On Monday evening, India’s second-largest information technology (IT) services company by market capitalization, Infosys announced that it has signed a mega deal with one of its existing clients.
Infosys Wins $2 Billion AI, Automation Deal Expansion
Moving ahead, the IT major said that the deal to provide artificial intelligence (AI) and automation development, modernization and maintenance services is valued at $2 billion which will be spread over the next five years, in an exchange filing.
The company has not shared the details of the client and declined a request of comment.
On 20 July, Infosy was scheduled to announce its fiscal first quarter financial results.
Interestingly, this deal win comes against the backdrop of weakness and uncertainty in India’s $245-billion IT services industry.
Infosys chief executive Salil Parekh guided for 4-7% annual revenue growth rate on 13 April.
It is mostly affected by the underwhelming market expectations, projected on macroeconomic headwinds leading to a slowdown in tech spending around the world.
In a 29 June investor note, brokerage firm ICICI Securities projected Infosys to report 0.8% sequential revenue growth for the June quarter.
Even the September quarter is likely to remain “relatively soft” for Infosys, “given no mega-deal ramp-ups in Q2,” said Sumeet Jain, research analyst at ICICI Securities, in the note.
Second Half Of This Fiscal Year Likely To Bring In Growth
This $2-billion deal win will definitely add to the company’s mega deal portfolio for the September quarter.
“We believe that Infosys could narrow its revenue growth guidance to 4-6% in constant currency (CC) terms for FY24, (down) from 4-7%. We are now expecting 5.1% CC growth for Infosys in FY24, with EBIT (earnings before interest and taxes) margin at 21%,” said Jain’s note to investors, prior to the disclosure of this deal.
To be specific, Infosys’ large deal win value for the March quarter stood at $2.1 billion.
With this, the IT major closed FY23 with 40 $100-million-plus clients, up from 38 in FY22.
Although Infosys’ forecast for FY24 is weak, the company could offer a revised upward guidance towards the second half of this fiscal, according to the industry analysts.
The June quarter “is likely to be a struggle” for Infosys, along with weakness exhibited by Wipro And Tech Mahindra as well, said Omkar Tanksale, senior research analyst at brokerage firm Axis Securities.
Further adding, “Most deals in the market during the June quarter have been cost optimization deals, and their translation to billable value is likely to be inconsistent, because of the nature of these deals. Most of them could be spread out over a longer tenure, which could therefore not see IT firms get direct translation of large deal wins into their net deals closed for the quarter.”
Given Infosys’ “broad-based portfolio of clients”, the company is likely to remain strong in the long run, beyond the immediate two quarters, he said.
It appears that the second half of this fiscal year is likely to bring growth for the overall sector, too.
