• Revenue Growth: 1.7% quarter-on-quarter and 6.1% year-on-year in constant currency terms.
• Operating Margin: 21.3%, up 20 basis points sequentially and 80 basis points year-on-year.
• Free Cash Flow: $1.26 billion for the quarter, a 90% year-on-year increase.
• Large Deals: Total contract value of $2.5 billion, with 63% being net new deals.
• EPS Growth: 11.4% year-on-year increase to INR16.43.
• Headcount: Increased by over 5,000 to 323,000 employees.
• Attrition Rate: 13.7%.
• Revenue Guidance: Revised to 4.5% to 5% growth in constant currency.
• DSO: 74 days, with net unbilled revenues declining by $323 million sequentially.

• Warning! GuruFocus has detected 7 Warning Signs with INFY.

Release Date: January 16, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Infosys Ltd (NYSE:INFY) reported a revenue growth of 1.7% quarter-on-quarter and 6.1% year-on-year in constant currency terms.
• The company achieved an all-time high free cash flow of $1.26 billion for the quarter.
• Large deal total contract value (TCV) for the quarter was $2.5 billion, with 63% being net new deals.
• Infosys Ltd (NYSE:INFY) saw double-digit growth in Europe and India, particularly in the manufacturing sector.
• The company is expanding its enterprise AI capabilities with Infosys Topaz, developing over 100 new generative AI agents for clients.

Negative Points

• The automotive sector in Europe continues to remain slow, impacting growth in that region.
• Third-party costs increased significantly, impacting both revenue and costs.
• The top five clients saw a decline in revenue, attributed to furloughs and currency impacts.
• The guidance for Q4 implies a negative growth, primarily due to seasonality and lower working days.
• Utilization rates are above the comfort level, indicating potential inefficiencies or over-reliance on current workforce levels.

Q & A Highlights

Q: Can you comment on any one-time items in your revenues or margins this quarter, and how do you see volume growth into fiscal '26? A: Jayesh Sanghrajka, CFO: Our third-party costs were higher this quarter, impacting both costs and revenue. There were no other one-off items. It's early to predict FY26 volume growth, but we will have more clarity by April when we announce full-year guidance.

Q: The guidance increase is positive, but the implied number for Q4 suggests a negative trend. Is this due to seasonality or third-party sales? A: Jayesh Sanghrajka, CFO: The Q4 guidance reflects seasonality and lower working days. The third-party seasonality, which was significant in Q3, also impacts Q4 guidance.

Q: How will AI impact the volume of work and productivity, and will it be net additive or dilutive for Infosys? A: Salil Parekh, CEO: AI agents are helping clients with time and cost reduction, leading to growth opportunities. We are developing 100 new agents, which should expand our work scope. AI is broad-based across industries, and we see it as a growth driver.

Q: Can you discuss the pricing environment and how you see it progressing with your value-based pricing strategy? A: Jayesh Sanghrajka, CFO: Pricing is stable, and our value-based pricing strategy is yielding results. It's difficult to predict future growth rates, but we aim to continue improving.

Q: What is the outlook for the retail vertical, and how is it performing? A: Jayesh Sanghrajka, CFO: We see positivity in the US retail and CPG sectors, driven by improved consumer sentiment and strong holiday sales. This should reflect in growth over the next few quarters.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.