Infosys posts 16.6% net profit growth in Dec quarter, revises FY21 guidance

Large deals, digital growth drives outperformance

Information technology (IT) services major Infosys on Wednesday raised its full-year revenue and margin guidance after posting 16.6 per cent growth in net profit in the quarter ended December (Q3). The consolidated net profit of Rs 5,197 crore in Q3 is the highest ever for the firm, and beat analyst estimates, which had pegged it at just over Rs 5,000 crore. 

The Bengaluru-headquartered company also guided for double-digit growth in the next financial year on the back of a ramp-up in large deals, acceleration in digital spends by clients, and a strong deal pipeline. The company revised its hiring target and indicated it would hire 24,000 freshers next year up from 15,000 planned earlier.

Infosys reported 12.3 per cent year-on-year revenue growth in Q3 at Rs 25,927 crore, as against an estimate of Rs 25,184 crore. The banking and financial services segment, which contributes over a third of its revenue and is its largest vertical, grew by over 13 per cent. Digital business continued its growth momentum, rising 33 per cent over the year-ago quarter. The business now contributes half of Infosys' revenue compared to 40.6 per cent a year ago. 

On a constant-currency basis, revenue growth came in at 5.3 per cent quarter-on-quarter and 6.6 per cent year-on-year (YoY). The company said the 5.3 per cent sequential growth was its highest in eight years.

Strong revenue growth and cost optimisation measures helped the company post muti-quarter high operating profit margins of 25.4 per cent, an increase of 350 basis points on a YoY basis.

Infosys results exceeded the Street expectations and were better than its peer Tata Consultancy Services, which posted 5.4 per cent and 7.2 per cent growth in revenue and net profit, respectively.

The company revised its full-year revenue and margin guidance in constant currency to 4.5-5 per cent (from 2-3 per cent earlier) and 24-24.5 per cent (from 23–24 per cent earlier).

Infosys Chief Financial Officer Nilanjan Roy said the company would be able to achieve better margins despite a pay hike and possible increase in travel spends in the fourth quarter. “We have cost optimisation levers which we can deploy to achieve the margins,” he added.

Infosys Chief Executive Officer and Managing Director Salil Parekh, who completed three years in office earlier this month, said the company was confident of double-digit growth in the coming fiscal. “The business momentum remains strong. We see market share gains coming to us. The order pipeline is strong,” he said.

Chief Operating Officer Pravin Rao said Infosys would be hiring 24,000 freshers next fiscal.

During the third quarter, the company won $7.13 billion worth of large deal contracts, which included its largest deal with German automotive firm Daimler worth an estimated $3.2 billion. Infosys expects deal momentum to continue as companies invest in digital space and build their tech infrastructure.

The company also announced a definitive agreement to purchase assets and onboard employees of Carter Digital, one of Australia’s leading experience design agencies. “This asset takeover strengthens Infosys’ global design and experience offerings, demonstrates its continued commitment in bringing innovative thinking, talent and creativity to its clients, and provide effective global digital solutions,” it said.