Infosys sees Q2 cloud revenues cross $1 bln, raises lower end of revenue projection, reduces margin band

Infosys, yesterday, raised the lower end of its revenue projection band for the current fiscal year, but lowered the upper bound of its operating margins – capturing an industry-wide trend amid a potential recession in the Indian IT services companies’ biggest markets. Overall digital technologies related services continued to grow strongly, but the company also saw strong demand for its core IT outsourcing services, CEO Salil Parekh said yesterday. Notes: Infosys, yesterday, raised the lower end of its revenue projection band for the current fiscal year, but lowered the upper bound of its operating margins estimate – capturing an industry-wide trend amid a potential recession in the Indian IT services companies’ biggest markets. India’s second biggest IT services company reported revenues rose 4 percent for the three months ended Sep. 30 from the previous quarter and 18.8 percent from a year earlier, in constant currency terms. The Bangalore company said it had won $2.7 billion in large contracts, the biggest haul in seven quarters. More than half of this was “net new,” according to Infosys. Infosys defines a large deal as any order worth $50 million or more in value over the life of the contract. “While concerns around the economic outlook persist, our demand pipeline is strong as clients remain confident in our ability to deliver the value they seek, both on the growth and efficiency of their businesses. This is reflected in our revised revenue guidance of 15-16 percent for FY23,” Infosys CEO Salil Parekh said in a statement. In July, Infosys had forecast revenue growth in the range of 14-16 percent for the year that ends March 31, 2023. Parekh, yesterday, also signalled the sustained shift to the cloud that started picking up during the Covid pandemic. During Q2, the company saw more than $1 billion in cloud services revenues, he said. Overall, Q2 revenues rose 13.9 percent in reported terms to $4.6 billion from the year earlier period. Revenues attributed to digital services accounted for 61.8 percent of overall sales and those grew at 31 percent during the quarter in constant currency terms, Parekh said. Q2 operating margins expanded by 150 basis points sequentially as the company saw strong demand for its core IT outsourcing business as well, and attrition – meaning staff churn – trended downward for the third quarter in a row, on an annualised basis. Margins were lower by 2.1 percent in comparison with Q2 of FY22. Infosys continues to have the highest attrition rates among the top Indian IT companies. Q2 attrition was 27.1 percent versus 28.4 percent at the end of the previous quarter and 20.4 percent a year earlier. The company ended Q2 with 345,218 employees, reflecting a net addition of about 10,000 recruits. And in the backdrop of the overall macroeconomic environment and operations seeing an increasing proportion of staff returning to the office, Infosys changed its margin projection for the fiscal year to 21-22 percent from its July estimate of 21-23 percent. CFO Nilanjan Roy expects the company to end the year with margins closer to the lower end of the range. Theme music courtesy Free Music & Sounds: https://soundcloud.com/freemusicandsounds