Infosys shares drop 6% despite posting good Q3 numbers; what is weighing on sentiment?

The company reported a good set of numbers and also increased the full-year revenue guidance. Despite that, Infosys ADRs slipped in the overnight trade on Wall Street amid a sell-off in the IT stocks.

The tech-heavy index on Wall Street, the Nasdaq Composite, lost 172.94 points, or 0.89%, to settle at 19,338.29. The benchmark index was dragged lower in part by a 4.04% drop in Apple after data from research firm Canalys showed the iPhone maker was overtaken as China's biggest smartphone seller in 2024 by rivals Vivo and Huawei.

Infosys Q3 FY25 Results

IT services major Infosys on Thursday reported an 11.46% year-on-year increase in consolidated net profit to ₹6,806 crore in the October-December quarter of FY25.

The company had posted a profit of ₹6,106 crore in the corresponding period of the previous fiscal.

Revenue from operations for the quarter under review came in at ₹41,764 crore, 7.58% higher than ₹38,821 crore in the third quarter of FY24.

"Our strong revenue growth sequentially in a seasonally weak quarter and broad-based year-on-year growth, along with robust operating parameters and margins, is a clear reflection of the success of our differentiated digital offerings, market positioning, and key strategic initiatives. We continue to strengthen our enterprise AI capabilities, particularly focusing on generative AI, which is witnessing increasing client traction," Infosys CEO and MD Salil Parekh said.

The company added 5,591 employees during the quarter, bringing the total headcount to 323,379.

In geographical terms, Infosys saw double-digit year-on-year growth in India and Europe. North America registered an annual growth of nearly 5%.

"Financial services in the US continue to grow strongly in this quarter and over the past few quarters. We have seen a revival in European financial services during Q3.

"We are seeing an improvement in the retail and consumer product industry in the US with discretionary pressure easing," Infosys CEO and MD Salil Parekh said during the company's earnings call.

For the third consecutive quarter, Infosys raised the 2024-25 fiscal year revenue guidance. It now anticipates revenue growth of 4.5 to 5% in FY25, up from the 3.75-4.50% it had given in the previous quarter.

Operating margin guidance remained unchanged at 20-22%.

Infosys CFO Jayesh Sanghrajka said the firm is on track to meet its hiring commitment and will hire over 15,000 staff in the current fiscal year.

"We are expecting 20,000-plus fresher hiring for FY26," he said.

On whether a new US regime will affect the company, Sanghrajka said the company's dependence on H1B visas has reduced.

"Over the years, our dependence on H-1B visas has reduced significantly.

"First and foremost, our onsite mix has reduced significantly—we used to be in the 30% range...we are now at the 24% range.

"Within that, our near shore has increased significantly," the CFO added.