Ladies and gentlemen, good day, and welcome to Infosys Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to you, sir.

Thanks, Nirav. Hello, everyone, and welcome to Infosys earnings call for Q1 FY'25. Joining us on this call is CEO & MD, Mr. Salil Parekh; CFO, Mr. Jayesh Sanghrajka, and other members of the leadership team. We'll start the call with some remarks on the performance of the company, subsequent to which the call will be opened up for questions. Please note that anything we say which refer to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risk that the company faces. A full statement and explanation of all these risks is available in our filings with the SEC, which can be found on www.sec.gov. I'd now like to pass on the call to Salil.

Thanks, Sandeep. Good evening, and good morning to everyone on the call. We started the financial year with a strong performance in quarter one across multiple dimensions, including broad-based revenue growth expansion -- broad-based revenue growth, expansion in operating margin, strong large deal wins, and strong cash generation. Our revenues for the quarter grew 3.6% sequentially and 2.5% year-on-year in constant currency terms. I'm particularly pleased with 7.9% growth in financial services segment where we are seeing improvement in client spend in North America. All geographies and most industry groups grew sequentially, volume growth turned positive after several quarters, we also had an improvement in realization. We had another quarter of strong large deal wins with 34 large deals at a total contract value of $4.1 billion. Our clients see us as a preferred partner of choice for consolidation, cost takeout, and efficiency programs. This is also a reflection of our leadership trend. With the mobilization of our margin program, we see positive impact on our operating metrics and pricing. This resulted in our margin expanding by one point sequentially. Jayesh will elaborate on margin puts and takes later on the call. Free cash flow was highest ever at $1.1 billion. Our employee attrition rate was at 12.7%. We continue to see strong traction from our clients with generative AI programs delivered through Topaz. Enterprises are focused on their own data set that can be used in generative AI large language models. As an example, we are partnering with a telecommunications leader to transform the product engineering practices with AI and to elevate both the customer and employee experience. Another example is how we are optimizing and modernizing IT infrastructure services and transforming the IT operating model with AI for a leading bank. We're helping several of our clients prepare…

Thank you, Salil. Good morning and good evening everyone and thank you for joining the call today. We entered FY'25 focusing on key strategic priorities, including market share gains to accelerate revenue growth and drive margin improvement through Project Maximus. I'm delighted to highlight results that we have achieved across different business dimensions this quarter, including strong and broad-based revenue growth across all gears and most verticals year-on-year in constant currency terms, sequentially positive volume growth after several quarters coupled with improvement in realization. Financial services returned to positive sequential growth after six quarters with 7.9% growth in constant currency terms. 34 large deals signed during the quarter, which is a record number of deals in any quarter, large deal TCV at $4.1 billion including 58% net new. Deal pipeline continues to remain strong, 1% operating margin expansion sequentially. Improvement in operating parameters including 1.8% increase in utilization and lowest on-site mix in ten quarters. Highest-ever free cash flow generation in the quarter with free cash flows normalized for tax refunds at 104% of net profits, fifth consecutive quarter of reduction in unbilled, attrition has remained stable, and increase in return on equity by 1.5% Q-o-Q to 33.6%, primarily resulting from higher payouts to investors. With that, let me now elaborate with details. Revenue for Q1 was $4.7 billion, up 3.6% sequentially and 2.5% year-on-year in constant currency terms. This included benefit from improved realization from one-timers of 0.5%. Operating margin improved by 1% sequentially to 21.1%, led by 1.4% improvement in gross margins on account of strong operating performance across different dimensions. The major components of sequential margin work are as follows. Tailwinds of 2.2% comprising of normalization of Q4 one-timers of 1%, 0.8% benefit from Project Maximus largely from higher utilization and value-based selling, 0.4% from the improvement…

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. [Operator Instructions] The first question is from the line of Ankur Rudra from JPMorgan. Please go ahead.

Hi, thank you, and good to see very good numbers after a while. Just wanted to get a sense of, Salil, you know, what's the breakup of the very strong momentum this quarter? If you could, between the large deals that you've won over the last year, any kind of improvement in execution of short cycle business or discretionary business, and potentially better execution? And also when you answer that, if you can talk about how client conversations are changing, if there's anything turning a bit more positive and any change in the momentum on the short cycle deal, while large deal we can see is going on very strongly. Thanks.

