Infosys tops up bitter earnings with better guidance
Bengaluru-based Infosys' earnings for the last three months were worse than what the Street had estimated. The software exporter's revenue growth guidance of 13-15 percent for FY23, however, exceeded analysts' expectations.
Infosys, India's second-largest software exporter, expects 13-15 percent growth in constant currency revenue in the next 12 months -- its best guidance in 10 years. Bengaluru-based Infosys, however, disappointed the Street with its quarterly earnings.
| Year | Lower end (%) | Upper end (%) | Guidance range (%) |
| 2011-12 | 18 | 20 | 4 |
| 2012-13 | 8 | 10 | 4 |
| 2013-14 | 6 | 10 | 4 |
| 2014-15 | 7 | 9 | 2 |
| 2015-16 | 10 | 12 | 2 |
| 2016-17 | 11.5 | 13.5 | 2 |
| 2017-18 | 6.5 | 8.5 | 2 |
| 2018-19 | 6 | 8 | 2 |
| 2019-20 | 7.5 | 9.5 | 2 |
| 2020-21 | Suspended | ||
| 2021-22 | 12 | 14 | 2 |
| 2022-23 | 13 | 15 | |
Analysts in a CNBC-TV18 poll had expected the company's guidance at 12-14 percent.
This guidance from CEO Salil Parekh followed 1.2 percent sequential growth in revenue, in constant currency terms -- in other words, without factoring in exchange rate changes -- between January and March, the slowest months for software services in any year. Analysts had estimated the constant currency revenue growth at 3.2 percent.
Infosys' earnings for the last three months failed to meet analysts' expectations.
Infosys' revenue, in dollar terms, came in at $4,280 million for the fourth quarter of the financial year 2021-22, as against $4,250 million for the previous three months.
According to Jefferies, which had expected Infosys to give a revenue growth guidance of 12-14 percent in the base case scenario, every one percent change in growth outlook could see a seven percent impact on the target valuation.
CLSA sees the company's growth moderating sequentially after the inflation from pass-through revenues in the December quarter. It had expected Infosys to give a guidance of 11-13 percent.
Attrition at the company worsened to 27.7 percent between January and March, as against 25.5 percent in the previous three months.
Infosys shares ended 0.4 percent higher at Rs 1,748.7 apiece on BSE ahead of the earnings announcement.
The stock has beaten the Nifty50's benchmark return in the past one year.
Jefferies has a 'buy' call on Infosys shares with a target price of Rs 2,135. It prefers Infosys over TCS given the Bengaluru-based company's stronger growth profile and 10 percent valuation discount.
CLSA has Infosys and Wipro as its key picks in the Indian IT space.
How IT shares have fared in the recent past
| Stock | Return (%) | ||
| One month | Three months | One year | |
| TCS | 1.7 | -6.1 | 18 |
| Infosys | -4 | -7.8 | 25.2 |
| Wipro | -4.6 | -13.9 | 33.5 |
| Tech Mahindra | -5.1 | -17.9 | 40.8 |
| HCL Tech | -5.7 | -15.7 | 14.1 |
The Nifty50's 12-month return stands at 20.5 percent.
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