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Infosys CY24Q4 earnings call key takeaways

1/21/2025

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Demand Environment

Clients continuing to prioritize cost takeout over discretionary initiatives
- But spending towards new growth areas like AI, cloud adoption, cybersecurity, data and analytics is observed
Clients have started to view IT investments more favorably post-election-related certainty and interest rate cuts in recent months

GenAI

Have built 4 small language models for banking, IT operations, cyber, and enterprises broadly
- Have 2.5bn parameters, built using proprietary data sets
Developing over 100 new GenAI agents for deployment
- Have live deployments, not just proof of concept
- Typical business outcomes includes:
  - Time reduction
  - Cost reduction
  - Greater impact with customer base and growth
Working closely with GenAI partner ecosystem to develop joint solutions
Case studies:
- Client: Large Technology Company
  - Project: Developed a Generative AI-powered research agent that generated comprehensive solutions within seconds for requests made for the product support teams
- Client: Professional Services Company
  - Project: Created 3 audit agents to intelligently automate multiple tasks
Using GenAI for internal productivity
- Small and large language models helping with software development

Revenue

CY24Q4 Revenue of $4,939mn, +6.1% YoY in CC
Regions (in order of growth):
- India +40.1% YoY in CC
- Europe +12.2% YoY in CC
- North America +4.8% YoY in CC
  - Returned to positive growth trajectory after four quarters
- ROW -11.1% YoY in CC
Verticals (in order of growth):
- Manufacturing +10.7% YoY in CC
  - Automotive sector in Europe continues to remain slow
  - However, there is a continued momentum in areas such as engineering, IoT, supply chain, cloud ERP and digital transformation
  - The benefits of vendor consolidation are being more apparent, contributing to the growth of existing accounts and the establishment of new relationships
  - The pipeline is healthy, with a mix of large and small deals and a focus on cost takeout and portfolio rationalization
- Energy, Utilities, Resources and Services +8.6% YoY in CC
  - Macro headwinds and supply-demand imbalances continue to influence spending patterns
  - Growth in demand for electricity to cater to data centers is expected to bring in more investment in energy
  - Resources clients are more watchful about the changing geopolitical dynamics impacting the supply chain
  - Discretionary spend remains muted
  - Investment in industry clouds and energy transition solutions have helped win multiple deals
- Hi Tech +8.4% YoY in CC
  - Continues to remain soft
  - Some clients are reducing the run cost and pausing discretionary investments
  - Seeing opportunities in cost takeout deals, including legacy product management and managed services based business operations
  - Programs are driven by cloud computing and new tech like AI and ML
- Life Sciences +6.3% YoY in CC
- Financial Services +6.1% YoY in CC
  - Saw third consecutive quarter of volume growth
  - U.S. continues to grow strongly in this quarter and over the past few quarters
    - See discretionary spend increase in capital markets, mortgages, cards and payments
  - Have seen a revival in European Financial Services during Q3
  - Expansion into Nordics, Middle East, and Southeast Asia is also contributing to growth
- Communication +4.0% YoY in CC
  - Continues to face volatile macro environment, leading to growth challenges and rising OPEX pressure
  - Discretionary spending continues to be soft and current year growth is driven mainly by recent large deal wins focused on efficiency and consolidation
Others +3.2% YoY in CC
Retail +0.1% YoY in CC
- Seeing an improvement in US with discretionary pressures easing
- Companies are looking at investing in brand and technology initiatives
- S/4HANA migration deadline is driving budget allocation to make enterprise workload compliant
- Leveraging Infosys Topaz to showcase enhanced business value in predictive analytics and real-time insights and strategic decision-making

Bookings

CY24Q4 TCV of 17 large deal wins was $2.5bn
- 63% was net new
- Vertical-wise, signed 5 deals in Financial Services, 4 in Communication, 3 in Manufacturing, 2 each in Retail and EURS and one in Hi-Tech
- Region-wise, signed 11 large deals in America and 6 in Europe, also includes a BOT deal to set up a GCC in India
Large deal pipeline has become stronger in CY24Q4
Seeing a 3.6% 9-month pricing realization tailwind
- Seeing pricing as stable at this point in time
Decrease in share of to 5 clients is due to furloughs

Margin

CY24Q4 Operating margin of 21.3%, +80 bps YoY
- Headwinds
  - 70 bps from furloughs and lower working days, offset by higher leave utilization and others
  - FY'24 comp increase, higher variable payout, impact due to amortization of intangibles from recent acquisitions and large deal ramp-up
- Tailwinds
  - 40 bps from currency movements
  - 30 bps from Project Maximus
  - 20 bps from lower costs relating to provisions for post-sales customer support and expected credit loss provision, offset by higher third-party costs
Wage hikes will happen in two phases
- 1st phase starting January 1st
- 2nd phase starting April 1st
- Indian wages will increase 6% to 8% on average, with high performers getting more
- Overseas increases will be low single digit

