Bengaluru-based software major Infosys released its third-quarter financial results on Thursday. Net profit increased by more than 13.4% year-over-year to INR 6,586 crore from INR 5,809 crore in the same period last year and 2.4% quarter-on-quarter. Infosys secured transactions totalling $3.3 billion, the highest in the previous eight quarters, although the tech sector saw a typically bad quarter. 

It raised its guidance for the current financial year’s constant currency (CC) sales growth from 15%-16% to 16%-16.5%. Most analysts had predicted that the company would stick to its forecast for revenue growth. Instead, the year-over-year revenue boost was 13.7% in constant currency terms. Compared to a year ago, digital revenue made up 62.9% of total revenues, and it increased by 21.7% in constant currency. Infosys nevertheless kept its operating margin guidance for FY23 at 21-22%.

While the margin has decreased by 200 basis points year over year, it has remained relatively steady sequentially. 

Read more: TCS Crosses $7 Bn Revenue Per Quarter; 2k Employees Missing

Attrition Dips, Margin Improves

With significant transaction wins in the third quarter, Infosys was able to surpass the Street estimates, although its attrition rate dropped to 24.3%. This was lower than the quarter before when there was 27%, and from a year before when there was 25.5%.

The quarterly annual attrition rate plummeted by another 6% in Q3, reaching its lowest in the last seven quarters and trending downward.

Over the previous three quarters, Infosys’ attrition rate has been declining. It saw a decline of 2.5% in the most recent quarter, pointing to a decline in Q3. Nilanjan Roy, chief financial officer at Infosys, stated, “We expect Attrition to reduce further in the coming quarters”.

Despite currency benefits, Infosys’ operating margins remained constant at 21.5%. “Operating margins in Q3 remained resilient due to cost optimisation benefits which offset the impact of seasonal weakness in operating parameters,” said Roy. In the Q3 of 2022–2023, Infosys employed about 6,000 new employees. In the Q1 of this year, Infosys hired 21,171 more individuals, but in the second quarter, it hired only 10,032. The company set a 50,000 fresher hiring target at the start of FY23, and 40,000 of them were hired in the first half of the year.

Infosys’ net addition of employees in Q3 took a major hit, slipping by 84% to 1,627 from over 10,000 in Q2, making the total headcount 346,845. 

CEO Salil Parekh said the company had implemented new changes and policies to improve Attrition. He said, “Attrition is going down every quarter for us. There were several policies that we put in place, several changes, much more aligned with the employee expectations, career development, training, and many of those things, (that) I believe are helping us with very sharp six-point reduction attrition this quarter, but also in the previous quarters.”

The decline in attrition rate is expected to impact margins positively. 

The third quarter saw the slowest vertical growth for Infosys in the financial services sector. Revenue growth was just 2.2% YoY. Infosys got two clients in the $50 million bracket and roughly 13 in the $10 million bracket in the third quarter.

Geographically, the company did well last quarter in North America and Europe. In North America, revenue growth was up 10% yearly; in Europe, it was up 13.6%. 

TCS Vs Infosys Vs HCL

Infosys performed better than its nemesis TCS, which barely beat revenue estimates. However, due to the global economic slump, TCS performed worse in Europe, where clients were cutting back on spending.

But the attrition rate of TCS in Q3 was lower than Infosys. TCS witnessed a minuscule decline in attrition rate from 21.5% in the previous quarter to 21.3% in FY23 Q3. However, in the same quarter—FY22 Q3—Attrition was about 11.9% last year. More importantly, hiring dropped at TCS. 

In Q3FY23, HCL Tech outperformed brokerage expectations by delivering a 5% QoQ revenue increase in cross-currency terms to $3,244 million. EBIT margin grew by roughly 165 basis points QoQ to 19.6%, as against a 60 bps projection, exceeding Street projections.

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