Infosys Reports Strong Q2 FY24 Performance; Revises Revenue Growth Guidance
Infosys Reports Robust Performance in Q2 FY24
Infosys Limited (NSE: NS:) has reported a strong performance for the second quarter of FY24, with a sequential growth of 2.3% and a year-on-year increase of 2.5% in constant currency terms. This positive growth highlights the company’s resilience and ability to adapt to changing market conditions.
Record-Breaking Deals Secured
During this period, Infosys secured a record $7.7 billion in large deals, with 48% of them being net new. This achievement showcases the company’s strong market position and its ability to attract and retain valuable clients.
Revised Revenue Growth Guidance
However, due to a subdued environment for digital transformation programs and discretionary spending, Infosys has revised its revenue growth forecast for FY24. The revised guidance now stands at 1% to 2.5% in constant currency terms.
Gaining Market Share in Key Areas
Infosys continues to gain market share in cost efficiency, automation, and artificial intelligence (AI). The company’s focus on these areas positions it well for future growth and success.
Anticipating Seasonal Impact
As Q3 and Q4 are typically softer quarters for Infosys, the company anticipates the usual seasonal impact during this time. Despite this, Infosys has closed four mega deals and has a promising pipeline for future deals, particularly in the cost and efficiency space.
Delays in Initiating Large Programs
During the earnings call, Infosys’ CEO, Salil Parekh, and CFO, Nilanjan Roy, discussed various factors impacting the company’s performance. They highlighted delays in initiating large programs and longer cycles in closing deals as reasons for slower growth. However, they expressed confidence in the positive impact of Project Maximus on cost optimization and margin improvement.
Proprietary Models and Narrow Transformer Approaches
Parekh clarified that Infosys is working with proprietary models from partners and is not developing its own large language models. The company is focusing on narrow transformer approaches and applications in software development, text, voice, and video. These models are being used for clients and some internal activities within Infosys.
Impact of Discretionary Spend and Weak Verticals
The earnings call also discussed the impact of discretionary spend on revenue and the weakness in certain verticals such as financial services, mortgages, asset management, high tech, telco, and retail. Infosys’ revised revenue growth guidance takes into account both volume and the impact of third-party bought-out items.
Confidence in Margin Improvement Strategies
Infosys’ executives mentioned that large deals have not eroded margins in the past and expressed their confidence in the company’s experience and strategies to improve margins over time. They highlighted the ongoing benefits of the Project Maximus program and its potential to enhance margins in the future.
Looking Ahead
Infosys expects headcount to improve as they have headroom to increase utilization further. The company is well-positioned to navigate the challenges posed by the current market environment and is committed to delivering strong performance and value to its clients.
This article was written with the support of AI and reviewed by an editor.
