Infosys Sticks To Growth Forecast As Sikka’s Bet Starts Paying Off
Infosys net profit fell 3.4 percent sequentially. Revenue in dollar terms rose 3.2 percent.
Infosys Ltd. stuck to its full-year growth forecasts as contribution from new services like artificial intelligence and cloud helped the company cushion a fall in quarterly revenue across most other verticals.
India’s second largest software services provider maintained sales growth guidance at 6.5-8.5 percent on a constant-currency basis for the ongoing financial year. It raised full-year U.S. dollar sales forecast from 6.1-8.1 percent to 7.1-9.1 percent. The outlook may be revised depending on the performance in the June-September quarter, Chief Executive Officer Vishal Sikka said during a media conference after announcing the earnings.
Changes initiated by Sikka are in the right direction as services started after April 1, 2015 contributed a tenth of revenues, brokerage Kotak Securities Ltd. said. The brokerage cited benefits of automation and contribution from new services for the company meeting analyst estimates.
Net profit fell 3.4 percent to Rs 3,483 crore in the three months ended June compared to the previous quarter, Infosys said in an exchange filing. That’s in line with analyst forecasts. Overall revenue was flat at Rs 17,078 crore, just beating Rs 16,996-crore estimate of analysts tracked by Bloomberg. In dollar terms, it rose 3.2 percent to $2,651 million.
Margins Beat Estimates
Earnings before interest and tax, or operating profit, fell 2.4 percent to Rs 4,111 crore. That’s higher than the Bloomberg consensus estimate of Rs 4,010 crore. EBIT margins contracted 60 basis points to 24 percent, but surpassed estimate of 23.6 percent. Kotak Securities attributed it to a higher utilisation rate and benefits of automation.
Infosys maintained its operating margin guidance at 23-25 percent for the year.
The revenue growth and resilient margins despite headwinds were an outcome of the firm’s persistent focus on execution, Sikka said in a press release.
I am encouraged by the uptick in revenue per employee for six quarters in a row, and the strong momentum in our new high growth services and software, as we accelerate our focus on innovation-led growth.Vishal Sikka, CEO, Infosys
Segment-Wise Performance
Only the life sciences and healthcare segment registered sequential growth in revenue in the April to June quarter.
- Financial services revenue declined 1.3 percent to Rs 4,594 crore.
- Manufacturing revenue declined 2.9 percent to Rs 1,863 crore.
- Energy segment revenue was flat at Rs 3,957 crore.
- Retail and consumer segment revenue declined 0.6 percent at Rs 2,695 crore.
- Life sciences and healthcare segment revenue grew 1 percent to Rs 2,170 crore.
Other Key Highlights
- The company's utilisation excluding trainees increased 2 percent to 84 percent
- Operating cash flow during the quarter stood at $644 million compared to $547 million during the previous quarter
- Cash and cash equivalents stood at $6,091 million as on June 30, 2017
- The company has also increased its dividend pay-out to 70 percent from 50 percent