IT major Infosys beat margin expectations in June quarter and retained its full year guidance on Friday sending its shares up by 4 per cent in early trade. The stock was the top gainer on the 50-share Nifty benchmark.
Infosys’ consolidated sales in the June quarter grew to Rs. 12,770 crore against estimates of Rs. 12,817 crore, but profits were higher at Rs. 2,886 crore beating estimates of Rs. 2,677 crore on the back of better-than-expected rise in margins.
Infosys operating margins at 25 per cent were 250 basis points ahead of estimates. Analysts had estimated margins to drop on the back of salary hikes and rupee appreciation.
Dollar revenues grew to $2113 million, lower than estimates of $2142 million, but Infosys retained its FY15 revenue growth outlook at 7-9 per cent.
The June quarter is considered to be seasonally strong for outsourcers because most clients firm up their IT budgets by March after which new orders begin to flow.
Infosys, once the bellwether among Indian IT firms, has lagged the IT industry over the last few years. Analysts have blamed Infosys’ underperformance on its weakness to win new deals or mine existing clients because of its misplaced focus on products, platforms and consulting business (dubbed Infosys 3.0) at the cost of large “bread and butter” outsourcing deals. This led to shrinking market share and declining profitability.
Infosys brought back its cofounder Narayana Murthy in 2013 and under him the outsourcer doubled revenue growth and increase margins by aggressive cost-cutting in 2013-14 fiscal. But analysts say the company needs a new strategy to win back its bellwether tag. The responsibility to rejuvenate Infosys has been handed over to Vishal Sikka, who will take over as the new CEO on August 1