Thanks Ankur. The view on discretionary or short cycle, what we are seeing is in financial services in the US, we've seen that shift that we have highlighted and we saw that during the quarter. Outside of that, the discretionary still remains similar to where we were when we started the year, which is still in a difficult situation. So, that's the one that we have seen the change in. The client conversations, in general, there's a lot of talk and discussion with generative AI, but the programs, even though they're not POCs, the actual projects are not large revenue projects and transformation is not so much what we are seeing. So even in a large deal, the vast majority still cost take out efficiency, consolidation, automation, that type of work. And in some instances where there is, these are funded massively through cost take out, the transformation is. So it's not really big, big, large spends there. So, that's how we are seeing the discretionary work at this time.

Thank you. And, you know, from here on, are you -- I mean, while you've seen this change in financial services, in your client conversations, do you sense there's anything in particular clients especially in, you know, maybe the Hi-Tech space or energy and utility where you've highlighted problems still persist, or even manufacturing, which might change the client behavior, maybe not this year, but into next year, what are the main things clients may be waiting for?

So there, first on energy utilities, we've had a good outcome last year. We've seen sort of similar discussions now, not a huge change. Manufacturing again, good outcome last year will be decent growth. This is just slower than last year. So not like a big, big change there. On Hi-Tech it's still difficult as you point out. I don't know what the trigger could be. Of course, on a macro level, there is not with client, but generally speaking, a view that if US inflation and interest rate and all of those discussions change, that will change something. But we don't know what will that trigger be.

Okay, appreciate it. Maybe just one question for Jayesh. Jayesh, you know, great performance on the margins. Could you maybe talk about how do you think about the percentage from here on? Utilization, especially including trainees seems to be high. I guess, that indicates fewer trainees in the system. What sort of headwind will we see from there? Secondly, I'm guessing there'll be wage hikes at some point in the next couple of quarters. So how are you thinking about what will help you maintain if not improve margins from here and extend Project Maximus?

Yeah. So Ankur, thank you for that first of all, and if you look at the Project Maximus and we have talked about the five pillars of Project Maximus, many of them are starting to show results, VBS, which is Value Based Selling is one of them. Efficient pyramid, where utilization and other factors are other part of it. Lean and automation is a third piece in that. So there are many of these tracks which are showing results and we still believe there is more need there. Of course, in terms of, if you look at the headwinds, you know, you will have comp review at some point in time during the year that could be an headwind. We have at this point in time not decided the timing et cetera of that. So that would be headwinds. Some of the large deals that we have signed, the transition and ramp up of that would be a headwind. So we will have to balance that as we go through the year. At this point in time, we are very confident of our margin guidance.

Appreciate it. Thank you and best of luck.

Thank you. Next question is from the line of Keith from BMO. Please go ahead.

Hi. Thank you very much. First, I wanted to get some additional feedback on financial services. You indicated that you thought that business outcomes or business energy had improved. I just want to hear a little bit more about that. It's certainly something we haven't heard from some of our software-related companies, but what do you think is the driver of the improvement in financial services in particular?

So Keith, there, if you look at our commentary on that, we are seeing some recovery in US financial services, specifically in the areas like mortgages, capital markets, and card payments and the larger clients there. So we are seeing some volumes coming in and some recovery -- some early signs of recovery in those areas.

Do you think that's Infosys or do you think that's, in other words, are you wining share in those accounts or do you think that's more broader base in saying North American banks that there is a general trend towards recovery and spend?

So, I think, it's combination of various factors. It's where, you know, where, I mean, there are instances where we are consolidating, there are instances where we have won new and larger businesses. As I talked about, some of the large deal wins also in the financial service sector. So I think there are multiple combination of those factors in that.

Okay. And then, just on the margin guide, in terms of puts and takes, you highlighted some on the previous question. How is the -- you closed the deal that's adding almost $200 million in revenue on a run rate basis, how is that impacting margins, and/or any other issues you want to call out, including any comments on FX impact as you see it today in terms of margins? And that's it from me. Thank you very much.

Keith, I didn't get the question clearly, if you could repeat?

How is the M&A, the recent transaction that you closed, how is that impacting margins? And then also, how do you see the exchange rate is impacting margins as you look out over the next couple of quarters? FX rates.

