Due to increased furloughs and fewer significant agreements, Bengaluru-based Infosys, a global leader in information technology, is predicted to record reduced revenue growth in the third fiscal quarter of 2022–2023 (Q3FY23).
Although the company’s operating margin might rise by 10 to 40 basis points (bps) or up to 21.9% over the course of a single quarter thanks to a weaker rupee, lower attrition, and greater efficiency.
On Thursday, the business and its rival HCL Technologies will both release their Q3 financial results.
According to a Business Standard average of 5 estimates, Infosys’ Q3 sales could increase 18–19% year over year (YoY) to Rs 37,838 crore, while net profit could increase by 9–15% to Rs 6,470 crore.
The majority of brokerages anticipate Infosys to stick with its FY23 revenue growth guidance of 15–16% and EBIT margin guidance of 21–23%.
Key monitorables include growth and margin guidance, client budget commentary, deal momentum, macro impact on revenues, attrition trend, whether vendor consolidation and cost take-out deals have increased, the state of impacted verticals like hi-tech, retail, certain portions of the financial services industry, and Europe, as well as potential pricing leverage and margin outlook.
Here is a sample of what reputable brokerages anticipate:
IDBI Capital: Expects a 10 bps cross currency impact to largely offset revenue growth of 1.1% in constant currency (CC) terms. a broad-based increase in earnings before interest and taxes (EBIT) margin of 33 basis points is anticipated. Better utilisation and lower subcontracting costs were the key drivers of QoQ.
Kotak Institutional Equities: The brokerage anticipates 1.1% quarterly revenue increase while assuming a typical level of pass-through sales. Low growth will be caused by high furlough rates and the absence of a significant deal-breaker (unlike the prior two years). Furloughs and lowered income will also counteract the advantages of rupee devaluation and marginally better utilisation rates.
Dolat Capital: Strong performance across verticals is expected to drive sequential increase of 1.3% in CC terms. Operating margin is anticipated to increase 40 basis points QoQ, while profit is anticipated to increase 7.8% sequentially.
ICICI Securities: The business is expected to retain the status quo with regard to the annual growth guidance even in Q4 as the asking rate for CC growth for the following several quarters is around 0.5-1.1%, which does not seem strained. The downturn would have continued to have an effect in Q3 on sectors including BFSI (mortgage), retail, hi-tech, telecom, and Europe as a whole. One can anticipate a bias in favour of cost-take-out programmes in the mix of deals.
Furloughs and the lack of significant acquisitions will have an impact on PhillipCapital’s forecast of CC revenue growth of above 1.5%. Over the previous quarter, margins are expected to increase by 10 bps.