Infosys Q1 results: IT firm ups revenue growth forecast, deepens focus on GenAI

India's second-largest IT services firm, Infosys raised its revenue guidance for the financial year 2024-25 to 3-4%, up from the previous 1-3% guidance in Q4 of FY24. This upward revision in revenue guidance indicates better spending from clients.

Announcing its Q1 FY25 results, the company said on Thursday, it has reported a 7.1% year-on-year rise in net profit at Rs 6,368 crore for the June quarter, compared to Rs 5,945 crore in the same quarter last year. Revenue for the quarter grew by 3.6% year-on-year to Rs 39,315 crore, up from Rs 37,933 crore in the corresponding quarter of last year. Like the previous quarter, in this quarter too, Infosys has underscored its focus and commitment to generative AI. However, the company did not disclose specific figures.

Focused approach on GenAI, TCV

The company's total contract value (TCV) for the large deals during the quarter stood at $4.1 billion, slightly below analyst estimates of $5 billion. Nonetheless, the overall growth was strong.
 
"We had an excellent start to FY25 with strong and broad-based growth, operating margin expansion, robust large deals, and highest ever cash generation. With our focused approach to generative AI for enterprises working with their data sets on a cloud foundation, we have strong traction with our clients. This is building on our Topaz and Cobalt capabilities," MD & CEO Salil Parekh was quoted as saying.
 
In the June quarter, the financial services segment grew by 27.5%, outperforming Q4FY24's 26.4% and Q1FY24's 28.1% growth. Retail saw a slight decrease to 13.8% from 14.3% in Q4FY24 and 14.5% in Q1FY24. Communication grew by 12.1%, up from 12.3% in Q4FY24 and 11.7% in Q1FY24. Energy, utilities, resources & services maintained a growth of 13.3%, while manufacturing stayed consistent at 14.7%, according to the company. Infosys also reported a 3.6% quarter-on-quarter (QoQ) and 2.5% YoY revenue growth in constant currency terms. The company's free cash flow increased to ₹9,155 crore, up by 59.2% YoY.
 
Last week, Tata Consultancy Services (TCS), India's largest IT services company, reported an 8.7% increase in net profit for the first quarter of FY24, attributed to the successful execution of large deals. Net profit rose to ₹12,040 crore from ₹11,074 crore last year but decreased by 3.2% compared to the previous quarter. Revenue increased by 5.4% to ₹62,613 crore, with an operating margin of 24.7% and a net margin of 19.2%.

TCS is also increasing its investment in AI, doubling its pipeline to $1.5 billion this quarter. While Infosys is reportedly managing over 225 generative AI programs for clients, TCS is working on around 270 AI projects globally and applied for 154 patents. TCS chief K Krithivasan stated they are still in the experimental phase with generative AI and it will take time to see business value.
 
Headcount declines for sixth quarter in a row
 
Infosys saw a decrease in headcount by 1,908 in the June quarter, marking the sixth consecutive quarter of declining headcount, which is attributed to Infosys' evolving hiring strategy aimed at improving utilisation rates.
 
The total headcount for the first quarter of fiscal year 2025 was 315,332, down from 336,294 in the same period of the previous fiscal year, a YoY decrease of 20,962. The attrition rate for the first quarter increased slightly to 12.7% on a twelve-month basis.
 
In contrast, TCS added 5,452 employees on a net basis in the fiscal first quarter, reversing three straight quarters of decline. The company's headcount had dropped 1,759 sequentially in the March period. With the latest increase, TCS employs 6,06,998 people, the company said on July 11 as it shared the numbers for the first quarter of the FY25.
 
Meanwhile, HCLTech, India’s third-largest IT services company, which also published its April-June quarter results last week, maintained its FY25 revenue growth guidance of 3-5%, with its current revenue growth by 6.7% YoY to ₹28,057 crore. The company experienced a sequential decline of 8,080 employees in the first quarter of FY 2025.