So, Keith, the acquisition that we have done, compared to the size of the company is relatively smaller to have a material margin impact. And as you would have seen from our filings also, the in-tech is coming with healthy margins. And there are opportunities, et cetera, in synergies. Coming to the ForEx. The ForEx has remained range bound for last couple of quarters. So, at this point in time, we don't really see an impact. But, you know, as you would appreciate, ForEx is range-bound, I mean, ForEx is unpredictable, and it can have the margin benefit of -- or impact depending on which way it goes. At this point in time, it is remaining range-bound.

Okay. All right. Perfect. Many thanks. Congratulations on solid results.

Thank you.

Thank you. Next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.

Hi. Good evening. Thank you for taking my question. My first question was for Jayesh, just a clarification. So during the press briefing, you talked about 40 bps of one-off impact in the margin. So can you just help us understand the revenue and the margin impact coming out of that? And I understand it is a recovery which you have made from one of the customers based in India, if that is correct. Thanks.

Yeah. So, that's right. This is for a customer base in India, it's one-off, you know, in the revenue and therefore most of that has flown into margin directly. So, 0.5% on revenue pretty much impacting, 40 bps on margins.

Got it. Thanks for that. My second question was, Salil, for hyperscalers, we are seeing the growth is accelerating. And also the AI demand, especially for some of the chip makers such as NVIDIA, has been quite strong. So it doesn't seem like the discretionary demand is entirely missing in the market. So, is there a transformation in the underlying business mix which is happening where possibly discretionary demand for now at least is moving towards platform and hardware makers and not coming to services companies?

So there, the view we have is what we saw and we've highlighted so far the shift in financial services in the US shows that some of that type of demand is coming now. We will wait and see across all the industries whether it's what you are describing or whether tech services project discretionary work also comes back, whether there will be transformation programs in tech which will also come. We are definitely seeing more and more discussions in enterprises on generative AI programs. Jayesh also shared a couple of examples, I shared a couple of examples. So we do see, and these are not POC, these are actual projects where we are participating, so we do see that. My own sense is this US FS is one data point. We will wait and see what some of the other data points look like.

So, Salil, what I was trying to understand was that is there a decoupling of discretionary demand which is happening or is this a sequence in which we'll see first the hardware and platform makers getting the discretionary demand and eventually coming to services? So, is that a decoupling or a sequence of event which eventually comes to services as well? What do you think would be the chain of events?

That's difficult to say. So again, it's just this year, one quarter what we saw was that in Financial Services US, some of that discretionary work is there, and whether it was decoupled or following on from something, difficult to say, but we did see some evidence on that.

Thanks a lot for that.

Thank you. Next question is from line of Nitin Padmanabhan from Investec. Please go ahead.

Yeah, hi, good evening. Congrats on the quarter. I just wanted your thoughts on one, the financial services phase. You did mention that you saw growth from mortgages, cards, payments, and obviously capital markets. When you think of the sustainability of the recovery, how should we think about it? Because mortgages, for it to continue to give you a delta would require rates to come down meaningfully. And from a cards perspective, it looks like delinquencies in the US are rising. So it's like a mixed data point that we see on the outside. But just wanted your thoughts on how are you thinking about the sustainability of the recovery on the financial services phase. And then I had one more quick question.

So, Nitin there what we are seeing right now is early signs, as I said, you know, of recovery. Of course, it's early signs, so we don't know how sustainable at this point in time it is going to remain, but the fact that we saw volume growth after many quarters, we saw strong growth in our financial services after, again, six-odd quarters. So I think those are the positives that we are taking. We are seeing large deals, both the ones that we had signed and the ones we are -- there in the pipeline. So all of that put together gives us a little bit of confidence on that. But yeah, we have to see more data points to see how the year progresses.

So, one of your smaller peers characterized it as financial services who have sort of stalled multiple projects in the past, and having sort of not spent for almost six quarters, having to make those spend because that's causing problems and thereby that seeing a pickup with short cycle projects on those deals, would you characterize it similarly? Are you seeing something similar?

I wouldn't say that, Nitin, to be very honest. You know, we are seeing this not specific to one-off clients, it could be limited to one-off clients, for that player, I can't comment on that. But we are not seeing it concentrated in one client, et cetera.

Right. And lastly, on the guidance, I think if we include the acquisition and normalize the earlier guidance for the acquisition, I think the earlier guidance would have been in the 2% to 4% range. Now, it looks like they've narrowed it to 3% to 4%, including the acquisition on both cases, despite the strong beat in the current quarter. So, is it just that you're being very watchful and careful about it or is there something more to it that you specifically worry about?

