Infosys Q2 24/25 (Media) Earnings Report

Infosys EPS Results

• Actual EPS: $0.19
• Consensus EPS: $0.19
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.18

Infosys Revenue Results

• Actual Revenue: $4.89 billion
• Expected Revenue: $4.89 billion
• Beat/Miss: Beat by +$8.66 million
• YoY Revenue Growth: N/A

Infosys Announcement Details

• Quarter: Q2 24/25 (Media)
• Date: 10/17/2024
• Time: Before Market Opens
• Conference Call Date: Thursday, October 17, 2024
• Conference Call Time: 7:00AM ET

Infosys (NYSE:INFY) is a global leader in digital services and consulting, serving clients in more than 50 countries. Established in 1981 and headquartered in Bengaluru, India, Infosys has grown into one of the world's leading technology services companies.

The company offers a broad range of services, including business consulting, technology solutions, cloud and infrastructure, data analytics, and AI-driven enterprise offerings. Infosys pioneered the Global Delivery Model and, in March 1999, became the first Indian company to be listed on NASDAQ—later transferring its listing to the NYSE, where it trades today under the ticker INFY.

Infosys partners with organizations around the world to help them modernize, innovate, and grow in an increasingly digital economy.

Infosys Q2 24/25 (Media) Earnings Call Transcript

Key Takeaways

• Infosys delivered a 3.1% Q/Q and 3.3% Y/Y constant-currency revenue rise in Q2 with a 21.1% operating margin, and raised FY25 CC revenue growth outlook to 3.75–4.5% while keeping margin guidance at 20–22%.
• Financial services saw 2% Q/Q growth led by capital markets, mortgages and payments, while automotive in Europe remained soft and other verticals prioritized cost takeouts over new discretionary projects.
• The company is deepening generative AI capabilities by deploying enterprise AI platforms, building its own small language model with proprietary and industry data, and rolling out multi-agent solutions for clients.
• Operational efficiency program Project Maximus contributed ~80 bps to margins, offsetting headwinds from salary hikes, variable pay and acquisition amortization, keeping margins steady at 21.1%.
• Infosys plans to onboard 15,000–20,000 fresh graduates in FY25 and has already increased headcount for the first time in several quarters, reflecting confidence in the talent pipeline.

Presentation

[Rishi Basu, Head of Investor Relations at Infosys]

I'd like to welcome all of you. This hall that we are in brings back fond memories for many at Infosys. In October of two thousand and one, Mr. Ratan Tata visited Infosys to inaugurate this very hall, which is named after the Tata Group founder, Mr. Jamsetji Tata. Mr. Ratan Tata spent almost an entire day on our campus and planted a tree to commemorate this occasion. Over the years, that tree has flourished. A happy reminder of the occasion and all the values that he stood for, and today it stands as a mark of his legacy at Infosys.

[Rishi Basu, Head of Investor Relations at Infosys]

Let me share some of those memories with you. Could we have the video, please? I now request all of you to join us for a minute's silence in memory of Mr. Ratan Tata, a titan of Indian industry and a leader who exemplified the spirit of India through his life and work. I request you to put your mobile phones on silent, and I request you rise. Thank you. I would now like to invite our Chief Executive Officer, Mr. Salil Parekh, for his opening remarks. Over to you, Salil.

[Salil Parekh, CEO at Infosys]

Thanks, Rishi. Mr. Ratan Tata has left an indelible mark on our country and really for each of us to be able to dream large and to stay grounded. He will be missed by all of us. Let me now share with you an update on our results. We had a strong performance in Q2, with robust and broad-based growth, stable operating margins, strong cash generation, strong large deals, and increased employee headcount. Our revenue grew 3.1% quarter-on-quarter and 3.3% year-on-year in constant currency terms. Financial services grew at 2%, manufacturing double digit, energy, utilities, and services at 5.8%, all quarter-on-quarter. We saw growth in all geographies quarter-on-quarter. Our operating margin for Q2 was 21.1%.

[Salil Parekh, CEO at Infosys]

The financial services segment in the U.S. continues to see discretionary spend increase in capital markets, in mortgages, cards, and payments. We've seen slowness in the automotive sector in Europe. Apart from these verticals, demand trends remain stable, with clients continuing to prioritize cost takeouts over discretionary initiatives. We are deepening our work in generative AI. We are deploying enterprise generative AI platforms, building our own small language model, and developing multi-agent solutions for our clients. With our strong performance in Q2 and our current outlook, we have revised our revenue growth guidance for financial year 2025. The new guidance is 3.75%-4.5% growth in constant currency for the full year. Our operating margin guidance remains the same at 20%-22%. With that, let's open up for questions.

