Infosys: Information technology (IT) company Infosys‘s shares dropped more than 1% in early trading because the business is scheduled to release its Q3FY24 earnings later today. At approximately 10:20 am, Infosys’ shares were down 1.20 percent at Rs 1,501.60 a share, indicating that the firm is experiencing volatility ahead of the important third-quarter earnings.
Market Observers Predict Subpar Q3 Earnings for Infosys
This is because market observers anticipate that the Bengaluru-based IT company will release subpar Q3 earnings. According to some forecasts, flat sales growth would result in a 5–8% decline in year-over-year (YoY) profit. All eyes, however, will be on the company’s updated sales projection for FY24 and any additional reductions that may be made.
Aside from that, the management’s statement regarding the cancellation of the significant $1.5 billion AI agreement and the general state of demand would be other important variables to keep an eye on.
Challenges in the IT Industry’s Third Quarter
While it is well known that the third quarter of December is often a difficult one for IT companies, analysts are concerned that the effects of two months of wage increases will negatively influence Infosys’ EBIT (profits before interest and taxes), both sequentially and year over year.
Performance Anticipation
Prior to Infosys Q3 results, brokerages emphasised the following points:
Income forecasting
Brokers disagree on whether Infosys should stick to its revenue projections for FY24. Others anticipate it to remain between one and two and a half percent.
Estimates of profit and sales
Axis Securities projects unchanged revenue at Rs 38,945 crore and an 8.7% drop in net profit to Rs 6,010 crore. Emkay Global projects a 7.5% decline in profit to Rs 6,091 crore and an increase in sales of 0.8% to Rs 38,632 crore. PhillipCapital anticipates a 5.3% decline in earnings to Rs 6,239 crore.
Factors affecting the Q3 outcomes
PhillipCapital points out that sluggish ramp-ups, furloughs, and cautious mood across important verticals may mean that recent substantial contract wins don’t really matter. Sharekhan projects a possible 1.8% drop in credit card revenue as a result of cross-currency headwinds and discretionary spending reductions and furloughs.
Total Contract Value
Remarks regarding the TCV of the Infosys deal, which was $2.3 billion in the June quarter and $7.7 billion in the September quarter.
Margin Issues
Concerns over third-party items in the P&L statement—which have been more than peers’ share and dilutive to margin—are raised by analysts.
Advice lowering standards
Emkay Global speculates that Infosys may stick to the 20–22 percent EBIT margin range while reducing its revenue growth outlook range to 1-2 percent in constant currency (CC) terms year over year.
Management analysis
Expectations on important issues like early client talks, projected IT spending for 2024, and details regarding the $1.5 billion deal’s termination.
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