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Earnings

Infosys Q2 results today: Here is what to expect

Updated : October 16, 2018 08:04 AM IST

Infosys, India’s second largest software services provider, will report its second-quarter earnings after market hours on Tuesday.

Its larger rival Tata Consultancy Services Ltd (TCS) has grown, year-over-year, in double digits for three straight quarters. TCS reported a 22.6 percent jump in consolidated net profit in the July-September quarter this year.

Infosys’ second-quarter earnings will be a key trigger for IT industry as the second half of the year (October-March) is usually tepid for home-grown IT firms.

Here are some of the key numbers to watch out for:
  • Dollar revenue growth is seen higher by 2.3 percent, constant currency growth should see a sequential improvement of 2.8-3 percent. So lower than 3.7 percent that TCS reported, margins will see an improvement of 60-70 basis points (bps). One basis point is one-hundredth of a percentage point.
  • The benefit of rupee depreciation will not reflect in Infosys’ margins on account of the fact that the company is making investments in digital and there could be a wage revision for the senior employees. So TCS had a 150 bps margin improvement but for Infosys, it is expected to be about 60-70 bps.
  • That will drive up the company’s profitability. In the prior quarter, the profits were negatively impacted because of a write-down that they had done in one of the acquisitions.
  • The big question is on their guidance, FY19 constant currency revenue guidance of 6-8 percent likely to be maintained, their margin guidance for this year stands at 22-24 percent. Most analysts believe that it will be maintained but there is an outside chance that the company will look to revise it higher to factor in the benefit of the INR weakness.
What to watch -Rupee benefit on margins -Has the company chosen to re-invest benefits -Will the company look to pay/promotions to arrest rising attrition -Pick up in Digital; Contributed 28.4% to total revenue in Q1 -Can the company sustain $1 bn plus of deal wins

-BFSI declined by 0.2% in Q1 (QoQ)

 

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