Infosys cheers Street as Q1 earnings in-line with estimates

India’s second largest information technology (IT) services company Infosys today cheered investors by posting earnings for April-June 2014 (Q1FY2015) on expected lines, and throwing up a positive surprise on the margins and volumes growth front.

The Bangalore-based company, which has missed Street estimates for several quarters in past, today posted a 21.6% year-on-year growth in net profit at Rs 2,886 crore, and a 13.3% year-on-year growth in revenues at Rs 12,770 crore.

Even as sequentially the revenue is down 0.8% and net profit is down 3.5%, it is far lower than anticipated. The street was expecting net profits to be down in the range of 8-10%.

In dollar terms, Infosys posted a revenue growth of two% quarter-on-quarter for Q1FY2015 at $2,133 million, which was in-line with analysts’ estimates of 1.8-3.0%.

Reacting to the earnings, shares of the company rose nearly 3% in early trade. At 09:30 AM, Infosys’ shares were trading up 2.6% at Rs 3,378.10 on BSE.

While operating profit margins for Q1FY2015 were expected to take a hit due to salary increments and high visa costs, the company managed to maintain them at 25.1%, marginally down from 25.5% in January-March 2014 (Q4FY2014).

The company clocked a quarter-on-quarter volume growth of around 2.9 percent during the quarter under review.

“We saw positive trends in our large deal wins during the quarter. We believe that this momentum will hold us in good stead as we focus on increasing volumes.” said Chief Operating Officer UB Pravin Rao, COO. “Employee attrition rates are worrisome and we are implementing various initiatives to retain good talent.”

As expected, Infosys said its attrition has risen to a fresh all-time high of 19.5% in Q1FY2015, against 18.7% in the previous quarter.

While analysts had expected Infosys to continued seeing challenges in repeat business and new deal wins that it had witnessed in Q4FY2014, the company did not share any such concerns. “We continue to enjoy the confidence of our clients by demonstrating superior execution capability and value realisation.” said Chief Executive Officer and Managing Director SD Shibulal.

“As I transition the CEO mantle to Vishal (Sikka), I am confident that he will leverage this strong foundation to take Infosys to greater heights. I wish him the very best,” he added.

Infosys Technologies Limited