Infosys Q3 Results Review - Strong Bookings To Insulate Near-Term Revenue Growth: Motilal Oswal

Motilal Oswal Report

Infosys Ltd, reported strong Q3 FY23 revenue of $4.66 billion, up 2.4% QoQ in constant currency terms, ahead of our estimate of 1.5% QoQ CC. It posted a strong large deal total contract of $3.3 billion (up 22% QoQ, net new at 36%), the largest ever since Q3 FY21.

Management sees strong traction in the large deal pipeline, despite an adverse demand environment.

The weakness is clearly visible in parts of retail, hi-tech, financials (mortgages and investment banking), and telecom. Despite the weakness, Infosys raised its FY23 revenue growth guidance to 16.0-16.5% YoY in CC terms from 15-16% earlier, implying a limited impact from macro headwinds next quarter.

Ebit margin was flat QoQ at 21.5% in Q3 FY23, in line with our estimate. Easing supply, a 6% drop in quarterly annualised attrition, utilisation buffer, and fresher deployment should help Infosys to deliver 21.2% margin in FY23, in line with the lower end of its Ebit margin guidance of 21-22%.

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