Infosys Q4 Earnings Today: Five things to watch

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Infosys Ltd, India’s second largest IT exporter by revenue, will announce its fourth quarter results on Wednesday, a day after its larger peer Tata Consultancy Services (TCS) Ltd released its results. Infosys’ fiscal 23 revenue growth forecast will be a key item to watch, although analysts expect some growth moderation in the fourth quarter.

According to consensus estimates from Bloomberg, Infosys should post a net profit of 5,961 crores on revenue of 32,709 crores for the March quarter.

Mint highlights five things to watch in Infosys’ fourth quarter results to be released April 13 after market hours.

Revenue growth and forecasts

Investors will be watching closely the revenue growth forecast for FY23 as this would set the tone for the rest of the year. Brokerage firm Sharekhan estimates Infosys to provide an 11-13% revenue growth forecast for FY23 from 12-14% at the start of FY22. ICICI Securities expects Infosys to record 3.0% sequential growth in constant currency, driven by momentum in financial services, retail, communications, energy and manufacturing. Cross-currency headwinds would lead to sequential growth of 2.7% in dollars.

Margin outlook

Margins for most IT companies are expected to be under pressure due to supply-side challenges. Sharekhan expects Infosys to maintain its FY23 margin guidance at 22-24%. For the quarter ended March, ICICI Securities expects Infosys’ EBIT margins to contract 30 basis points quarter-over-quarter due to higher labor costs.

Momentum of the case

Investors will be watching for comments on the combination of deal sizes, total contract value (TCV), deal closing dynamics and deal pipeline. The ramping up of the Daimler deal and traction in digital technologies will be among the key factors to watch, according to ICICI Securities. During the December quarter, Infosys signed large transactions with a TCV value of $2.53 billion.

Demand from Key Verticals

Investors will be watching for management comments on demand, particularly in key verticals such as financial services, high tech and retail. For Infosys, financial services is the largest industry vertical, contributing 31.5% to total revenue in the December quarter. Retail contributed 14.5%, while high tech contributed 8.1% to total revenue in the December quarter.

Attrition rate

While the peak may be behind, the talent war and skill shortage should keep attrition high. Attrition at Infosys increased to 25.5% in the December quarter from 20.1% in the previous three months. “Corporate attrition would continue to be high and therefore the cost of bridging attrition (at higher costs) and the costs of retention, bonuses and compensation streamlining are expected to exert a margin pressure,” according to ICICI Securities.

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