Signs large deals worth $2.6 bn; April-June earnings miss Street estimates
The country’s second largest software services exporter, Infosys’s April-June quarter earnings was a mixed bag with the company missing street estimates on the net profit front but raising its full-year revenue guidance.
Net profit at Rs 5,195 crore was up 2.3% from the preceding quarter but lower than Bloomberg consensus estimate of Rs 5,378.01 crore.
Infosys, however, increased its full-year revenue guidance in constant currency terms to 14-16% from 12-14% earlier. This was slightly higher than the Street expectations. The company retained its full-year Ebit margin guidance at 22-24%.
The company’s consolidated revenue during the quarter was ahead of estimates at Rs 27,896 crore, up 6% quarter-on-quarter. Constant currency revenue was up 4.8% q-o-q. Earnings before interest and tax (Ebit) increased 2.5% sequentially at Rs 6,603 crore, which was above estimates but margin declined 80 bps to 23.7% due to higher employee cost.
“Driven by the dedication of employees and the trust of clients, we grew at the fastest pace in Q1 in a decade, at 16.9% year-on-year and 4.8% quarter-on-quarter in constant currency,” Salil Parekh, CEO and MD, Infosys, said.
“We remain confident of delivering on the margin guidance, underpinned by our comprehensive cost optimisation programme, despite increasing cost headwinds arising largely from compensation review, talent acquisition and retention,” Nilanjan Roy, chief financial officer, said.
During the quarter, Infosys signed large deals worth $2.6 billion and added two new clients in the $100-million plus category and 12 new clients in the $10-million category compared to the preceding quarter.
“Digital itself grew to 53.9% of overall revenue during Q1. Digital and cloud have been the main focus areas and that is where we see a strong demand,” Parekh said.
In terms of employee attrition, the company saw a 3% increase from 10.9% to 13.9% in Q1FY22. “We are already performing with high employee utilisation. We have hired 8,000 people in Q1FY22 and will increase campus hiring to 35,000 globally. We continue to conduct up-skilling programmes. We will have one more compensation cycle in July 2021 and also increase promotions,” Pravin Rao, COO, said.