Infosys Q1FY23 earnings: Profit misses estimates, revenue increase

Infosys reported its Q1 earnings on Sunday evening, and profits were below analysts’ expectations. The share price of Infosys was trading 0.55% lower on Monday morning at Rs 1498.05 post the earnings.

Key highlights of the Infosys Earnings: 

• Net Profit: Rs 5,360 crore, 3.2% year-on-year
• Revenue: Rs 34,470 crore, up 23.6% year-on-year
• Operating margin at 20.0%, a decline of 3.7% since last year and a decline of 1.5% since the March quarter
• Revenues in Constant currencies terms jumped by 21.4% since last year and 5.5% since the March quarter
• Reported revenues at $4,444 million, a growth of 17.5% since last year
• Digital revenues at 61.0% of total revenues, since last year, growth of 37.5% 
• Basic Earnings Per Share at $0.16, a decline of 1.1% YoY
• Free Cash Flow at $656 million; Free Cash Flow conversion at 95.2% of net profit

Below is the detailed review of Infosys Q1FY23 Earnings:

Infosys Q1FY23 Earnings: Profit Jumped

Infosys, India's second-largest IT firm, reported a 3.2% on-year rise in consolidated profit to Rs 5,360 crore below street estimates. Analysts had an estimated profit growth between 5.5% and 9.5%. In the same period last year, the company reported a net profit of Rs 5,195 crore. On a sequential basis, the profit declined by 5.7% from Rs 5,685. 

Infosys Q1FY23 Earnings: Revenue up by 23.6%

The consolidated revenue from the operations jumped to Rs 34,470 crore, up nearly 23.6% on the year and 6.8% from the previous quarter. Analysts had estimated revenue of Rs between 21.5% and 22.5%. Infosys’ digital revenue was 61% of total revenues. Among verticals, manufacturing, communication, life science, and financial services posted robust year-on-year growth in sales. Geographically, North America reported 17.8% on-year growth, Europe 21.9% growth, and India saw muted growth of 2% from the year-ago quarter.

Infosys Q1FY23 Earnings: Margins down

The company was impacted by supply-side pressures, travel costs, and a rise in wages. The operating margins fell by 3.7% on year to 20.1%. Operating margins were down 1.5% from the March quarter.

Also, there was a decline in utilization due to a high number of freshers in the June quarter. The utilization level tanked 570 bps on year to 77.6%. It fell 240 bps sequentially (including trainees).

Infosys Q1FY23 Earnings: Guidance maintained

Infosys has maintained its margin guidance for FY23 between 21% and 23% and has increased the revenue guidance between 14% and 16%.

Infosys Q1FY23 Earnings: 106 New Deals

The company added 106 new clients in Q1FY23. In the June quarter, for $100 million plus bucket, the company added 38 new clients. It added 69 new clients in the $50 million plus bucket and 278 clients in the $10 million plus bucket.

Infosys Attrition rate: 

During the Apr-June quarter, Infosys saw a rise in attrition at the company. The voluntary attrition rate increased to 28.4% from 27.7% in the previous quarter and 13.9% in the year-ago period. Infosys total employee count increased by 21,171 taking the total count to 3,35,186. 

Infosys Management Commentary

“Our strong overall performance in Q1 amidst an uncertain economic environment is a testament to our innate resilience as an organization, our industry-leading digital capabilities, and continued client relevance as we continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities and differentiated digital value proposition”, said Salil Parekh, CEO, and MD.

Infosys Share Price: Analysts view

Mitul Shah, Head of Research at Reliance Securities: Infosys reported a subdued Q1FY23 performance. Margins were below expectations. However, management raised its FY23 revenue growth guidance from 13-15% to 14-16% and maintain its EBIT margin guidance at 21-23%, indicating better performance during the balance of 9M of FY23.