A respectable Q1 gives Infosys a better outlook

The softer-than-anticipated end to FY25 for Infosys (see here) did not carry through into the start of the new fiscal year with the company's Q126 revenue increasing by 3.8% yoy at constant currency to $4.94bn. Operating margin for the three months ended 30 June eased back a tad both sequentially and against Q125 to 20.8%. First quarter large deal TCV was also down by over 7% yoy to $3.8bn, of which only 55% was net new business.

The most significant factor driving the improvement in Infosys's top line performance was a return to growth for its North America region. Having shrunk during the first quarter of FY25 and ended the year on a downward trajectory, Q126 turnover in the territory was up both qoq and yoy by 0.3% and 0.4% respectively. Infosys Europe delivered another double-digit sales growth quarter bolstered by the contribution from the in-tech acquisition in late spring 2024. The pace of quarterly yoy expansion in the geography did, however, slow from 15% in Q425 to just over 12% in Q126 and we'll get a better view of the organic progress being made in this region come the publication of the Q2 results.

Across Infosys's vertical industry portfolio, demand from the firm's manufacturing clients remained the most resilient in Q1 with their collective revenues up by 12.2% yoy to almost $800m. The quarter also saw notable upticks in momentum from the company's energy, utilities, resources & services and communications sectors. The pace of growth slowed materially in Infosys's financial services and life sciences verticals. Turnover in the latter shrank by just shy of 8% yoy (Q425: -3.4%).

Overall, however, it has been a positive start to FY26 for Infosys and one that compares favourably to those of its offshore peers which have published their results for the same period (see here). While remaining cautious regarding the outlook for the full year, the company has increased the bottom end of revenue growth guidance from flat to 1% with the top end held at 3%.

Posted by: Duncan Aitchison at 09:42

Tags: results   offshore   IT+services