Q3 FY25 Earnings Forecast for INFY
In this analysis, we evaluate Infosys’ financial performance for Q3 FY25. The analysis incorporates macroeconomic factors, seasonal patterns, and exchange rate trends to deliver actionable insights for investors and stakeholders.
Key Metrics from Q1 and Q2 FY25
Revenue Trends
- Q1 FY25 Revenue: ₹39,315 crore
- Q2 FY25 Revenue: ₹40,986 crore (QoQ Growth: +4.2%)
- H1 FY25 Total Revenue: ₹80,300 crore (YoY Growth: +4.4%)
Cost and Profitability Metrics
- Cost of Sales: Averaged ~69.5% of revenue across Q1 and Q2.
- Operating Margin: Consistently at 21.1%.
- EPS: ₹15.38 (Q1), ₹15.71 (Q2), reflecting a 7% YoY increase.
Cash Flow and Return Metrics
- Free Cash Flow (Q2): ₹7,010 crore (down from ₹9,155 crore in Q1).
- Return on Equity: Stable at ~31% in Q2.
Sector-Specific Trends
- Large Deal Wins: $2.4 billion in TCV for Q2 FY25, with 41% net new deals.
- Client Geography Contributions: North America remains the largest contributor, but its share declined from 58.9% in Q1 to 57.4% in Q2.
Revised Q3 FY25 Forecast: Factoring New Data and Seasonal Adjustments
Revenue Projections
Given the seasonal softness in Q3, influenced by holiday-related slowdowns and budget constraints:
- Base Growth Projection: Adjusted to a conservative 1% QoQ growth.
- Currency Impact: Factoring in a slight USD/INR appreciation (+0.94%).
Forecasted Revenue: ₹41,395 crore.
Cost and Profit Projections
- Cost of Sales: Estimated at ₹28,774 crore (~69.5% of revenue).
- Operating Expenses: Expected to remain stable at ₹3,932 crore (~9.5% of revenue).
- Operating Profit: ₸8,689 crore (~21% margin).
- Net Profit (PAT): ₹6,379 crore (~15.4% margin).
Earnings Per Share (EPS)
With 375.59 crore shares outstanding:
- Adjusted EPS forecast: ₹17.00.
Comparison to Street Expectations
| Metric | Revised Forecast | Street Expectations | Variance |
|---|---|---|---|
| Revenue (₹Cr) | 41,395 | 41,320 | +0.18% |
| EPS (₹) | 17.00 | 16.18 | +5.06% |
Key Insights and Sector Dynamics
Positive Drivers
- Large Deal Momentum: Continued strong TCV from large deals ($2.4 billion in Q2).
- Currency Tailwinds: USD appreciation supports INR revenue.
- Operational Efficiency: Stable cost structures despite macroeconomic headwinds.
Challenges
- Seasonal Headwinds: Reduced client activity during the holiday season.
- North America Decline: A notable decrease in revenue contribution.
- Cash Flow Pressure: Decline in free cash flow could indicate higher working capital requirements.
Conclusion and Investment Recommendation
Infosys’ Q3 FY25 performance is expected to show modest growth, aligning closely with street expectations. Revenue is forecasted at ₹41,395 crore, with an EPS of ₹17.00. Seasonal headwinds and regional shifts may limit significant upside potential.
Investment Recommendation: Maintain a neutral outlook, focusing on Infosys’ ability to sustain operational margins and capitalize on large deal wins.
Earnings for Q3 FY25 is out!
Lakshmi Narasimman
Lakshmi Narasimman