So Nitin there we don't really break up the guidance into what is organic and what is true for a specific acquisition that we have done. Having said that, if you look at our filings, the in-tech revenue for the last year was EUR170 million, and we -- I mean, we've just closed it, so we'll only get part of that revenue. So you can do a back-of-the-envelope calculation and the rest of it is going to be all the factors that Salil talked about Q1 performance, including large deal wins, the volume in US financial services while the discretionary still continues to remain challenging.

So perfect. That's all from my end. Thank you and all the best.

Thank you.

Thank you. Next question is from the line of Vibhor Singhal from Nuvama Equities. Please go ahead.

Yeah, hi. Good evening. Thanks for taking my question and congrats on a very solid start to the financial year. Salil, two questions from my side. One is, we have seen that, I mean, almost all verticals have done really well for us this quarter, but for the retail sectors. I think retail sector is something which is like in the almost entire industry, your peers also have kind of spoken about it. What is the outlook on this sector? I mean, what do you think the clients are waiting for to restart their spends? And where could those spends be coming in, in terms of the domains that we are looking at? And then I have a follow-up question.

So Vibhor, I think there, I think it's a sectoral challenge at this point in time, the whole sector is going to -- going through challenges. And it's not specific to us. And as Salil was mentioning earlier, one of the factors could be US interest rates recovering, et cetera. But it's hard to predict what will lead to recovery in the sector at this point in time.

No. I mean just to drill a bit little further on that, what exactly is, I mean, so we know that macro overhang is on most of the BFSI companies and all. At this point of time, any specific thing that you think could be a trigger apart from let's say, I mean, of course the interest rate that you mentioned that could possibly see these companies reverting their spend or difficult to call out that again?

So retail typically has higher exposure to discretionary as well, right? So and that is going to be linked to the macro environment largely, Vibhor. So, I think that would be one of the key reasons. Otherwise, outside of that, we are winning these, if you look at this quarter also, we have won eight large deals in retail as well. But the discretionary spending has to come back.

Got it. Got it. My second question is I think at the end of the last quarter, we had mentioned that we are expecting the first half to be better than the second half. Any change in that outlook given the deal win in this quarter has been quite strong. So do you -- if those were to slightly ramp up in the second half, would you be -- would it be correct to say that maybe we can expect second half to be slightly better than what we were expecting it three months ago?

So Vibhor, two parts there. We still continue to believe our first half is going to be better than the second half, and I think Q1 is just a testimony of that, from that perspective, we've delivered from there. Of course, the fact that we have increased guidance is also a proof that we are seeing the three quarters better than what we envisaged earlier.

Got it. Got it. Great. Thank you so much for taking my questions and wish you all the best.

Thank you, Vibhor.

Thank you. Next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.

Hi. Thanks for taking my question. So Salil the first question is on revenue. It looks like --

Gaurav, sorry to interrupt you. There is a slight disturbance from the line. Can you speak through the handset?

Yeah. Can you hear me better?

Yeah, go ahead.

Yeah. Salil, the first question is for you. On revenue, it looks like it has surprised you positively, which is why you've raised the guidance. So, is it led by the ramp-ups on the deals happening faster than you expected? Is it led by leakage in the discretionary improving compared to the last few quarters that you have seen?

So, this is Salil. The way this quarter has gone, what we have seen is, the volumes have been strong. We then see that change in the financial services in the US, which has given us more, more positive outcome for the quarter. Then, some of the work that we're doing in terms of working with our clients on value and pricing has also translated overall into the mix for our revenue. And then, the way we saw the outlook as we did some of the large deals in this quarter, which was a good outcome, that gives us a little bit more visibility into the year. So, all of those things led us to look at this as being a stronger outcome.

Got it. Any reason to believe that this momentum could decelerate in near-term? Any data point to suggest that? Or as of now you would expect the momentum to continue from a near-term perspective?

So what we have done is, we've taken what we have seen in this quarter across the different industries and service offerings and then put in, as Jayesh shared, what is more typical, which is our second half is usually lower than our first half. And with that, we have created the outlook for the year, but we didn't take into account any other trigger beyond what I just shared.

Thank you. Last question for Jayesh. What would be the incremental levers for margins from here on utilization is near peak, subcon has already stabilized. Just trying to understand what could be the additional levers over the coming quarters. Thank you.

