Infosys Q4 revenue seen lower as IT spend slows

IT major Infosys is set to announce its fourth-quarter earnings today, amid a sectoral downturn due to macroeconomic headwinds. In the last quarter, the company remained cautious and further narrowed its guidance. As the results of a new quarter unfold, here are some key metrics to watch out for.

Revenue growth

Infosys is expected to record a degrowth of around 0.5 per cent, on a quarter-on-quarter (q-o-q) basis, according to a poll of brokerages. The growth is noted to be impacted by the continued impact of a slowdown related to a cut in discretionary tech spending, some extension of furloughs, and project ramp downs; partially offset by large deals ramp-up.

• Also read: Infosys announces collaboration with Proximus

Margin and guidance

Brokerages expect EBIT margins to decline 25 basis points, if not remain flat. Margin headwinds for the quarter are wage hikes, visa costs, and one-off impact from McCamish system cyber incident. In the last quarter, Infosys had further narrowed its guidance from 1-2.5 per cent to 1.5-2 per cent. As the demand environment remains unchanged, it is to be watched out for if the company will revise its guidance downwards. 

Deals, TCV

The total contract value (TCV) of large deals in the last quarter stood at $3.2 billion, with 71 per cent net new additions, lower than $7.7 billion booked in Q2, where multiple mega deals were signed. “Deal wins TCV for most IT service companies is likely to recover after the moderation in deal win TCVs in Q3FY24,” Sharekhan notes in its preview report. 

Management commentary

Management commentary on performance of impacted verticals such as BFSI, retail, hi-tech, FY25 revenue growth, margin outlook, commentary on core markets, client budgets; timeline of large deal win ramp-ups and pipeline, and hiring plans are to be watched out for. 

Attrition, hiring

Infosys’ total headcount fell by 6,101 employees to 3,22,663, in Q3 from 3,28,764 in Q2. Voluntary attrition during the quarter fell to 12.9 per cent from 14.6 per cent last quarter. Employee headcount of industry peers are still on a decline trend, it is to be watched out for if Infosys follows the trend.