Infosys Q3 Results: Raises Revenue, Margin Guidance For FY21

Infosys Ltd. raised revenue and margin guidance for the ongoing fiscal, deriving optimism from large deal wins and an increase in clients’ appetite for spending on technology as businesses move online during the pandemic.

Revenue of India's second-largest software services provider increased 5.52% over the preceding quarter to Rs 25,927 crore in the three months ended December, according to an exchange filing. That compares with the Rs 25,182.9-crore consensus estimate of analysts tracked by Bloomberg.

Dollar revenue rose 6.2% to $3,516 million. On a constant currency basis revenue rose by 6.6%.

Other highlights (quarter-on-quarter)

• Net profit rose 7.26% to Rs 5,197 crore, against the Rs 5,060.56-crore forecast.
• Operating income increased 5.79% to Rs 6,589 crore.
• EBIT margin remained steady at 25.4% against 25.3% despite wage hikes and cross-currency headwinds.

Infosys raised its FY21 revenue and margin guidance for the second straight quarter. The company now expects its revenue to grow 4.5-5% in the financial year ending March 2021 compared with 2-3% growth forecast earlier. It also raised its operating margin guidance to 24-24.5% against the earlier guidance of 23-24%.

Infosys in December said over the past few months there has been increased speed at which all its clients are adopting digital and many of its large deals are new digital transformation projects. During the third quarter, El Paso Water selected Infosys as its strategic partner for customer service transformation; Rolls-Royce announced strategic partnership for aerospace engineering in India; and Daimler transferred its automotive IT infrastructure operations.

The company, in a media statement, said large deal total contract value was at all time high of $7.13 billion, with 73% being net new.

That fared well for Infosys which, along with other technology peers, saw an increase in costs after the pandemic stalled trade and forced employees to work from home. The firms even lost billings as they generate most of their business overseas.

Infosys’ mainstay banking and financial services vertical continued to lead growth. All other segments, barring hi-tech, saw growth sequentially during the reported quarter.

Like Infosys, rival Tata Consultancy Services Ltd. also saw a rise in revenue and net profit in the three months ended December, and guided for a double-digit revenue growth in the next fiscal. Wipro also posted a rise in revenue and net profit during the period. It even raised revenue growth guidance for the IT services business.

Shares of Infosys closed 1.16% higher before the results were announced compared with a flat Sensex and Nifty.