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INFOSYS: Key numbers to watch out for

Vishal Krishna
12th Jan 2018
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New CEO Salil Parekh is all set to announce his first set of earnings numbers today, and here are five things we need to watch out for:

  • Analysts expect revenue to be estimated at $2,747 million, a 0.7 percent quarter on quarter, and 7.7 year-on-year growth based on 0.85 percent constant currency and (-)15 bps cross currency impact on-quarter.
  • Update on growth strategy with induction of new CEO, and commentary on client budgets
  • FY18E revenue guidance, expected to be maintained at 5.5-6.5 percent in constant currency terms
  • EBIT guidance of 23-25 percent growth also likely to be maintained
  • May announce large deal wins in October-December, and automation impact
  • According to HDFC Securities, the following will impact the IT Sector in the third quarter:
  • Revenue growth is expected to be at 1.2 percent quarter-on-quarter, and 9.1 percent year-on-year. Tier-1 IT is expected to post revenue growth of 1.2 percent quarter-on-quarter (as compared with 0.3 percent in 3Q FY16-17 each).
  • Operating performance is expected to be stable despite seasonal headwinds supported by increased automation and higher efficiencies. HDFC Securities expects IT sector to aggregate EBITDA at 22.5 percent, down 20 bps on quarter.
  • Within Tier-1 IT, TCS is expected to lead operational performance while Infosys and HCL Technologies are expected to lag. Within Tier-2 IT companies, there will be margin expansion from Persistent, Zensar, Mindtree and Mphasis.

The new CEO will have to deliver results because the internal squabbles have over the last fifteen months have taken the focus away from Infosys' ability to deliver results for shareholders. That said, the previous management has re-skilled employees in design thinking and understanding new technologies like AI and machine learning. Going forward, the CEO will have to manage growth-hungry shareholders, demanding clients and invest in new technology that will add value to Infosys in the future.

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