Infosys Q3 earnings: Make hay while the sun shines

livemint.com:

Infosys Ltd's stock is up by over 7% on Friday after its December-quarter earnings turned out to be not as bad as was feared. Amid global demand uncertainty and seasonal weakness, information technology investors were bracing for dismal December-quarter (Q3FY24) results from IT companies. But in a partial sigh of relief, Infosys' constant currency revenue had declined sequentially by 1%, whereas the consensus estimate was for a fall of 1.5%.

In a quarter usually impacted by furloughs, revenue growth for Infosys was aided by higher sale of third-party items. These are usually part of large or bundled deals where payments are made by clients for hardware or software procured on behalf of them. Sector wise, the performance of the manufacturing, energy and utilities, and life sciences segments was robust, while telecom and hi-tech lagged.

But the pain point remains–a gap between deal wins trajectory and revenue growth. The management commentary is still cautious and does not provide much-awaited clarity on revenue growth revival as the traction in discretionary and large transformation projects remain weak with slow client decision-making. Infosys has tightened its FY24 revenue growth projection (in constant currency terms) from 1-2.5% to 1.5-2% year-on-year.

"The guidance implies a revenue decline of 1.5% to 0.5% revenue growth in 4QFY24," said analysts at Kotak Institutional Equities. Infosys announced a large deal total contract value of $3.2 billion in Q3FY24, a decline from $7.7 billion in 2QFY24. However, its net new deal component at around 71% was strong.