Infosys reports in-line quarter, revenue up 5.8% YoY in constant currency

Infosys reported a quarter that was largely in line with expectations and said it retains its full-year revenue growth guidance at 5.5-6.5%, excluding the impact of currency movements.

With nine months gone, the company has grown at 5.6% in constant currency terms so far.

For the third quarter, revenue in constant currency was up 0.8% on quarter, and 5.8% year on year.

The company’s revenue, in dollar terms, has grown by 1% on quarter and 8.0% on year.

In rupee terms, there was a growth of 1.3%. Net profit was up 37.7 percent at Rs 5,129 crore due to lower tax expenses (see chart).

“Our Q3 performance is strong. We had 8% year-on-year growth and 24.3% operating margin with US$ 593 million of free cash flow,” said Salil Parekh, CEO & MD.

Karan Taurani of Dolat Capital said the top line growth was below his expectation, which was for 1% in constant currency terms.

Q3 operating margin improved to 24.3% from 24.2% in Q2 18.

“Our operating margins were stable on the back of broad-based improvement in operational efficiency parameters. Our cash generation continued to be robust during the quarter.” said M.D. Ranganath, CFO.

Utilization excluding trainees at all-time high of 84.9%, the company said.

Attrition declined to 15.8% from 17.2% in Q2.

The company said its operating margin guidance remains unchanged at 23%-25%.

“The numbers are broadly in line, given BFSI weakness,” said Dipesh Mehta IT analyst at SBICap Securities. “We are expecting improvement in the next two quarters.”

“Increased adoption of our digital offerings and new services helped stabilize price realization. We were able to grow client relationships across revenue categories,” said Pravin Rao, COO.

“During the quarter, we provided compensation increases and higher variable payouts to our employees. Our investments in employees continues to deliver results as reflected in lower attrition.”

The company bought back shares worth Rs 13,000 crores.

More than the quarterly numbers, the Street is looking for signs of reassurance from the new management led by Salil Parekh that it is on top of the global transition taking place in the IT services market.

Former CEO Vishal Sikka has kicked off radical changes to the company’s focus and outlook, and it remains to be seen how much of those will be kept and how much lost under the new management.