Categories Concall Highlights, Earnings, Technology

Infosys Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Infosys Ltd (INFY) Q2 FY24 Earnings Concall

  • Financial Performance and Margin
    • Q2 FY24 saw strong performance with 2.3% QoQ and 2.5% YoY growth in constant currency.
    • Operating margin reached 21.2%, an increase of 40 bps sequentially.
    • Margin expansion driven by cost optimization, improved utilization, pricing.
    • One-time payouts in quarter also helped boost margin.
  • Large Deals And TCV
    • Q2 large deal TCV was $7.7 billion, highest ever for the company.
    • 48% of large deals were net new.
    • 4 mega deals signed in Q2, excluding the additional $1.5 billion MOU.
    • Large deal wins indicate market share gains in areas like cost efficiency, automation, and AI.
    • The conversion of these large deals into revenue would be phased and not an immediate impact.
    • Seeing slowing decision making on closing new deals.
  • Headcount And Attrition
    • Headcount stood at 328,000 employees, a decline of 2.2% sequentially, showing focus on optimization.
    • Reduced headcount by 5% over the past three quarters.
    • Utilization excluding trainees improved from 81.1% to 81.8%.
    • LTM attrition in Q2 further decreased to 14.6%, with no sequential change in quarterly annualized attrition.
    • Expects room for further utilization improvement, which can positively impact margins.
  • Economic Environment And Demand Outlook
    • Environment of slow growth, delayed decision making, and low discretionary spend.
    • The company revised its growth guidance for FY24 to 1-2.5% in constant currency terms due to challenges in discretionary spend.
    • Financial services seeing spend reductions and project delays.
    • Communications facing growth challenges and cost pressures.
    • Manufacturing showing double digit growth but budgets still tight.
    • Retail focused on cost consolidation despite strong quarter.
    • The potential budget cycle for 2024 is uncertain, and discussions with clients indicate a continued emphasis on cost and efficiency.
  • Volume Performance
    • Quarterly volume performance was constrained due to the slowing or stoppage of discretionary work and transformation programs.
    • Q3 and Q4 outlook expects usual seasonality with softer quarters and no major change in volume constraints.
  • Proprietary Large Language Models
    • Infosys is not developing its own LLMs, but working with partners’ proprietary and open source models.
    • These models have applications in software development, text, voice, and video analysis, both for clients and Infosys’ internal use.
    • Infosys continues investing in generative AI, especially Topaz platform.
  • Wage Hikes
    • Announced wage hikes, effective from November 1st.
    • INFY is optimistic that its cost optimization program, Project Maximus, will counterbalance wage increases and enhance margins in the next 18 months.
  • Industry Softness
    • Seeing softness in financial services like mortgages, asset management, and parts of retail.
    • Similar view of softness as previous quarter in these industries.
  • Pricing Dynamics
    • Like-for-like pricing in the IT services industry has remained relatively stable.
    • Clients occasionally seeking discounts, but pricing trends haven’t significantly deteriorated.

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