So, Gaurav, if you look at there, you know, again, across all the pillars of Maximus, there are multiple of them are firing. Value Based Selling, we have seen, you know, as we talked earlier, we have seen improvement in realization. So, that's one lever we do have, we continue to have. We did talk about hiring some freshers as we go through the year. So that would help in getting some better role ratios or better role mixes, etcetera, near-shoring lean automation. So there are multiple levers. We still have to improve or offset the headwinds. The headwinds that we see as today is, as I said earlier, again is comp, which is a -- which is a decision we'll take as we progress through the year, and the ramp up of the deals won towards the end of last year as well as this quarter.

Thank you very much.

Thank you. Next question is from the line of Bryan Bergin from TD Cowen. Please go ahead.

Hi. Good evening. Thank you. First question I had on is on generative AI. Can you provide some detail on how GenAI may be impacting your delivery productivity and whether it may be changing any nature of the contracting conversations with clients yet?

Thanks. Thanks for the question. On delivery and generative AI, so what we have done, we have taken all of our service lines and start to put in place the impact of generative AI and broadly AI into this. And that change is ongoing, a lot of it has happened. Where we are seeing some of the benefits on delivery relate to areas, for example, software development or process optimization. There's also a large benefit on productivity for more customer service type of areas that we have already demonstrated proof of. We don't have a lot of footprint on that within our current mix, but we know from new work that's something that is being discussed with clients. In each of these for the contracting, the way our clients are looking at it, within their own enterprise, on their own data set, when there's a client where we see and where they have, let's say, for software development, a single, uniform approach across the whole company, which is not that frequent because of acquisitions and different decisions in different divisions and department, then the range of benefits is potentially higher, and the contracting discussions are around what of those benefits will accrue with the client. So, a lot of these discussions are in that spirit. There is some benefits that accrue to us and some to the client. But there are very few clients within their own data sets which have large, consistent tech landscapes which can give the full benefit of generative AI right away. Many clients also need their data infrastructure to be put in place where sometimes that is not in place today between structured and unstructured data. So the work actually starts with building a data program, when they're able to spend that on a data program, and then to have the cloud capability in place so that a lot of, part of the data, part of the apps on the cloud for a client. So, the discussion is typically on, here's the roadmap for generative AI in an enterprise, given the landscape of tech, and here are the first steps, data and cloud, and then here's something that can actually deliver impact today, which could be more, let's say a smaller area of the company. But these are all discussions which are done, which eventually relate to how contracting is done.

Okay, that's helpful. Thank you for the color. My follow-up is a clarification just on the 1Q one-time item, I think, you cited 40 bps, quarter-over-quarter op margin benefit, and a similar revenue impact. Was that expected in your prior guidance or was that a surprise or a new item that wasn't expected before on the plan?

That wasn't expected in our guidance that was a new item.

Okay, thank you.

Thank you. Next question is from the line of James Friedman from Susquehanna International. Please go ahead.

Hi. Good evening and let me echo the congratulations. Salil, in terms of banking, is the improvement contemplated to continue?

In terms of what? Sorry. We lost you Jamie.

James, sorry to interrupt. Can you speak a little louder please?

Oh, I'm sorry. In terms of the banking vertical, the BFSI vertical, is the growth contemplated to continue?

So what we see today is this change in the US Financial Services, we don't -- the way we've constructed our outlook is we are assuming that will be the way it will progress. So, we have not assumed that it will change. We will not also assume that it will become much larger. We will not also assume that this will move to some other geography in financial services. So, we don't know, but that's what the assumption is into our guidance, all the client discussions seem to indicate that US Financial Services, we will have this sort of attraction. So that's the way we build our outlook.

Got it. Thank you. And then in terms of Europe, it has been an important source of growth for the company this cycle. Could you unpack some of the trends that you're seeing in Europe?

On Europe, so what we are seeing is, different things in different places. So, for example, in the Nordic countries, we've had good traction over the last few quarters and even a little bit before in how we've engaged with clients and we've seen some good expansion of our large deal programs. We've seen some of that in Continental Europe broadly, if you look at some of the large deals across Telco. We've seen that a different type of a positive traction in Germany, where we are seeing some of our local Europe competitors are having more constraints and where we are benefiting from those constraints as we are expanding. So it's different in different geographies, and our focus -- or even industry, our focus has been to be a little bit more fine-tuned into that market and then try to get the benefit of it.

