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BENGALURU: All eyes are on Infosys Ltd’s performance after Tata Consultancy Services Ltd (TCS) missed analyst estimates on both revenues and profit. Infosys' Q1 results might set the tone for the rest of the earnings season.

In the March quarter, the Bengaluru-based IT services major had guided for 12-14% sales growth in constant currency terms in FY22 and an operating margin band of 22-24%. Analysts expect Infosys to maintain a double-digit revenue growth guidance and provide further clarity on execution.

As per consensus Bloomberg estimates, Infosys is expected to clock revenue of 27,634.5 crore and a net profit of 5,358.8 crore for the June quarter.

Mint highlights five things to watch out for in Infosys’ first quarter earnings that will be declared on 14 July, after market hours.

Revenue guidance and growth

Analysts expect Infosys to raise its FY22 revenue growth guidance on the back of a strong Q1 performance. HDFC Securities expects Infosys to raise the guidance by about 100 basis points. The revenues for the June quarter are expected to grow 4.0% sequentially driven by ramp up of deals and traction in cloud, ICICI Securities said in a pre-earnings note.

Deal pipeline

Investors will closely watch the deal pipeline of Infosys as it has won some large digital transformation deals in the recent past. Last year, Infosys signed a large deal with German automotive major Daimler AG for an estimated value of about $3 billion and a $1.5-billion deal with US investment firm Vanguard. Investors will monitor the ramp up of these deals and look out for commentary on the nature of future deals. “Infosys is witnessing a healthy deal pipeline led by cost take out deals," ICICI Securities said.

Digital growth

Digital and cloud have been the key drivers of growth for IT services companies since the pandemic began, so investors will track the company’s digital growth momentum. Infosys’ digital business grew 34.4% y-o-y in constant currency and contributed 51.5% to the total revenues for the quarter ended March.

Attrition rate

The IT industry in general is expected to see a rise in attrition rates as demand gradually picks up. Hiring activity in India has bounced back with 15% growth in June compared to May, led by the IT-software sector, according to latest data from Naukri JobSpeak. So, investors will watch for the attrition rates and the company’s strategy to contain high levels of attrition. Infosys’ voluntary attrition for the March quarter rose to 15.2% from 10% in the preceding quarter, indicating the uptick in demand.

Management commentary on outlook

Investors will closely monitor the management’s commentary on demand outlook and market share gains. Any commentary on the impact of the second wave of the coronavirus will be closely watched. “The deal pipeline is strong and IT demand is healthy, as clients look to accelerate digital transformation," IIFL Securities said.

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