[Rishi Basu, Head of Investor Relations at Infosys]

Thank you, Salil. We will now open the floor for questions. As always, we request one question from each media house to accommodate everyone over the next hour. Joining Salil is Mr. Jayesh Sanghrajka, Chief Financial Officer, Infosys. We have the first question from Ritu Singh from CNBC-TV18.

[Ritu Singh, Deputy Editor and Anchor at CNBC-TV18]

Hi, first, on the guidance revision, if you could break down for us how significantly altered is the demand environment now, versus what you saw a couple of quarters ago? And how much of this revision upwards is organic versus the contribution that you're seeing because of the in-tech acquisition? One, if you could begin by telling us that. Also, there have been seven revisions in the revenue guidance in the last eight quarters. Could you tell us what you have in terms of visibility now, in terms of the turnaround that you're speaking about? Financial services is something that you've highlighted, but some of the other areas of concern that you've been speaking about, retail, high tech, et cetera, what are you seeing there? What are you hearing from clients, on discretionary spends?

[Ritu Singh, Deputy Editor and Anchor at CNBC-TV18]

And if I may, also a word, your headcount has increased for the first time, perhaps in seven quarters. You know, you told us last time you're looking to hire about 15,000-20,000 freshers this year. Are you on track to do that? And if I may, sorry, add another question on guidance while we're talking about this. You know, you've maintained the guidance for margins at 20%-22%, but you've deferred the wage hikes to the third quarter. How much will be the impact from that? And, you know, there was no real expansion despite this Project Maximus that you've undertaken.

[Ritu Singh, Deputy Editor and Anchor at CNBC-TV18]

Just give us a sense of why, you know, despite what we saw with the rupee, why that didn't happen, and how much of a hit do you anticipate in the coming quarter because of the wage hikes? Thank you.

[Salil Parekh, CEO at Infosys]

So let me start off with some of the ones that you asked, and then Jayesh will add a little bit on the margins and also on the revenue growth guidance. So first, on the revenue growth guidance, the way we look at this is based on what we've done in the quarter. Then we look at our pipeline and look at what we anticipate, and based on those factors, as we sit today, looking out for this financial year, that's Q3 and Q4, we've looked to increase the revenue growth guidance. Now, part of it is the second question you asked on the industries. So we see financial services, discretionary spend is looking stable, strong, especially as we highlighted in capital markets, cards and payments.

[Salil Parekh, CEO at Infosys]

We also shared that in automotive, we see slowness in Europe. In the other verticals, the view, the discussions with clients are similar, so we don't see any change. There's no new discretionary, and especially the point, the verticals you mentioned, retail, or high tech. What we do see is more focus on the cost takeout elements there itself. In terms of the margin piece, let me first hand over to Jayesh, and then there may be some other comments on the revenue itself.

[Jayesh Sanghrajka, CFO at Infosys]

Yeah, so just to add to the guidance piece that Salil was talking about and to your question on in-tech. If you recollect, last time when we announced the guidance, we had clarified that in-tech is now completely included in the last guidance, so there is no additional impact or additional benefit this quarter on account of in-tech. It was already baked in in the last quarter's guidance. Having said that, you know, there are multiple factors that we look at when we give guidance. You know, a strong H1 performance, the pipelines in terms of large deals and less than 50 million deals that we have.

[Jayesh Sanghrajka, CFO at Infosys]

Our less than 50 million deals have also increased, double digit this quarter, so that has also contributed to a, you know, increase in our guidance. Coming to your margin question, if you look at our margin, this quarter, margin has remained steady at, 21.1%, similar to last quarter. And if you look at the puts and takes, you know, we got 80 basis points of benefit from Project Maximus, 10 basis points from currency. That was offset by, 30 basis points on account of acquisition because of the, amortization of intangibles, and the 60 basis points is on account of, the salary and the variable, increase that we provided, as well as the other costs. So Project Maximus has been contributing.

[Jayesh Sanghrajka, CFO at Infosys]

It's offsetting the comp increase in the variable additions that we are doing. So that's baked in in our guidance. We have guided for 20-22%, you know, for the full year. At this point in time, we are confident of our guidance, you know, with the wage hike that we are planning in Q4. The wage hike is going to be in the phased manner. Some part of that will be effective January, and the balance will be effective April.

[Salil Parekh, CEO at Infosys]

Thank you.

[Jayesh Sanghrajka, CFO at Infosys]

Go ahead. So sorry. We are on track to, you know, onboard the 15,000+ freshers that we talked about last time. We have onboarded many of them in the first half, but we are on track to onboard 15,000-20,000 at a group level in FY 2025.

