Infosys Q3FY25 Preview: Revenue guidance under review as analysts eye modest growth

Infosys is set to announce its Q3FY25 results on January 16, with analysts predicting another revision to its revenue growth guidance. In Q2FY25, the IT major adjusted its guidance for the seventh time in eight quarters, settling at 3.75-4.5 per cent in constant currency (cc) terms. Revenue for Q3FY25 is forecasted at Rs 41,756-41,876 crore, up from Rs 40,986 crore in the previous quarter. Quarter-on-quarter growth is expected to be between 0.3 and 1 per cent in cc terms.

Margins and cost optimization

Earnings before interest and tax (EBIT) margins are projected at 21.3-21.5 per cent, consistent with Q2’s 21.1 per cent. While Motilal Oswal Financial Services (MOFSL) forecasts a 30-basis-point (bps) margin dip due to furloughs and fewer working days, pricing gains and cost efficiencies from “Project Maximus” are expected to offset these challenges. Conversely, Emkay Global Financial Services anticipates a 20-bps margin expansion owing to operating efficiencies and currency tailwinds.

Deal activity and TCV trends

During the quarter, Infosys secured contracts with Kardex, StarHub, and RheinEnergie. However, deal wins for the broader IT sector remain subdued due to weak discretionary spending and the absence of mega deals. Large deal total contract value (TCV) for Infosys declined from $4.1 billion in Q1FY25 to $2.4 billion in Q2FY25. Analysts expect cost takeout and vendor consolidation deals to dominate the pipeline.

Hiring and attrition updates

Infosys’ headcount rose by 2,456 to 3,17,788 in Q3FY25, compared to 3,15,332 in Q2. Voluntary attrition increased slightly to 12.9 per cent, up from 12.7 per cent in Q1FY25, but improved year-on-year from 14.6 per cent in Q2FY24. Wage hikes originally scheduled for Q3 may now be deferred to Q4.

Growth guidance outlook

Analysts suggest that Infosys could revise its growth guidance to 4-4.5 percent in cc terms, marking the eighth adjustment in nine quarters. This comes amid a challenging demand environment, although opportunities in generative AI and cost-optimization initiatives may provide catalysts for recovery.