

A CNBC-TV18 poll of analysts pegs revenue growth for the 2023-24 fiscal at 1-3.5% in constant currency (CC) terms and at 8-9% for the next financial year.

In dollar terms, analysts expect revenue to come in 0.8% higher sequentially at $4655 million and 13% higher on a quarter on quarter in rupee terms at ₹ 38425 crore. Infosys profit after tax (PAT) is likely to rise 4.7% sequentially to ₹ 6,225 crore. The operating profit or earnings before interest and taxes (EBIT) is likely to stand at 21% at ₹ 8,070 crore for the second quarter, according to the poll.

Analysts expect Infosys’ guidance for the current fiscal to remain unchanged between 1% and +3.5% compared to 4-7% CC growth earlier. They indicated that there also is a possibility that the company may narrow guidance to 2-3.5% while EBIT margins shall be maintained between 20%-22%. This comes following disappointment in the first quarter when guidance was cut sharply for FY24.

It must also be noted that Infosys is yet to announce any wage hikes, therefore, any announcement regarding the effective date for revision will be key to watch. Among other factors that the Street will watch out for are profitability dynamics of mega deals, margin levers, senior management attrition given multiple leadership exits and commentary on the ramp-up timelines of mega deals to provide comfort on better revenue growth in the latter half of the year.

In the previous June ended quarter, the IT firm had said that the demand environment was not worsening anymore and that its pipeline is healthy but conversion cycles are still longer. It had pointed to continued softness in short-cycle deals and some negative impact on discretionary business though the pace of impact had moderated. It had also said that there would be a lot of focus on margin optimisation efforts at the company.

Meanwhile, Infosys share price had hit a low of ₹ 1,185.3 on April 17, the day of Q4 results and is up 26% from that level, while it touched recent high of ₹ 1518.4 on September 15. While the stock is up 7.5% in July to September quarter though it still down 2.5% in 2023 (year-to-date).