[Rishi Basu, Head of Investor Relations at Infosys]

Thank you. The next question is from Haripriya Sureban from NDTV Profit.

[Haripriya Sureban, Journalist at NDTV Profit]

Hi, guys. Salil, if you could give us a sense on the budgets opening up, right? The U.S. Fed decision and the elections also coming to a close now. More stability is expected, at least in the US markets. So how do you see that in your conversation with the clients? Do you see more budgets opening up? Does this mean that, you know, Q3 and Q4 will be significantly better? Also, give us some sense on the growth you're seeing in the emerging markets, because we see that it's an up-and-coming opportunity for other players as well. So how is it panning out for you? And on the margins, just to double tap on that, you have been on the lower end of your guidance consistently now.

[Haripriya Sureban, Journalist at NDTV Profit]

So do you think with the markets getting better, demand coming back, that should also translate into better margins, and you probably reach the higher end? And on the fresher hiring, specifically you have mentioned your goals there, but with the new AI roles coming up and so much of work with generative AI, do you think you will do more specialized hiring? And will the salaries be better there, even on the fresher level and the lateral hiring?

[Salil Parekh, CEO at Infosys]

Let me start off, I think, first, on the budgets, and then a little bit on the emerging markets, and then Jayesh will add on, on the margins, and we'll come back on, what's going on with generative AI. On the budgets, what we see today is, you know, in financial services, we're starting to see the discretionary spend improving. We shared that last quarter, and we see that continuing, as we saw this Q2 roll out. In the other industries, in automotive, we still see the slowing in Europe, which we referenced before.

[Salil Parekh, CEO at Infosys]

And then for the other industries, whether you look at retail or high tech or telco, we still see the discretionary spend part of the budget is constrained, and there's still much more emphasis on the cost, and efficiency discussions. On the emerging markets, in that sense, you know, our presence is much more in Western Europe, in U.S., Australia, though for us, some of the newer growth markets, we do see good traction in Japan, good traction in Middle East, but relative in terms of size, they're still quite small, but a good, good outlook in those markets. You want to go on the margin or come on Gen AI?

[Jayesh Sanghrajka, CFO at Infosys]

Yeah. So on the margins, if you look at where we are for the H1, we have delivered 21.1% for H1, both the quarters as well, they're the same numbers. That is slightly above the midpoint of our guidance. Our guidance is 20%-22%, right? If you look at contributions from Maximus, as I was saying earlier, I think we've got a lot of benefit. You know, every quarter, we've been calling out the contribution from Project Maximus. If you look at the tracks that has delivered well, the value-based selling has been consistently delivering. The lean and automation has been delivering. You know, our utilization is pretty much at all-time high levels. Subcontractor has reduced. So there are multiple tracks which are running well.

[Jayesh Sanghrajka, CFO at Infosys]

What the program has delivered at this point in time is we have arrested the margin decline, and we have, you know, offset all the cost headwinds in terms of comp, in terms of additional variable pay, et cetera. So despite that, we have been able to maintain our margin. Our aspiration continues to remain to increase our margins in the midterm.

[Salil Parekh, CEO at Infosys]

Thank you. On the recruitment part, with the generative AI. On generative AI, we have a huge amount of focus in three specific areas. We are building enterprise-wide generative AI platforms. We're building a small language model that will be rolled out across industries, and we've launched already what are called multi-agent solutions. So this is beyond being an assistant. It's really an agent which does a lot more of the solutioning within clients. So we see a huge amount of opportunity, a very deep approach that we built for generative AI, and so that recruiting will continue with those skill sets. So there, the distinction will be much more focused on as people mature and get deeper in their career.

[Salil Parekh, CEO at Infosys]

We have, for example, within the company, a program called Power Programmers, which is focused on different sets of skills. So as those skills become deeper, we will look at those options.

[Rishi Basu, Head of Investor Relations at Infosys]

The next question is from Chandra Srikanth from Moneycontrol.

[Chandra Srikanth, Executive Editor- technology and Startups at Moneycontrol]

Salil, on the face of it, you know, your numbers are below what the street was expecting because they were very optimistic of a 3.9%-4% quarterly growth margins. I think the expectation was around 21.3%, and even the guidance was, you know, between 4%-5%, and I think the TCV number that brokerages were expecting were, you know, closer to the $3 billion mark. So can you take us through, you know, if there were one-off factors or some deals did not sort of come through this quarter? Secondly, why don't you just move to a quarterly revenue guidance instead of revising the annual guidance every quarter? Because as you know, Ritu said, this is the seventh guidance revision in the last eight quarters. Is that something that you will consider?