Got it. Thank you, Salil. I'll jump back in the queue.

Thank you.

Thank you. Next question is from the line of Sumeet Jain from CLSA India. Please go ahead.

Yeah, hi, thanks for the opportunity. Firstly, I wanted to check, you know, in your previous guidance of 1% to 3% you gave in April, was in-tech acquisition part of that guidance?

So, Sumeet, this is Jayesh here. We had clearly called out at that point in time that in-tech acquisition isn't part of it, because we were -- I mean, it was pending approval from various regulatory authorities.

Right. So, maybe in-tech acquisition now being closed and the 50 basis point impact on revenue in India business, can one assume these are the two primary factors for your revision in the guidance?

Not necessary. Again, as I said, we don't break out our guidance between, you know, the in-tech and non in-tech from that perspective. But if you look at the numbers that we printed when we announced the acquisition in-tech, revenue was around EUR170 million. And it's only going to be part of the year considering we just concluded or closed the transaction. And there are other factors, our Q1 performance, volume, financial services, growth offset by the continuing softness in the discretionary part of the business.

Got it. That's helpful. And secondly, I wanted to check, in your cost line item, the third-party items you bought for service delivery is significantly down this quarter, almost one percentage point of your revenue, and also down on an absolute level. So can you just give us a sense as to, from the bookkeeping perspective, how to look at this line expense item going forward?

So there, Sumeet, as we have said earlier as well, the third-party hardware, software cost is an integral part of many of the large deals where we take over turnkey projects from the clients, including technology landscape of theirs. And that is therefore dependent on the kind of deals, and how the ramp up or ramp down of those deal depends -- deals happen across the quarter. So it is going to be to that extent dependent on which deals and how it ramps up and down.

Got it. And lastly, just on the India business, can you give us a sense what kind of project it was? Because it's a pretty sharp jump we have seen this quarter. So any large deal ramp-up we are seeing there, or some government contract, what exactly is the nature of this one-time impact?

So Sumeet there, first of all, the India business is relatively much smaller. So anything that happens in that business shows up in percentage terms much larger. But having said that, it was one-time impact on one of our India clients, you know, and it's one-off. So I think we should just take it as one-off.

Got it. Thanks for the opportunity and all the best.

Thank you.

Thank you. Next question is from the line of Kawaljeet Saluja from Kotak Securities. Please go ahead.

Hey, hi, thank you, everyone. You know, great to see a well-rounded performance, congratulations. Just a couple of questions. First is for Jayesh. Jayesh, you know that 40 bps recovery that you see, does it show up in either ECL or provision for post sales client support or, you know, it's just basically a direct flow-through from revenues, yeah.

It's 40 bps -- 50 bps on revenue cover, which is impacting 40 bps on margins.

Okay. And basically does it tie-in with provision for post sales client support or that's something which is separate?

No, it's separate.

Okay, got it. Yeah. Second thing is wage revision. You know, I mean, I guess the cycle got -- cycle of wage revision was changed last year. Do we get back into wage division cycle, which is a lot more normalized, which is actually starting second quarter or that's something on which you have not taken a call yet?

So if you recall, Kawal, last year we did our wage revisions in effective November. So, at this point in time we haven't really decided. We are evaluating, considering all the factors that we always consider, including the inflation, including when was the last wage revision taken, the environment, the macro environment, as well as the peer practice. And we will take a call considering all of these factors. Having said that, as I called out in our margin walk also, we have increased our variable pay during the quarter versus last year as well as last quarter.

Okay, that's very helpful. A final question is Jayesh for you and Salil, both of you have articulated the fact that you want the profitability to improve in the medium term. And then there are number of structures, levers, that will be utilized to drive that expansion. I mean, what kind of an environment, and what kind of levers does one need to see to gain that directional comfort of profitability improvement from here on as such?

So, Kawal, if you look at our margin walks across the last three or four quarters since we launched the Project Maximus, you would see consistently the contribution from the Project Maximus across various pillars from L&A, Lean and Automation, from Value Based Selling, on the pyramids, et cetera, or things like that. So you will see, I mean, you have seen that, and our endeavor is to continuously focus on all of that. At this point in time, they are offsetting the headwinds to a large extent. The endeavor is to more than offset the headwinds in the mid-term.

Okay, cool. Thanks. Yeah. Wish you the best.

Thank you. Next question is from the line of Jonathan Lee from Guggenheim Securities. Please go ahead.

