Infosys lands $1.6-bn deal with Liberty Global amid economic challenges

IT services major Infosys has secured one of its largest deals worth $1.6 billion (€1.5 billion) from Liberty Global, a digital communications British-Dutch American telecom multinational.

The deal involves Infosys building and expanding the technology platforms for entertainment and connectivity for Liberty Global. This agreement marks the third major deal for Infosys this year. However, this deal comes when Infosys faces challenges due to tough economic conditions, reducing its revenue expectations for the current financial year.

Infosys said it is keen to introduce Infosys Topaz, a set of services, solutions, and platforms driven by artificial intelligence (AI) for Liberty Global. This will enhance the existing digital foundation built by Infosys Cobalt for Liberty Global, the CEO of Infosys, Salil Parekh, said in a statement.

According to a filing with the exchange, the agreement is initially set for five years, possibly extending it to eight years. If the extension occurs, the deal's total value could reach €2.3 billion ($2.5 billion).

Regarding financial performance, Infosys reported a 1 per cent increase in revenue for the first quarter of the fiscal year 2024 (1QFY24), totalling $4.62 billion. Additionally, the company secured a significant deal worth $2.0 billion in July 2023.

Despite these positive aspects, Infosys lowered its revenue growth projection for the full fiscal year 2024 due to lower-than-expected demand, delays in decision-making processes, and postponements of major deals.

The company's profit margin (EBIT margin) experienced a slight decrease of 20 basis points to 20.8 per cent, primarily due to increased employee expenses. Despite the adjustment in revenue guidance, Infosys maintained its EBIT margin projection for the fiscal year 2024 at 20-22 per cent.

While the reduced revenue guidance may negatively impact the company's stock price temporarily, analysts from Motilal Oswal believe that the revision is more about managing expectations in the current economic environment rather than operational shortcomings. Despite the cut in revenue guidance, Infosys's revenue growth for the first quarter of fiscal year 2024 is in line with its peers' performance.

Analysts anticipate a recovery in the macroeconomic conditions over the upcoming quarters, which could lead to double-digit growth in fiscal year 2025. They project a Compound Annual Growth Rate (CAGR) of 7.7 per cent in USD revenue from fiscal year 2023 to 2025.