[Chandra Srikanth, Executive Editor- technology and Startups at Moneycontrol]

Thirdly, can you take us through the contribution from pass-through revenues, third-party software sales this quarter? Because I think that was a significant component last time around. Jayesh, despite deferring wage hikes to Q3, you know, you mentioned that the acquisition costs kind of got baked into the margins. What other tailwinds will you have in Q3, you know, to maintain it at 21.1%-21.2%? Have all the freshers been onboarded, those who have been hired in 2020-2023? And finally, Salil, tell us about your small language model. You know, how many parameters is this going to have? When will it go live? And, you know, for which industry are you building this first?

[Chandra Srikanth, Executive Editor- technology and Startups at Moneycontrol]

Are you building this on top of, you know, open source platforms, or are you leveraging your partnership with OpenAI? Thanks.

[Salil Parekh, CEO at Infosys]

So quite a few questions. Let me see if I can remember them one by one, even better. On the way we've seen our growth, our focus is really on what we're driving in the business. We see a lot of traction that we started to see in financial services, which has given us a good growth last quarter and this quarter, and we've called out last quarter and also now that outside of that, we don't see other industries yet starting to have a change in the discretionary spend. That's the outlook of where we built out our growth guidance. We are actually very positive and delighted that we've gone from 3%-4% to 3.75%-4.5%. So it's a huge upward movement in the growth guidance.

[Salil Parekh, CEO at Infosys]

Our view is we want to share, as we see each quarter, what we see the outlook for the year. We are not looking at whether that's a change or not, sometimes happens, sometimes doesn't happen. But this way, we give a clear color for a full year, as best as we know, when we close the quarter and look at the parameters. Those are really the factors that have gone into what we've done. Let me talk a little bit about the small language model, and then maybe, Jayesh, you can pick up. So there, it's an incredible approach that we have taken. We are building this on various open source components. We have a narrow set of data, which is from industry and also Infosys proprietary dataset.

[Salil Parekh, CEO at Infosys]

That will comprise the small language model. We are working on different industry applications for the small language model, and we believe it will be a huge way for clients to leverage what they can do in terms on top of that, building some business logic on top of this small language model. So we think it's an incredible differentiated approach, and we are seeing some good discussions on that basis with clients. So that we are not sharing yet. The work has started. The idea was to make sure we share the way we are going about working in generative AI. It's at a very deep level across those three areas.

[Jayesh Sanghrajka, CFO at Infosys]

Yeah. So if you look at margins, as I said earlier, we have delivered 21.1%, which is slightly above the midpoint of our guidance, which is 20%-22%. As we get into the H2, we will have headwinds, you know, coming from compensation increase. Our last comp increase was in November, so we've decided the next one to start from January in a phased manner, in two steps. So part of that will be effective January, and the balance will be effective April. We will have headwinds in terms of softness, which is regular, which is seasonal in Q2, in H2 for us, furloughs, low working and calendar days, et cetera. So those will be the headwinds.

[Jayesh Sanghrajka, CFO at Infosys]

The tailwinds will continue from Project Maximus, which has been delivering well over the last few quarters, and at this point in time, we are confident of our margin guidance of 20%-22%, with an aspiration to increase in the medium term. Yeah, so as I said earlier, we are on track to onboard 15,000-20,000 freshers at group level in FY 2025. We are not breaking it up between what was the past and this, but we are onboarding all the 15,000-20,000 freshers.

[Rishi Basu, Head of Investor Relations at Infosys]

Thanks, Chandra.

[Jayesh Sanghrajka, CFO at Infosys]

Yeah. So, look, it's first of all, it's the third-party cost, which is integral part of all the large deals or many of the large deals that we embark on, where we have taken over the turnkey projects for the clients, and, you know, third-party costs are integral part of that project. And it comes as part of the mega large deals that we sign. So there is, there's nothing specific there. It will come as and when we sign those kind of deals, but it also increases our propensity with the clients and stickiness with the clients.

[Rishi Basu, Head of Investor Relations at Infosys]

Thank you, Chandra. The next question is from Beena Parmar from The Economic Times.

[Beena Parmar, Tech, IT and Investments Correspondent at The Economic Times]

Firstly, the North American geography has seen further degrowth. Could you list out, you know, what are the core reasons? And, you know, what kind of impact do you see because of the rate cuts that we've seen by global central banks? Also, you know, the status of onboarding, just to follow up, could you tell us as to if all the onboarding has been done from the previous years, 2022 and 2023, and how many freshers have been added so far, maybe in this fiscal year? And, you know, what kind of fresher onboarding that you will look at going forward? While you've said it is 15,000-20,000, but what is remaining? And, what is the impact of the wage hike?