Great. Good evening and thanks for taking our question. A lot of moving parts here.

Jonathan, sorry to interrupt you. May I request you to speak a little louder, please?

Hey, great. Good evening and thanks for taking our questions. A lot of moving parts here on the margin side. Can you remind us how we should be thinking about seasonality through the year, especially as you think about the impact from Project Maximus and large deal ramps?

So, margin -- on Jonathan margin, one of the headwinds would be comp decision as and when we take. There are seasonalities in our business model, which is furloughs that impact us in Q3 and Q4, that also impact both pricing to some extent and margin therefore. But those are the large seasonalities that we have in our model. Outside of that, our margins are going to be dependent on our acceleration on Project Maximus as well as the revenue and volume growth, which helps us flattening our pyramid and therefore benefit from the pyramid.

I appreciate that color. And second, can you help us think through what's contemplated in your outlook, both at the low end and at the high end, as it relates to vertical performance based on your expected large deal ramps or what's in your pipeline?

Jonathan, sorry, your question didn't come across as clearly. Would you repeat that, please?

Can you help us think through what's contemplated in your outlook as it relates to vertical performance based on expected large deal ramps and what's in your pipeline, both at the low end and at the high end of the range?

So there, Jonathan, it's very difficult to call out which vertical performance will end up to low end and high end of our range. I think we run various models internally to get to the margin band. Some of them, you know, get us to the lower end of the band, and some of the assumptions will get us to the higher end of the band. I don't think there is any secular segment that is going to drive either ways.

Got it. Appreciate the color. Thank you.

Thank you.

Thank you. Next question is from the line of Girish Pai from BOB Capital Markets. Please go ahead.

Yeah. Thanks for the opportunity. The 3% to 4% guidance, if I do my math, comes to about 1% to 1.5% CQGR from here on. It seems way too conservative, because that also includes the in-tech acquisition. So are you assuming that the 2H FY'25 is going to be pretty bad?

So Girish, there let me give little more color on the math. If you look at the first quarter, our year-on-year growth has been 2.5% and 50 bps as I say of that is one-off. So that's the first point. We have always maintained that our H1 is going to be better than the H2 and that the guidance bakes in on that. And then there is in-tech. So all of that put together makes up for a guidance of 3% to 4%.

Okay. The next question is on US Financial Services. You think this is more a Infosys-specific situation? Or do you think this is a much more broad-based that the other vendors who have US Financial Service exposure would also be doing well? Or this is something very specific to you?

So, this is Salil, so difficult for us to say like for the other companies. We can see that some of that benefit on financial services, in cards, in payments, we see some of the benefits which came through with some of our clients, but I'm not able to tell if it's just Infosys or not. We do feel we have a very strong set of capabilities from digital, cloud, generative AI, cost and efficiency. So we do see much more connect with clients, but difficult to say for the others.

Okay. If I may squeeze in one last question, Salil, you mentioned that interest rates are one factor which could probably be driving demand. So are the customers looking at the start of a cutting cycle or are they looking at a certain level of fed funds rate before they kind of start spending in a much bigger fashion?

So there, I think, my point in the prior comment was more on what is the macro environment. So first, we don't know if that sort of, if that's a trigger or it's not a trigger. We are typically seeing a large digital program, the large program, even now with Generative AI, our clients are still not ready to launch on them. So the sort of more specific point you make, difficult for us to take a view on that.

Okay. Thank you very much.

Thank you very much. Ladies and gentlemen, we'll take that as the last question. I will now hand the conference over to the management for closing comments.

Thank you. So, thank you everyone for joining us. It's really wonderful to get all the questions. We are delighted with the strong first quarter growth, margin, cash, large deals, volume. So very, very good to see that outcome for our business. We have a good outlook, so the change in guidance gives a sense of what we see in the outlook, 3% to 4% growth. We hold the margin 20% to 22%. Good to see Financial Services in the US have that change. We feel extremely strong in what we're building in Generative AI, and we can see the traction to that in the projects and programs we're doing. And we believe we are well positioned really as a company where we are benefiting from a variety of areas, whether it's in digital, whether it's in cloud, whether it's in technology transformation or cost efficiency. All of these are something that we can support our clients with and we remain well-positioned to do that through this year and into the future. So thank you again for joining us and catch up at the next quarter call.

Thank you very much. Ladies and gentlemen, on behalf of Infosys, that concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.