Employees

CY24Q4 Total employees of 323,379, +5,591 QoQ, +716 YoY
- Second consecutive quarter of headcount addition
CY24Q4 Voluntary Attrition % (LTM - IT Services) of 13.7%, +80 bps YoY
CY24Q4 Utilization (excluding trainees) of 86%, +170 bps YoY
- 83% to 85% is the target range
Targeting 15,000 freshers for the year, with 20,000 expected for next year

Guidance

FY25 Revenue growth revised to 4.5% to 5.0% in CC
- CY25Q1 has lower working days
FY25 Operating margin unchanged at 20% to 22%

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TCS CY24Q4 Earnings Call Key Takeaways

1/20/2025

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Demand Environment

Customer priorities continue to remain centered around cost optimization and business transformation
Expect client IT budgets to remain similar in CY25 with a positive bias
With the reduction in the interest rates, easing of inflation, and reduced uncertainty with the new US administration taking over, expect the discretionary demand to strengthen
Verticals:
- Seeing early signs of revival in discretionary spend in BFSI and Retail
- Manufacturing, Life Sciences, and Healthcare should start seeing growth in the medium term as near-term challenges have bottomed out this quarter
GenAI, AI, and cloud services continue to see significant growth
- Customers are gearing up to leverage AI by focusing on application modernization and cloud
- Helping clients build LLMs, benchmark their performance, and enhance their efforts in quantization
Clients are investing in
- Agentic AI adoption
  - Represents the next stage of maturity in the exponentially evolving space of AI
  - Adds reasoning capabilities to large language models
  - Moving beyond initial wave of chatbots and RAG deployments of GenAI
  - Allows to design, train, and deploy agents that solve high-value business problems
- Building a robust data foundation
- Technology modernization
- SAP S/4 HANA transformations
- Cloud engagements

Revenue

CY25Q4 Revenue of $7.539bn, +3.6% YoY in SD, +4.5% YoY in CC
Vertical (in order of growth):
- Energy Resources and Utilities +3.4%
- Consumer +1.1%
  - Primarily driven by the improvement seen in retail in all major markets
  - Travel, transportation, and hospitality performed well in UK, EMEA, and APAC, but considerably slowed in the US due to a market specific issue and strained customer profitability
  - Retail growth strong in the fashion apparel sub-segments
- BFSI +0.9%
  - Leading adopter of AI, GenAI, and other cutting edge technologies
- Manufacturing +0.4%
  - Continue to see softness in CY24Q3 due to a combination of macro and industry specific issues in auto and aerospace, which have faced challenges from supply chain unrest and the labor market
  - Feel it will bottom out in CY25Q1 and growth will come back
  - Continue to capture demand on the back of significant investments in factor of the future, smart manufacturing, software vehicles, and GenAI
- Technology & Services -0.4%
  - Client IT budgets continued to remain flat
- Life Sciences Healthcare -4.3%
  - Client specific challenges called out last quarter are largely stabilized
  - MedTech industry is undergoing rapid transformation driven by the shift to intelligent devices and predictive AI, GenAI in genomics, cell therapy, and personalization
  - Customers are also investing significantly in scaling their digital manufacturing capabilities and building a resilient supply chain
  - Buyers waiting for more policy clarity in the US until discretionary spending returns
- Communications and Media -10.6%
  - Continues to encounter challenges with demand, primarily led by technology-driven cost optimization
  - There are encouraging signs of a rebound in IT spending as telcos advance their efforts to expand into adjacent businesses while enhancing efficiency in their core operations
Geographies (in order of growth):
- India +70.2%
- Middle East +15%
- Latin America +7%
- Asia Pacific +5.8%
- UK +4.1%
- Europe +1.5%
- North America -2.3%

Bookings

CY25Q4 Order Book TCV of $10.2bn
- Highlight of the quarter was exceptionally strong and broad-based TCV, especially strong in:
  - North America $5.9bn
  - BFSI $3.2bn
  - Consumer Business $1.3bn
Saw the deferral of some projects based upon the ROI expectation which saw reprioritization
Seeing a decrease in the deal cycle by a few weeks on deals greater then $20mn
Verticals:
- Good deals wins in BFSI, CPG
Geographies:
- Europe has one of the best deals wins

Margin

CY25Q4 Operating Margin of 24.5%, +40 bps QoQ, -50 bps YoY
- Headwinds
  - Furloughs
  - Q3 seasonality
- Tailwinds
Margin aspiration remains 26% to 28%

Employees

CY25Q1 Closing headcount of 607,354, -5,370 QoQ
- QoQ reduction was due to seasonality
- Don’t see a correlation between headcount and growth in the short-term
LTM attrition of 13.0% in IT Services
Awarded 25,000 promotions, total year 110,000

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IT Services Blog

Infosys CY24Q4 earnings call key takeaways

TCS CY24Q4 Earnings Call Key Takeaways

Chad Huston

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