[Beena Parmar, Tech, IT and Investments Correspondent at The Economic Times]

Can you quantify it? How much is the wage hike as well, if you can just tell us that?

[Jayesh Sanghrajka, CFO at Infosys]

So on the wage hike, we don't quantify the impact, nor have we quantified, you know, what will be, as I said, it will be in the phased manner, you know, starting from Q4. On fresher onboarding, we will onboard 15,000-20,00 freshers during the year.

[Beena Parmar, Tech, IT and Investments Correspondent at The Economic Times]

How many have been hired so far in these two quarters?

[Jayesh Sanghrajka, CFO at Infosys]

We haven't given that breakup, but you can see the net numbers for us have been declining for the last few quarters. This is the first quarter where we had a net increase. So, you know, that's an anecdote you can derive, but we will onboard all the freshers that we have committed in the past.

[Beena Parmar, Tech, IT and Investments Correspondent at The Economic Times]

The North America.

[Salil Parekh, CEO at Infosys]

North America.

[Rishi Basu, Head of Investor Relations at Infosys]

North America.

[Salil Parekh, CEO at Infosys]

Yeah. So there, first quarter-on-quarter, we've seen growth in North America. There again, financial services was a big part of it. On a year-on-year basis, we saw negative growth. We see, as you mentioned, the rate cut in the U.S., plus the lower inflation would indicate signs of some more spend. Certainly in financial services, we've seen that, and we will wait to see in the other industries when that starts to happen.

[Beena Parmar, Tech, IT and Investments Correspondent at The Economic Times]

Just to follow up on the mega deals lineup as well, what is the pipeline, and where is the current growth coming from in terms of the deal closures?

[Salil Parekh, CEO at Infosys]

So the pipeline is still quite robust on large deals. The type of large deals are still much more on cost and efficiency, and not so much on digital transformation. So that's sort of the lay of the land in terms of the deal outlook. And we are seeing a lot of discussion in cost and efficiency still across all industries.

[Rishi Basu, Head of Investor Relations at Infosys]

Thank you. The next question is from Jas Kripalani from The Mint.

[Jas Kriplani, Senior Correspondent at The Mint]

Oh, good evening. So your peers have given mixed signals on the future outlook. Now, I want to ask whether the current prevailing macroeconomic conditions can dampen any sort of a prospect of a demand recovery, especially that has been aided by the U.S. Fed rate cut? Second, I want to understand, is cloud a part of discretionary spending? And I ask this because over the last 15-18 months, Infosys and a lot of its peers have said that cost takeout deals are the priority. Now, do clients consider cloud as an expensive prospect, and hence they are considering it in the discretionary bucket? Last part, sir, are you seeing any kind of a slowdown in the cloud spend over the last 6-9 months?

[Jas Kriplani, Senior Correspondent at The Mint]

Just if I could squeeze in one more question, what percentage of your total revenue could be described as cloud revenue? That's about it.

[Salil Parekh, CEO at Infosys]

So I think the start off was much more on the macro, the first question, and I'll go through one by one. On the macro, you know, typically we've seen, at least in the past cycles, when interest rate cuts start to begin and inflation is more in control, typically in our end markets, Western Europe and U.S., and also Australia, the interest in spending on large technology programs typically increases. But today, as we've seen, as we've shared, we've seen this change last quarter and this quarter in the financial services on discretionary. And last quarter, we had extraordinary growth in financial services. This quarter, very strong growth in financial services.

[Salil Parekh, CEO at Infosys]

Now, we don't know when the others when they'll come, but that's typically the way the macro affects the tech industry. On cloud, I think we have a very strong cloud business. You know that we have the Cobalt set of capabilities, where we work with each of the large public cloud players, and we build out various tools, templates, industry blueprints, which can work with the cloud provider, with the client to roll out whatever approach our clients are taking. Then we have a private cloud business, which is also part of Cobalt. And then, of course, we do a lot of work with the SaaS providers, where that's that's part of our cloud activity.

[Salil Parekh, CEO at Infosys]

We don't break out the cloud number, but it's in good shape within the company.

[Jas Kriplani, Senior Correspondent at The Mint]

Thank you.

[Jayesh Sanghrajka, CFO at Infosys]

Does it come out to Cost Takeout?

