INFY Q3 2024-2025 Call Highlights: Large Deals, Hiring Boom & AI Strategy!

Infosys Ltd., a global leader in next-generation digital services and consulting, in its Q3 earnings call discussed about negative growth due to fewer working days and reversal of third-party revenue benefits from Q3. The company also mentioned developing 100 new AI agents and small language models, viewing them as growth drivers rather than just cost-cutting tools. Management maintained an optimal utilization rate target of 83-85% and reported a 3.6% year-over-year pricing improvement. The decline in top five client revenues was attributed to furloughs and currency impacts. Management expressed optimism based on improved client sentiment in US and European financial services and US retail sectors.

India’s second-largest IT services provider, delivered a robust Q3 performance, marked by significant growth with net profit rising 11.6% year-over-year and revenue increasing 7.6%, while maintaining an operating margin of 21.3%. The company secured $2.5 billion in large deals with 63% being net new and announced employee compensation increases averaging 6-8% starting January 2025. Notable achievements included exceptional cash management with 157% free cash flow conversion in Q3 and the first nine months of FY25 already exceeding FY24’s total free cash generation. The company has made significant strides in optimizing its workforce structure, reducing its H1B visa dependence with onsite mix decreasing from 30% to 24%. Looking ahead, the company is doubling down on talent development, with plans to significantly expand its fresh graduate hiring from 15,000 plus to over 20,000 in the coming year.

Continue Reading: Discover the Vital Insights from Infosys Ltd.’s Earnings Call!

Financial/Operational Metrics:

• Total Revenue: INR42,623 crore, up 7.6% YoY.
• Net Profit: INR6,822 crore, up 11.6% YoY.
• Basic EPS: INR16.43, up 11.3% YoY.
• Free Cash Flow: INR10,647 crore, up 91.9% YoY.
• Large Deal Total Contract Value: $2.5 billion.
• Attrition: 13.7%.

FY25 Outlook:

• Revenue Growth: 4.5-5.0% YoY in constant currency.
• Operating Margin: 20–22%.

 

Analyst Crossfire:

• Third-Party Costs and Volume Growth (Ankur Rudra – J.P. Morgan)? Third-party costs rose due to seasonality and mega deals. Volume growth guidance for FY26 will be clearer by April, with no significant one-time items impacting revenues or costs this quarter (Jayesh Sanghrajka – CFO).

 

• Q4 Guidance and Seasonality, AI’s Impact on Business (Ankur Rudra – J.P. Morgan)? Q4 guidance reflects third-party seasonality and fewer working days. These factors contribute to a sequential decline despite Q3’s higher revenue from third-party business. AI agent deployments drive client efficiencies and growth, with small language models contributing to software development and customer service improvements. AI usage is broad-based and not easily categorized as cost or discretionary (Jayesh Sanghrajka – CFO, Salil Parekh – CEO).

 

• Pricing and Utilization Trends, Top 5 Client Growth (Bryan Bergin – TD Cowen, Rishi Jhunjhunwala – India Infoline)? Value-based pricing strategies support margins, with the pricing environment remaining stable. Utilization at 86% is slightly above the comfort range but expected to stabilize between 83%-85%. Declines in top five clients’ contributions are due to furloughs and currency impacts, with no sector-specific trends observed (Salil Parekh – CEO, Jayesh Sanghrajka – CFO).

 

• Net New Business Expansion & FY ’26 Industry Outlook (James Friedman – Susquehanna, Sandeep Shah – Equirus)? INFY highlighted robust net new business growth, driven by traction in cloud, generative AI, SAP S/4HANA, and cost takeout services. Management noted a positive trajectory in financial services, retail, and large deal pipelines, though specific FY ’26 guidance was not provided (Salil Parekh – CEO).

 

• Small Deal Pipeline & Recruitment Trends (Sandeep Shah – Equirus Securities)? INFY reported a stable small-deal pipeline and recruitment aligned with plans to hire 15,000 plus freshers this year and 20,000 plus next year, reflecting growth ambitions (Jayesh Sanghrajka – CFO).

 

• Pricing Increases & Utilization Rates (Sumeet Jain – CLSA, Abhinav Ganeshan – SBI)? INFY attributed the 3.6% YoY pricing increase to margin-expansion initiatives like value-based selling and automation efficiencies. Management also stated that the company’s comfort zone for utilization is around 83%, indicating current levels may moderate in the near term (Jayesh Sanghrajka – CFO).

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