Infosys shares were up nearly 9 percent in early trading on Thursday after releasing a strong set of Q1 2024 earnings. The consulting firm also revised its revenue forecast upwards to 3-4 percent growth for the Full Year 2025, from projections of 1 to 3 percent in the previous quarter.
CEO Salil Parekh said:
All geographies and most industry groups grew sequentially, volume growth turned positive after several quarters, we also had an improvement in realization. We had another quarter of strong large deal wins with 34 large deals at a total contract value of $4.1 billion. Our clients see us as a preferred partner of choice for consolidation, cost takeout, and efficiency programs. This is also a reflection of our leadership trend.
The key numbers for the quarter include:
- Revenues in constant currency terms grew by 2.5% year-over-year and by 3.6% compared to the same quarter last year
- Reported revenues at $4.714 billion, growth of 2.1% year-over-year
- Operating margin at 21.1%, growth of 0.3% year-over-year and 1.0% compared to the same quarter last year
Hopes for AI
Parekh also highlighted that Infosys is seeing strong traction from its clients with generative AI programmes, delivered through its Topaz offering – an AI marketing suite. Infosys says that Topaz brings together over 12,000 AI assets, over 150 pre-trained AI models and 10 AI platforms, steered by “AI-first specialists and data strategists”.
The CEO said:
As an example, we are partnering with a telecommunications leader to transform the product engineering practices with AI and to elevate both the customer and employee experience. Another example is how we are optimizing and modernizing IT infrastructure services and transforming the IT operating model with AI for a leading bank. We’re helping several of our clients prepare for the AI transformation journey by building strong data foundations with robust cloud capabilities using our Cobalt cloud services.
Industry analysts acknowledge our leadership in the domain of enterprise-generative AI. We continue to invest in strengthening our AI capabilities and building AI for our solutions for clients.
Our investment in nurturing our global workforce with AI-first skills and expertise continues as over 270,000 of our employees are now well-trained in building a wide range of AI-powered solutions for our clients.
Interestingly, Parekh also said that whilst the AI deals at present aren’t just proof of concepts – they are actual projects – they are not “large revenue projects” and that transformation is not what Infosys is seeing:
So, even in a large deal, the vast majority are still cost take out, efficiency, consolidation, automation, that type of work. And in some instances where there is [transformation], these are funded massively through cost take out.
My take
A nice bounce for Infosys that brings some optimism for tech spend. The AI comments are very interesting though, suggesting that automation is being used for efficiency, rather than boosting the top line. It will be worth keeping an eye on if and how that changes in the medium term.