[Salil Parekh, CEO at Infosys]

Cloud, so it depends. Sometimes it could be cost takeout, depending on how the cloud TCO looks from a client perspective and what is their usage. For example, when you're doing some work which is more related to the edge, not just the core, then there are different cost considerations. If you're doing more standard, you know, let's say, migrating a set of applications from on-premise to cloud, depending on your time horizon, you could get some benefit, but sometimes you don't because a lot of times other services are also mixed in. For example, you could also do cybersecurity with that, and which is separate in some instances. So it's not like all cloud is cost or all cloud is not cost. It depends on which way it's done.

[Rishi Basu, Head of Investor Relations at Infosys]

Thanks, Jas. The next question is from Veena Mani from The Times of India.

[Veena Mani, Special Digital Content Specialist at The Times of India]

Good evening, gentlemen. So Q3 is usually the quarter of furloughs around December. What does it look like this time? Is it, do you think it's going to be as usual or, based on your interactions with client, would it be a lot more because discretionary spend is still on the lower side? Also, I'm trying to understand, Q4, you mentioned that wage hikes will be rolled out. Now, if you could give us the quantum, say, for instance, HCL mentioned that, 7%-8% would be the average wage hike, and for top performers, it will be around 14%.

[Veena Mani, Special Digital Content Specialist at The Times of India]

Can, Infosys give us some sort of a guidance on, on what's, what the wage hike pattern would be and what the factors considered would be in terms of tenure or, other things, what all things, would be considered? And if you could tell us a little bit about the generative AI revenues, specifically, and any, and, the cases that went live in the, in the, second quarter, some examples of, how, the work around generative AI has, been done for your, clients. And you mentioned that, the revenue growth has been broad-based, but any, I mean, are there any micro, factors that one or maybe one or two factors that really contributed to where the revenue is heading?

[Salil Parekh, CEO at Infosys]

So let me start off. I think most, maybe I can address. I think the first point was on the Q3 furlough situation. So first, we don't comment on the specific furlough outlook we have. Whatever we have, it's in our guidance, 3.75%-4.5%. Having said that, it's the start of the quarter, so it's difficult to anticipate what it'll look like. But we do have, typically in previous years, a range of outcomes that we look at. We've considered that same sort of approach in building the guidance, and it's within that guidance. Then on the generative AI example, there are a host of examples, maybe to share something. We built for one client a multi-agent solution where agents work on a specific business process that they have and do the process almost completely on its own, by parts of the process.

[Salil Parekh, CEO at Infosys]

So it changes the way that they can do the process. It changes the way they can scale up what they can do as opposed to doing part of the process. We have another example with Telco, where we've rolled out one of the items I mentioned, the Enterprise Generative AI Platform. That platform can now so seventy thousand of their employees are leveraging that platform to build out their own use cases or benefits for what they want to use generative AI for, whether it's in knowledge area, customer service area, or the coding area. So we are doing a host of projects, not POCs, actual projects, projects that are getting completed, where clients are seeing some benefits from that.

[Jayesh Sanghrajka, CFO at Infosys]

Question on wage hike.

[Salil Parekh, CEO at Infosys]

On the salary increase, we don't comment on the specifics.

[Jayesh Sanghrajka, CFO at Infosys]

Revenue growth factors. That was the last, I think.

[Salil Parekh, CEO at Infosys]

Specific factors for the growth. I think more of what we discussed before, it's really more focused with what the traction we saw on financial services. Then each of the others, we've seen quarter-on-quarter growth, except for retail, if you look at our Q2 performance.

[Rishi Basu, Head of Investor Relations at Infosys]

Thank you, Veena. The next question is from Padmini Dhruvaraj, from the Financial Express.

[Padmini Dhruvaraj, IT, Tech and Startups Reporter at Financial Express]

Hi. So your large deal TCV has shrunk to 2.4 from 4.1 last quarter. So is this lumpiness because of the factors you mentioned, that other sectors barring BFSI, that there's it's still yet to rebound? And so this demand for BFSI, is it because your clients want to adopt AI? And what percentage of your top line came from in-tech revenue contribution? And your peers, especially in the mid-market space, have said there's a burst in 1-10 million deals. So while your client addition in that space has declined, so are you losing market share there? So are you collaborating with any GCCs here for digital modernization? How many have you partnered with, if yes?

[Salil Parekh, CEO at Infosys]

So quite a few questions. The first one, where we want to look at what we see with the growth?

[Jayesh Sanghrajka, CFO at Infosys]

Large deals.

