Bengaluru-based IT major Infosys registered flat revenue growth in the fourth quarter, missing market expectations. Its guidance for FY25 too remained conservative, amid a continued downturn for the sector. 

Revenue from operations stood at ₹37,923 crore, flat on a quarter-on-quarter (q-o-q) basis, and down 2.2 per cent in cc terms. Growth for the full year came in at 1.4 per cent, much lower than the 15.4 per cent recorded last year. The net profit for the quarter stood at ₹7,969 crore, up 30 per cent y-o-y and 30.5 per cent q-o-q, thanks to the one-time tax benefit. 

Salil Parekh, CEO and MD, said, “We see discretionary spending and digital transformation work at the same level. The focus is on cost efficiency and consolidation. Our large deal wins in FY24 will help us in the FY25.” He also noted that the outlook for the financial services vertical is better for next year than the current year, and the growth for the manufacturing vertical will be slower.

Deal pipeline remains robust as large deal total contract value (TCV) stands at $4.5 billion in Q4, higher than $3.2 billion recorded last quarter. Even as the pipeline looks strong, the outlook remains weak. The company revised the guidance band from 1.5-2 per cent to 1-3 per cent, as macroeconomic headwinds continue to persist. 

Operating margins for the quarter stood at 20.1 per cent, down 0.4 per cent q-o-q and 0.9 per cent y-o-y. For the full year, the company has remained on the lower end of its set band. Margin guidance, even for FY25, has been retained at 20-22 per cent.

Jayesh Sanghrajka, CFO, said, “After many years, we have seen an increase in on-site inflation, and the clients are therefore more amenable to having a pricing discussion.”

Dip in employee count

In tandem with the industry trend, Infosys too has seen a continued dip in its employee count for the fourth straight quarter. Q4 saw a decline of 5,423 employees, bringing the total headcount to 3,17,240. 

Sanghrajka said that given the change in growth environment, falling attrition, and the increase in utilisation rate, the net headcount has reduced, and there is room for improvement in the utilisation rate till 85 per cent. He also noted that hiring will be looked at as the year goes on and has no immediate targets.

Infosys has also changed its hiring model and is hiring less than half of freshers on campus and the rest off-campus. 

ADR shares down

Infosys has underscored that, effective from FY25, the company expects to continue a policy of returning approximately 85 percent of the free cash flow cumulatively over a 5-year period through a combination of semi-annual dividends or share buybacks, and special dividends. Following the Q4 results, Infosys’ ADR (American Depository Receipt) shares fell 1.2 per cent on the NYSE at 11 a.m New York time.

Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas, said, “Infosys sharply missed our revenue and margin estimates. It has also provided softer-than-expected guidance for FY25. Infosys weak quarterly numbers, lower-than-expected guidance for FY25, and declining headcount reflect continuity in weakness, with the only silver lining being a strong, large-deal TCV.” 

With inputs from BL Intern Meghna Barik