IT giant Infosys is set to announce its  fourth quarterly earnings for FY23 on 13 April . Among the positives, Infosys is likely maintain its strong deal wins. However, Q4 is expected to be seasonally weak with broadly muted growth sequentially due softness in BFSI vertical (Europe BFS and US regional banks) and delay in contracting and project re-prioritisation, which in turn is impacted by weakening macros.
Infosys reported a 13.4 per cent rise in its consolidated net profit for the quarter ended December 2022 at ₹6,586 crore. This is against ₹5,809 crore in the corresponding quarter last fiscal.
The company’s consolidated revenue from operations increased 20.2 percent to ₹38,318 crore as against ₹31,867 crore in the corresponding quarter last year. In constant currency terms, YoY revenue growth was at 13.7 percent while sequential growth stood at 2.4 percent.
The IT firm added that the total contract value for the quarter was the strongest in the last eight quarters at $3.3 billion.
What to expect in Q4?
In regards to Infosys, ICICI Securities expects revenue growth for Infosys to be soft at 0.1 per cent QoQ in constant currency terms, as March is a seasonally weak quarter for the company. This, it said, would translate to 16.4 per cent YoY CC growth in FY23E within the company’s guided range of 16-16.5 per cent.
“We estimate 110 bps cross-currency tailwinds in Q4FY23. We model 21.5 per cent EBIT margin, flat QoQ in Q4FY23 and 21.2 per cent in FY23, in line with management commentary of achieving margins near the lower end of guidance of 21-22 per cent. Large deal wins were strong in Q3FY23 at $3.3 billion (20 per cent QoQ), 31 per cent YoY), partly aided by the closure of a bunch of license deals,” it said.
ICICI Securities said the pipeline is replenished, but we expect deal TCV in the range of $2.5-3 billion, a decline on QoQ basis. It expects Infosys to start the year with conservative guidance of 6-8 per cent.
While, brokerage Motilal Oswal expect muted CC revenue growth of 0.6% QoQ due to seasonality and weakness in Financial Services; USD growth implies 110bp of currency tailwind.
“Operating margin to remain under pressure in the seasonally weakest quarter for Infosys; expect margin to decline by 30bp QoQ,” said Motilal Oswal in its report.
The brokerage noted that there would be no material change in large deal momentum compared to last quarter.
IT budget allocation, deal TCV, outlook on BFSI and attrition are key things to be watched out for, said the brokerage.
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