Infosys ADR Jumps 10%, FY25 Guidance Increased

Infosys, India’s second-largest software exporter by revenue, raised its FY25 revenue guidance to 3-4% in constant currency terms, exceeding analysts’ expectations who had expected it to maintain guidance at 1-3% which reflects better IT expenditure by clients. 

Q1FY25 Performance

For the first quarter of FY25, Infosys reported a 7.1% y-o-y increase in net profit, reaching Rs.6,368 crore.from Rs.5,945 crore. Despite a 20% decline from the previous quarter’s Rs.7,969 crore, the company raised its revenue growth guidance for FY25 to 3-4% in constant currency terms. 

CEO Salil Parekh attributed this to broad-based growth, operating margin expansion, several major deals, and the highest ever cash generation. Notably, large order bookings for the quarter stood at $4.1 billion, reflecting huge contracts compared to previous periods.

Operating Margins & Cost Optimization

Infosys maintained an operating margin guidance of 20-22% for FY25, with Q1 margins at 21.1%, a 100-basis-point improvement. CFO Jayesh Sanghrajka attributed this to Project Maximus, a comprehensive margin expansion program.

Major Deals & TCV

The company signed significant deals worth $4.1 billion in Q1FY25, a 78.2% year-on-year increase from $2.3 billion in Q1FY24, though it was an 8.8% sequential decline from $4.5 billion in Q4FY24. Despite this, the company’s upward guidance revision is seen as a positive indicator for future earnings. Additionally, Infosys is now focused on generative AI, which is positively  impacting customer services, software development, and process optimization. 

Sector & Geographic Performance

Growth was driven by BFSI (79% sequentially), manufacturing (6.4% YoY), communication (5.2% YoY), and energy, utilities, resources, and services (5.2% YoY). The US market remained subdued, down 1.2% YoY, while Europe grew 8.6% YoY and India surged 18.4%.

Hiring Plans

Despite a sixth consecutive quarter of declining headcount, Infosys plans to hire 15,000-20,000 fresh graduates for this year. The attrition rate slightly moderated to 12.7% from 12.6% in the previous quarter.

Stock Market Reaction

Following the announcement, Infosys’ shares opened 2.8% higher at Rs.1,819, while its ADRs (American Depositary Receipts) jumped around 10% % investor confidence in the company’s revised guidance and robust Q1FY25  performance.

Conclusion: Infosys’ Q1 performance, marked by revenue and net profit growth, boosted market confidence, reflected in a significant rise in its ADRs. The company’s focus on generative AI, strong deals, and hiring fresh graduates, despite headcount reductions, positions it well for sustained growth in FY25.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.