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Infosys Q1 Earnings Preview: What you should watch out for

Updated : July 12, 2019 08:09 AM IST

IT major Infosys will be reporting its first-quarter earnings on Friday and analysts expect the software exporter to post record low margins for the second straight quarter.

  • After the Tata Consultancy Services (TCS) missed street expectations on the revenue front, all eyes will be on Infosys.

  • The street is working with a dollar revenue growth of 2.4 percent, compared to 1.6 percent reported by TCS.

  • The company is likely to deliver a 2.8% constant currency growth vs 2.2% for TCS but this number also includes about 40-50 basis points (bps) contribution on the back of the acquisition of ABN Amro’s mortgage business in Europe.

  • Margins are expected to hit another record low for the second consecutive quarter, around 20 percent this time on the back of wage hikes, H1B visa cost, the rupee appreciation as well as localisation. The question is how much of that can be offset by a higher utilisation as well as productivity benefits.

  • On the big FY20 guidance – it is likely to be maintained typically in Q1 as very few companies go ahead and change it since they await for at least Q2 or Q3 to assess the change. So constant currency revenue growth of 7.5-9.5 percent and the margin guidance band of 21-23 percent is likely to be maintained despite the company’s Q1 margin coming in below this margin band.

  • The key area to track will be banking, financial services and insurance (BFSI). This quarter’s numbers will look good because of ABN Amro’s acquisition but one has to look at it on an organic basis.
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