Infosys Q3 In-Line With Street Estimates: Technical Analysis On This IT Stock After Quarterly Results

Tech giant, Infosys' third quarterly earnings for FY24 was in line with street estimates. Infosys reported a decline in its bottom line, while revenue was a mixed bag. However, the key highlight was the revision in FY24 guidance, while its attrition rate continues to decline. Infosys share is expected to see a neutral opening on Friday, while its support level is factored to stay above Rs 1,500.

In Q3FY24, Infosys posted a consolidated net profit of Rs 6,106 crore, down by 7.3 % year-on-year and 1.7% quarter-on-quarter. Consolidated revenue came in at Rs 38,821 crore in Q4FY24, registering a marginal growth of 1.3% YoY but slipped -0.4% QoQ. In dollar terms, Infosys revenue stood at $4,663 million, flat compared to revenue of $4,659 million in Q3FY24, but down by 1.2% from Rs 4,718 crore in Q2FY24.

Further, Infosys recorded a large deal TCV for the quarter was $3.2 billion, with 71% being net new. Operating margin for the quarter was 20.5%, a sequential decline of 70 bps. Attrition declined further to 12.9%. FY24 revenue guidance was revised to 1.5%-2.0% and operating margin guidance to 20%-22%.

On the Q3 results, Prashanth Tapse, Senior VP (Research), Mehta Equities said, "Infosys third-quarter earnings came in line with street estimates, as the December quarter is seasonally weak for the information technology sector. Infosys has revised and tightened its FY24 revenue guidance to 1.5-2.0% and operating margin guidance at 20-22%. December usually being a seasonally weak quarter with macro-economic headwinds INFY remained neutral."

Meanwhile, Dhruv Mudaraddi, Research Analyst, StoxBox said, "In Q3FY24, Infosys indicates a marginal decline in revenue QoQ, impacted by a challenging environment characterized by sustained weak demand, the absence of certain one-time sales, and the impact of furloughs. The absence of mega deals has slowed deal momentum during the quarter. Furthermore, a sequential decrease in EBIT margins can be attributed to the impact of two months of wage hikes and the absence of one-time sales observed in Q2FY24."

Despite the challenging environment, Mudaraddi added, "Infosys showcased its execution capabilities, with operational efficiencies realized under 'Project Maximus.' Cash generation remained robust, with Free cash flow to net profit conversion for Q3 at 90.6%. The company reduced its FY24 revenue guidance to 1.5%-2.0% and retained the operating margin guidance at 20%-22%."

Technically, Tapse said, "the expectation is being discounted in the price at Rs 1517, hence we expect a neutral opening on Friday with limited downside from here. We expect Rs 1500 to remain as support and expect to stay above this. The upside can be in the range of 1540-1560 in coming days."

On a fundamental basis, Mudaraddi said, "Infosys' strategic focus on generative AI, digital, cloud, cost efficiency, and automation positions the company for long-term value creation and market leadership. We will be keeping a close eye on the management guidance regarding the demand outlook in the BFSI and Hi-Tech verticals that are currently facing pressure, feedback on clients' CY24 budgets, deal ramp-up visibility, and the strategies in place to manage margins effectively."

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