Infosys Q2 Results: Revenue growth guidance band narrowed despite strong deal wins, margin expansion

Bengaluru-based Infosys now expects its financial year 2024 revenue to grow between 1% and 2.5%, narrower than the 1-3.5% growth it guided for during its June quarter results.

The company lowered the upper end of its guidance while reporting its results for the September quarter.

Infosys also maintained its EBIT margin guidance of 20-22% for financial year 2024.

For the September quarter, Infosys reported US Dollar revenue of $4.71 billion, which is slightly higher than a CNBC-TV18 poll expectation of $4.65 billion. On a sequential basis, US Dollar revenue grew by 2.2%, while estimates projected a 0.8% sequential growth.

The company reported revenue of Rs 38,994 crore, which was higher than the Rs 38,425 crore projected in the CNBC-TV18 poll. Operating profit for the quarter at Rs 8,274 crore, surpassed the Rs 8,070 crore estimate.

EBIT margin for the quarter at 21.2% was 20 basis points higher than the 21% estimate.

In constant currency terms, Infosys reported revenue growth of 2.3%, compared to a CNBC-TV18 poll expectations of 0.9% - 1%. The company, during the June quarter, had reported constant currency revenue growth of 1%.

Infosys won deals worth $7.7 billion this quarter. The street was anticipating deal wins to lend comfort to the company's future growth trajectory.

Brokerage firm Kotak Securities projected Infosys to report a TCV of $5.5 billion to $6 billion compared to its average of $2 billion to $2.5 billion.

MD & CEO Salil Parekh said that the deal wins were the highest across verticals and geographies. "This, in an uncertain macro-environment, is a testament to our ability to pivot and stay relevant to the evolving client needs," he said.

Parekh further said that a strong performance in the first half builds a solid foundation for the future.

In a media conference post the results, Parekh said that he has no view on what financial year 2025 looks like for the company.

Growth came from manufacturing, retail and life sciences verticals, which grew 12.6%, 9.2% and 18.4%, respectively, in constant currency terms during the quarter.

Financial services (-7.3%), communications (-4.3%) and Hi-tech (-0.6%) continued to face challenges with negative growth in constant currency terms during the quarter.

“The fact that the deal wins have been fairly recent and the conversion probably hasn’t yet kind of taken off because of the kind of hesitation that most of these new contracts, new deals have been coming with, so it is quite understandable why they have cut the guidance," Prakash Diwan, Market Expert said.

"If TCS numbers we were interpreting as some sort of bottoming out in Q2FY24, Infosys is saying it is not probably the bottom, we will probably see weakness continue in the next two quarters as well. So there is nothing very convincing about the numbers beyond the fact that they have just managed to get some growth and eke out some margins," he added.

Additionally, the company has also announced an interim dividend of Rs 18 per share, for which, the record date has been fixed as October 25, 2023. The payout date for the same has been fixed at November 6, 2023.

Shares of Infosys ended 2.8% lower ahead of its results announcement and was the top loser on the Nifty 50 index. The stock was the top loser on the Nifty 50 index. Shares are down 4.7% so far in 2023 and is the only stock on the Nifty IT index which has negative returns.