[Salil Parekh, CEO at Infosys]

The large deals growth, right? So there, typically our large deals are much more lumpy. So if you look at over sort of several quarters, some quarters a few more, some quarters a few less. Our focus really is making sure that if you look at all of H one, those are converted and are already into delivery mode. And we are seeing that coming through with the large deals, a lot more focus on cost and efficiency. On the smaller deals or smaller size programs, in fact, as Jay shared earlier, we have seen on deals below 50 million in value, which is outside of our large deals, which are not in the large deals, we've seen a huge increase, double-digit increase in that pipeline.

[Salil Parekh, CEO at Infosys]

We see a lot more traction of that sort of work that we already see. The point you made on financial services, we do see the discretionary spend there, but in the other industries, not yet.

[Padmini Dhruvaraj, IT, Tech and Startups Reporter at Financial Express]

Your collaboration with GCCs here?

[Salil Parekh, CEO at Infosys]

On the GCCs, so we are working very closely with GCCs all around. We are working with clients when they're setting up their GCCs. We're working with them when they do a build, operate, transfer, and we participate in it, with the build, operate, and when they transfer. We are working with them, with GCCs in India, to help scale them, to help with recruiting. And we are also working in some instances with clients when they are exiting from GCCs, when we have programs where we take them, and they become part of us. So a very strong connect with GCCs across India.

[Padmini Dhruvaraj, IT, Tech and Startups Reporter at Financial Express]

Infosys revenue?

[Salil Parekh, CEO at Infosys]

So in-tech contributed 80 basis points to this quarter's revenue.

[Rishi Basu, Head of Investor Relations at Infosys]

Thank you. The next question is from Uma Kannan, from The New Indian Express.

[Uma Kannan, Journalist at The New Indian Express]

Good evening. In general, I just want to ask you, like, how your acquired companies have performed in Q2? And today you have announced an acquisition of Blitz, right? So how this will help you in your overall revenue growth?

[Jayesh Sanghrajka, CFO at Infosys]

We don't specifically give out the performance of each of the acquired entities, but overall, our acquisitions have contributed well, both organically as well as in terms of synergy, over the years.

[Uma Kannan, Journalist at The New Indian Express]

So, Salil, you did speak about BFSI, but I just want to understand why there is degrowth in retail. Is there any specific reason?

[Salil Parekh, CEO at Infosys]

For what?

[Uma Kannan, Journalist at The New Indian Express]

In terms of revenue, retail contribution.

[Salil Parekh, CEO at Infosys]

No, we've talked about retail in the last few quarters. That industry is going through some change. So nothing has changed except to say that it's not actually come back with the discretionary spend. So it's not like we're pointing out something has changed in the behavior there, as opposed to FS, where there's better discretionary, or automotive in Europe, where it's a little bit softer.

[Uma Kannan, Journalist at The New Indian Express]

I just want to ask you one question on GenAI. You did speak about GenAI, but I just want to, you know, understand how the pipeline looks like. Are you seeing any particular sector growth in, say, for example, whether it is BFSI, retail? Like which particular sector you're seeing growth in terms of deals?

[Salil Parekh, CEO at Infosys]

Generative AI first is not in any specific industry or sector. It's across every industry. Part of generative AI work is it's already becoming embedded in everything we do. Any large program or transformation or cost efficiency, productivity, a part of it is generative AI. We have different ways of looking at it because, say, you look at, you know, a tech and ops deal in customer service, there'll be a large part of generative AI. Or if you look at something where we are building out new capabilities, there'll be some productivity benefits through generative AI. But it's not the full deal. It's parts of almost every deal that we're doing.

[Rishi Basu, Head of Investor Relations at Infosys]

Thank you. The next question is from Sanjana from the Hindu Business Line.

[Sanjana B, Tech Reporter at Hindu Business Line]

Good evening, gentlemen. Salil, last quarter you'd mentioned that, you know, while these gen AI projects are not POCs, they're not large revenue projects either. So when do you think this change will come? And also from what I can see, much of your revenues are divided between North America and Europe. There's been a flat growth, you know, like, between your revenue shares between the rest of the world and India. So, you know, like with emerging markets like LATAM and, you know, like Africa, is that something that you're looking at? And is nearshoring a strategy that you're employing? And beyond the margin guidance, say, in the medium term, what is your aspirational margin? Yeah, that's all. Thank you.

[Salil Parekh, CEO at Infosys]

So on the generative AI, we don't break out the revenue, as we had shared before. What we do see is the work we are doing is quite deep now. We are building enterprise generative AI platforms. We're building a small language model. We're working on multi-agent frameworks. So these are things which are quite deep within the generative AI landscape and where clients are really appreciating the sort of, let's say, thought leadership, industry leadership that we have on generative AI. In terms of the geographies, we have, of course, a strong focus within North America, within Europe, within Australia. We don't have business outside of our Finacle business in Africa, so it's a small part of our business.

