IT major Infosys is set to announce its third-quarter earnings on January 11 amid a sectoral downturn due to macroeconomic headwinds in a seasonally weak period. In the last quarter, the company remained cautious and further chopped its guidance. As the results of a new quarter unfold, here are the five key metrics to watch out for.

Revenue growth

Infosys is expected to record a degrowth in the range of -0.1 to -1.7 per cent, on a quarter-on-quarter (QoQ) basis, according to a poll of brokerages. The growth is noted to be impacted by a lower number of working days and higher-than-expected furloughs, and continued macro challenges.

Margin and guidance

Brokerages expect EBIT margins to decline in the 72-100 bps range. Margin headwinds for the quarter are wage hikes and muted revenue growth. The company is expected to maintain its guidance regarding healthy deal wins and a strong pipeline. Infosys reduced its growth guidance for FY24 from 4-7 per cent to 1-3.5 per cent after Q1 and then revised it further downward to 1-2.5 per cent after the second quarter.

Deals and conversion of pipeline

Large deal Total Contract Value(TCV) stood at $7.7 billion in Q2 compared to $2.3 billion in Q1 and was the highest TCV clocked by Infosys in a quarter. TCV in Q3 is expected to moderate there as the quarter didn’t see multiple large deal signings as the previous one. Further, Motilal Oswal, in its report, notes, “Deal pipeline remains healthy while closure remains a bit challenging due to slower decision making and furloughs. However, the conversion remains on track.”

Management Commentary

Management commentary on the impact of salary hikes on margins, deal TCVs and pipeline, pricing scenario, performance of impacted verticals such as BFSI, retail, hi-tech and telecom, reason for cancellation of the $1.5 billion AI deal, large deal win ramp-ups and pipeline, investments in GenAI partnerships and solutions and utilization, is to be watched out for.

Attrition and hiring

In Q2, Infosys’ total headcount fell by 7,530 employees, higher than last quarter, from 3,36,294 in Q1 to 3,28,764 in Q2. Voluntary attrition during the quarter fell to 14.6 per cent from 17.3 per cent last quarter. The management noted that the hiring outlook will depend on changes in the demand environment and attrition rates.

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