• Revenue Growth: 4.2% in constant currency terms for FY25; 4.8% year-on-year growth in Q4.
• Operating Margin: 21.1% for FY25; 21% in Q4.
• Free Cash Flow: $4.1 billion for FY25, 129% of net profit.
• Large Deals: $11.6 billion in FY25; $2.6 billion in Q4 with 63% net new.
• EPS Growth: 8.3% growth in EPS terms on a normalized basis for FY25.
• Headcount: 323,578 at the end of FY25, an increase of 6,000 year-on-year.
• Attrition Rate: 14.1% for FY25.
• Guidance for FY26: Revenue growth of 0% to 3% in constant currency terms; operating margin of 20% to 22%.
• Dividend: Proposed final dividend of INR22 for FY25, total payout of INR43.

• Warning! GuruFocus has detected 4 Warning Signs with INFY.

Release Date: April 17, 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 4.2% in constant currency terms for FY25, with a strong operating margin of 21.1%.
• The company generated $4.1 billion in free cash flow, marking its highest ever, which was 129% of net profit.
• Infosys Ltd (NYSE:INFY) closed 96 large deals in FY25 with a total contract value (TCV) of $11.6 billion, 56% of which were net new.
• The company is seeing growing demand for AI-led transformation projects, leveraging its Infosys Topaz AI-powered services.
• Operating margins improved by 50 basis points over FY24, despite headwinds from salary increases and acquisition-related costs.

Negative Points

• Sequentially, revenue declined by 3.5% in constant currency terms in Q4 due to reduction in third-party costs and seasonal weakness.
• The guidance for FY26 indicates a lower growth range of 0% to 3% in constant currency terms, reflecting uncertainty in the macroeconomic environment.
• There is a noted softness in the communications sector, with discretionary spending under pressure.
• The manufacturing sector is experiencing lower budgets, particularly in the auto and industrial manufacturing segments.
• The company anticipates a reduction in third-party revenues for FY26 compared to FY25, which could impact overall revenue growth.

Q & A Highlights

Q: Can you explain the factors behind the revenue decline in Q4 and whether it was concentrated in March or spread throughout the quarter? A: Jayesh Sanghrajka, CFO: Two-thirds of the 3.5% revenue decline was due to a reduction in third-party costs and related revenue, with some deals slipping. This decline was higher than anticipated and primarily occurred towards the end of the quarter.

Q: How does the guidance for FY26 account for seasonality and uncertainty? A: Jayesh Sanghrajka, CFO: The guidance reflects normal seasonality, but given the heightened uncertainty, a three-point guidance range was provided. The lower end assumes further deterioration, while the upper end assumes a steady to marginally improving environment.

Q: How is AI impacting existing projects, and could it lead to revenue deflation? A: Salil Parekh, CEO: AI is integrated into new deals and existing programs, offering benefits without impacting revenue negatively. The company remains confident in leveraging AI for growth, as evidenced by the 4.2% revenue growth last year.

Q: What is the outlook for third-party costs and their impact on FY26 revenue? A: Jayesh Sanghrajka, CFO: Third-party costs are expected to be lower in FY26 compared to FY25, based on current deals and pipeline. The decline in third-party costs contributed to the Q4 revenue drop, and its future impact is uncertain.

Q: How does the current macroeconomic environment affect discretionary spending and AI investments? A: Salil Parekh, CEO: While discretionary spending is unpredictable, AI investments are likely to continue. The company is focusing on cost takeout deals and expects an increase in outsourcing and consolidation opportunities in FY26.

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