[Salil Parekh, CEO at Infosys]

In Latin America, similarly, a small part of business. On nearshoring, we see a lot of traction that we are seeing across different nearshore markets. In Europe, there are certain markets. For North America, there are certain markets. And even in Asia, we have some markets in which we are building nearshore capability. So that's certainly moving along well. On the margin aspiration, we absolutely have an internal aspiration to drive margin higher and higher with all of the approach we're taking, but we have not shared that externally.

[Rishi Basu, Head of Investor Relations at Infosys]

Thank you. The next question is from Sonal Choudhary from the Deccan Herald.

[Sonal Choudhary, Business Reporter at Deccan Herald]

Good evening, gentlemen. While you've pretty much highlighted everything, there's a few questions that I'd like to ask. Firstly, on the hiring, as everyone has already asked, the 2022 letters that went out and the hiring, which you promised, that will be done from October. I just want to know if this two-year, 2022, 2023, the letters which went out in those years and the hiring that happened now, so, was there a lapse or anything on that front?

[Salil Parekh, CEO at Infosys]

Was there a what, sorry?

[Sonal Choudhary, Business Reporter at Deccan Herald]

Lapse.

[Salil Parekh, CEO at Infosys]

No, first, we are gonna hire everyone that has got a letter, and an offer, from Infosys. We have a phased approach to this hiring, and that is in process right now.

[Sonal Choudhary, Business Reporter at Deccan Herald]

Also, your operating margins, they're flat. They were expected to be at around 21.3%. So is there anything, any color that you'd like to add to that? Is that, is that something that you were also expecting?

[Jayesh Sanghrajka, CFO at Infosys]

As I said earlier, our margin guidance is 20%-22%, and we are slightly above the midpoint of the margin guidance, right? If you look at the puts and takes, we had 80 basis points coming from Project Maximus, 10 basis points coming from currency, and, you know, 30 basis points of tailwinds from the acquisition that we did, mainly on account of amortization, and the balance 60 basis points was invested in terms of salary hikes, in terms of additional variable pay and other costs. So net-net, it offset each other, and we have reported 21.1% at margin. We don't really call out what we were expecting and where we are. I think we have delivered on what we were planning for.

[Sonal Choudhary, Business Reporter at Deccan Herald]

And you're expecting this to, I mean, increase going ahead, right?

[Jayesh Sanghrajka, CFO at Infosys]

In the medium term, yes.

[Sonal Choudhary, Business Reporter at Deccan Herald]

Also, GCCs, you've spoken about it already. The popular mandate did put out that, you know, it's like a competition, while you've clearly highlighted that it's not, you're collaborating rather. So how many GCCs have you collaborated with till now?

[Salil Parekh, CEO at Infosys]

So, first, GCCs are doing a fantastic job. We are quite fortunate that we are working with many of the client organizations and their GCCs in India. There, there's a large number of GCCs here. We don't share specifically which GCCs we collaborate with, but to give you a sense, in financial services, in telco, in life sciences, we are working with a large number of those GCCs in India and helping them and supporting them. But we do not give specific the number of GCCs we are working with here. It's part of our overall client relationship. We have teams that work very closely because there are different needs sometimes for what the GCCs are looking for, and sometimes it's a holistic need across the client between the GCC in India and the global organization.

[Jayesh Sanghrajka, CFO at Infosys]

Thank you. With that, we come to the end of this press conference. We thank our friends from media for being here today. Thank you, Salil, and thank you, Jayesh. Before we conclude, please note that the archive webcast of this-

Participants

Executives

• Salil Parekh, CEO
• Jayesh Sanghrajka, CFO
• Rishi Basu, Head of Investor Relations

Analysts

• Sonal Choudhary, Business Reporter at Deccan Herald
• Ritu Singh, Deputy Editor and Anchor at CNBC-TV18
• Uma Kannan, Journalist at The New Indian Express
• Sanjana B, Tech Reporter at Hindu Business Line
• Chandra Srikanth, Executive Editor- technology and Startups at Moneycontrol
• Veena Mani, Special Digital Content Specialist at The Times of India
• Padmini Dhruvaraj, IT, Tech and Startups Reporter at Financial Express
• Beena Parmar, Tech, IT and Investments Correspondent at The Economic Times
• Jas Kriplani, Senior Correspondent at The Mint
• Haripriya Sureban, Journalist at NDTV Profit