Can Infosys maintain its momentum after reporting strong June 2025 quarter growth?
Infosys
reported strong sequential revenue growth for the June 2025 quarter driven by lower base in the previous quarter, higher pricing, and improved utilisation. In comparison, its peers including
Tata Consulting Services
,
HCL Technologies
, and
Wipro
failed to report a meaningful sequential top-line growth.
Infosys also revised the FY26 constant currency (CC) revenue guidance to 1-3% growth from earlier 0-3% growth citing a higher traction in new deal wins during the June quarter. For Infosys, revenue grew by 4.5% sequentially to $4,941 million in the June quarter after falling by 4.2% in the previous quarter. Analysts on average had anticipated 2.8% growth.
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The June quarter sequential growth may not help much in predicting the trend in coming quarters since it is benefitted by the low base in the previous quarter. A year-on-year comparison shows that revenue rose by 4.8%, the second fastest growth in nine quarters after the 5.9% increase seen in the December 2024 quarter. Given a sustained momentum in the
European market
and strong order booking in the June quarter, the country's second largest software exporter is expected to show improved traction in the coming quarters.
The company continued to show improving year-on-year business growth-12.3% in the June quarter, coming on the back of 13% growth in FY25 - in the European market, which contributes nearly one-third to its revenues. It reported flat trend in the US, its largest market, which forms over 56% of revenue. In addition, the
total contract value
(TCV) of large deal wins for the June quarter amounted to $3.8 billion, the highest since the previous year's June quarter when the TCV was $4.1 billion. The operating margin (EBIT margin) fell by 20 basis points sequentially to 20.8%. While phase-wise salary increase in the quarter and currency headwinds impacted the margin, better pricing and utilisation, and absence of acquisition related impairments compared with the prior quarter provided cushion.
Agencies
Despite revising the lower end of the revenue guidance upwards, the company has retained the target margin band at 20-22% for FY26 indicating that there may not be any significant margin levers in the short term.
Like the majority of peers,
Infosys
also reported higher employee attrition, which rose to 14.4% in the June quarter from 14.1% a quarter ago and 12.7% a year ago. The company's headcount increased by 8,456 year-on-year to 323,788, the highest addition among peers. The company management has stated that it would continue to execute hiring for the current fiscal year as planned. Infosys has gained nearly 11% on bourses since announcing its March quarter numbers on April 17, beating the 10% gain in the BSE Infotech index and the returns earned by peers. The stock is expected to stay on investors' radar given the sustained traction in new deals.
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